KUALA LUMPUR – Top Glove Corporation Bhd is unperturbed over the government’s introduction of the prosperity tax next year, and is confident it will not dig too deep into its pockets and affect its financial performance next year.
Executive director Lim Cheong Guan said this is because the company will not be imposed with the one-off tax, regardless of the profit it accumulates as a whole across the year.
Instead, he said tax will be charged based on the entity level, meaning only subsidiaries that record a profit of over RM100 million next year will be subjected to taxation.
“We have around eight separate glove entities that are generating income for the group, our subsidiaries,” he told a virtual press conference today.
“Assuming we have whatever profit, this will be spread among the eight entities. There is potential that some will have profits in excess of RM100 million, and some may not.
“So, they will not be subjected to the tax. This may help us cushion the impact of the tax on the group.”
He said government-announced tax incentives would also mean Top Glove, the world’s largest glove maker, will be able to absorb some of the impact of the prosperity tax.
Cheong Guan was commenting on how he foresees the recently-announced tax impacting the group’s financial performance next year, especially after the firm recorded a subdued profit for the first quarter ended November 30 (Q1).
The prosperity tax was announced during the tabling of Budget 2022 as the government bids to collect alternative revenues to help finance the country’s high healthcare costs against the Covid-19 pandemic.
The tax will be imposed on companies with profits above RM100 million. Firms will be taxed at a rate of 24% for income up to the first RM100 million, and 33% for the remaining taxable income.
The government expects to collect at least RM3 billion from the tax.
Lifting of export ban to US has helped
With a comparatively poorer financial performance this quarter compared with the past year, Cheong Guan said the United States’ recent lifting of a year-long ban on imports of Top Glove products over alleged forced labour will help the group in its recovery.
“Our sales from Malaysia to the US, since the lifting of the withhold release order (WRO), will lead to a gradual recovery.”
The US lifted the WRO early September after its Customs and Border Protection banned imports of gloves made by Top Glove in July last year, following evidence of migrant worker abuse.
Meanwhile, Top Glove executive chairman Tan Sri Lim Wee Chai is unperturbed by China’s rise in the glove manufacturing sector, saying Malaysia still has the edge in terms of quality and cost.
“When it comes to labour and utility costs, we are more competitive than them. On top of that, we also have sufficient raw material.”
He said despite lower revenue and profit, Top Glove’s Q1 performance is still better than the pre-pandemic days, referring to comparisons with figures from two years ago.
“In November 2019, our sales revenue was RM1.2 billion. Now we have RM1.5 billion, a 25% increase. Net profit also increased from RM110 million to RM186 million, a 60% gain.
“All these numbers show that now we are in a much better position than two years ago. Now, we are back to normal business.”
On the supposed labour shortage due to the government’s ban on foreign worker intake, Wee Chai said this has not affected the group much, with Top Glove recruiting between 8,000 and 9,000 local workers in the past year.
They include 2,000 technical and vocational education and training graduates, 2,000 fresh graduates from local universities, and up to 4,000 general workers and school leavers.
He said in total, Top Glove currently has 22,000 employees, with operating capacity of its factories at 65%. – The Vibes, December 10, 2021
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