1.     Impact of the Current 2024 Budget:

•         How has the 2024 budget impacted your company's operations and financial planning?

We are a small-scale startup, and the most direct impact we feel from the 2024 budget is the increase in the service tax from 6% to 8%. This change has made our membership fees appear higher than they actually are, which has discouraged some potential members from signing up. As a result, our membership sign-up rate has been affected, particularly during tougher months when consumers are more price-sensitive.

Without the internal funding from our investors, it would have been extremely challenging for us to withstand these difficult periods. This support has been crucial, allowing us to sustain operations, continue providing high-quality services, and implement strategic initiatives to attract and retain members despite the challenging environment.

•         What specific measures from the current budget have had the most significant effect on your industry?

As a small-scale startup in the sports and fitness industry (in particular a rather niche sector of martial arts), we were hopeful that certain measures in the current budget would drive more engagement with our services. One such initiative is the tax relief of up to RM1,000 for the purchase of sports equipment and activities. While this sounds like a positive step to encourage healthier lifestyles, it hasn’t had a significant impact on our business.

The tax relief is more geared towards individual purchases rather than encouraging people to join gyms or engage in ongoing memberships. Most of our potential members are focused on weighing the overall cost of a gym membership, and this relief doesn’t substantially offset the perceived cost, especially given the recent increase in service tax from 6% to 8%. As a result, the initiative, while beneficial for consumers buying equipment, hasn’t directly translated into increased membership or revenue for us.

•         Can you share any challenges or opportunities that have arisen as a result of the current budget allocations?

Service tax increases from 6% to 8% has significantly impacted our business sales. However, the government's investment in sports infrastructure and youth sports programs, such as the RM50 million matching grant for sports events, encourages greater participation in sports activities across the country, which may indirectly boost interest in martial arts training. While this doesn't provide immediate financial relief for us, it aligns with the broader goal of fostering a healthier and more active community

2.     Wishlist for the Upcoming Budget:

•         What are your top three priorities or requests for the upcoming budget?

1. Incentives for Sports and Fitness Facilities: We would like to see more tax incentives specifically for private sports and fitness businesses, such as gyms and training centers. This could include tax rebates for upgrading facilities, purchasing training equipment, or expanding community-oriented programs. These incentives would not only support small businesses like ours but also help create more accessible, high-quality spaces for people to stay active and engaged in sports.
2. Grants for Community Sports Programs: Introducing grants aimed at private sports businesses that run community-focused programs could have a significant impact. For example, providing grants to gyms that organize activities for underserved communities, offer free youth sports programs, or support local tournaments could encourage greater involvement in sports at the grassroots level. This would also align with the government’s goal of promoting a healthier lifestyle among Malaysians.
3. Support for Digital Transformation in Fitness: As the fitness industry increasingly embraces digital tools—such as online classes, virtual coaching, and fitness apps—we hope for initiatives that support digital transformation. This could include subsidies or grants for technology adoption, helping gyms to modernize their offerings and reach a broader audience. With many people still preferring remote or hybrid options, this support would help gyms cater to evolving needs while ensuring continuity in operations.

•         How do you believe the government can better support businesses in your sector through the next budget?

To better support businesses in the sports and fitness sector, the government should consider addressing the high business licensing costs that small-scale gyms and training centers face. Currently, the licensing fee for gyms is set at RM50 per square meter, which places a significant financial burden on smaller businesses like ours. This rate is particularly challenging for startups that are already navigating other expenses like rental costs, equipment investments, and staff salaries.

Reducing these licensing fees would make it more viable for small gyms to operate, allowing us to focus resources on improving facilities, hiring skilled coaches, and offering more community-oriented programs. It would also encourage more entrepreneurs to enter the fitness industry, ultimately fostering a more competitive and diverse market.

Additionally, we believe that a tiered licensing system based on the size of the business could be a fairer approach. Smaller facilities could be charged lower rates, making it easier for them to sustain operations, while larger, more established gyms could continue to pay the current fees. This would allow new and smaller players to grow, contributing to a healthier and more active society overall.

•         Are there any specific tax reforms or incentives you hope to see introduced?

Listed above

3.     General Budget-Related Questions:

•         How do you view the government's approach to economic reforms and its impact on the business environment?

The Madani Economic Framework in Malaysia’s 2024 budget focuses on creating jobs and attracting investments, especially in sectors like the digital economy and green technology​. This approach aims to draw more skilled workers to urban areas, boosting the local economy and expanding the customer base for various services, including fitness. As more people move to cities for job opportunities, they often seek activities to maintain a healthy lifestyle, making gyms like ours a natural choice. This framework indirectly benefits our industry by increasing the number of potential clients in urban centers.

•         What are your thoughts on the proposed changes to the Service Tax and Capital Gains Tax?

As mentioned above. Not much comment on capital gains tax.

•         How do you think the budget's focus on digital economy and sustainability will influence your business strategies?

The 2024 budget’s emphasis on the digital economy influences our strategies at Hikari Martial Arts Gym by driving us to strengthen our online presence through digital engagement. This helps us attract expatriates who often seek community and connection when settling into a new country. By offering a welcoming space where they can connect through sport, we position ourselves as a community hub for those new to Malaysia.