Literature Review

First and foremost, Mosbah (2014) mentioned that government had specified Pioneer
Status and Investment Tax Allowance to tourism investment and developed potential
investment opportunities in numerous districts. A multiple of tax incentives have been
examined to attract other countries’ investors. Investment occasions which are permitted tax
incentives such as tourism scheme like hotel businesses, entertainment scheme as well as
constructions of day off camps and convention centres. An occurrence of negotiations for extra
landing rights are in advance and promotional campaigns with airlines and tour representatives
were executed to enhance the connectivity for both scheduled and chartered flights. One
obviously perceptible characteristics for the advancement of tourism segment in Malaysia is
that number and in addition nature of tourist products of tourist products actualized have been
step by step expanding and relying upon the financial capacity of the nation, request and natural
issues. For example, first Malaysia Plans (MP) attempted to focus on cultural heritage and
nature as resources which don't require much investments. As the economy develops, private
sector reinforces and foreign direct investments (FDI) increments, new items that require
budgetary and organizational efforts were introduced such as shopping, sports, conventions,
water activities and carnivals, later on, the concentration moved to instructive tourism, eco-
tourism, gatherings and displays, recreational tourism, food tourism, golf tourism, as well as
health tourism.

Furthermore, the laws that administer tax and incentives in Malaysia prepare for direct
tax incentives grant partial or total relief from income tax payment for a predefined period
while indirect tax incentives are in the type of exclusions from import obligation, sales tax and
excise duty. The major tax incentives for organizations putting resources into the
manufacturing sector, high innovation companies, specialized machinery and equipment
companies, organizations that use oil palm biomass to create value-added products as well as
strategic projects are the Pioneer Status and the Investment Tax Allowance that depends on
certain needs, including the level of value-added, technology used and industrial linkages.
According to MIDA 2016, small quantity of companies established in Malaysia with
shareholders’ capital not surpassing RM500,000 and possesses at least 60% Malaysian equity
are entitled for tax incentives for small scale organizations under the Promotion of Investments
Act (PIA) 1986. Organizations producing transmission system, airbag system, brake system
and steering system are entitled for better budgetary incentives, for example, 100 percent fiscal
deduction for 10years under Pioneer Status or 100 percent for five years under Investment Tax
Allowance (Kamaruddin , Khalid, Supaat, Shukor, & Hashim, 2016).

A study was conducted by Cheng and Lalchand (2014) on sustainable power generation
in Malaysia on past perspective, present assessment and future plan. To uplift adoption of the
Five-Fuel Policy, it was sustained with the Small Renewable Energy Power (SREP) program
that provided acceptable Renewable Energy (RE) tariffs to encourage financially practical
investments for potential developers. The government also permitted budgetary incentives in
the form of Pioneer Status and Investment Tax Allowance other than import duty and sales tax
waiver to ease development of Renewable Energy projects. These scheme were encouraged
with the execution of UNDP-GEF-supported projects such as the Biomass-based Power
Generation & Co-generation in the Malaysian Palm Oil Industry (BioGen) project from 2002
to 2010 and Malaysia Building Integrated Photovoltaic project from 2005 to 2011. Besides, the
Malaysian energy market is extremely twisted such as the prices of the petroleum items and
natural gas prices as well as electricity tariff greatly controlled by the government through
subsidies. Even though a portion of the purpose is to attract foreign direct investment, subsidies
have subsequently led to non-efficient power use as well as suboptimal resources allocation.

Muthitacharoen (2017) conducted a study on assessing the significant of taxation on

foreign direct investment with the evidence from South-East Asian Developing Countries.
Understanding the cross-border effect of tax policies is essential for developing countries since
the uses of tax treatment may disintegrate a source of revenue that they are particularly
dependent on. Their investigation figures the bilateral effective average tax rate which
combines relevant local and international tax laws and utilizes the quantile relapse approach
with fixed impacts that obliges the skewed dissemination of foreign direct investment flows.
Estimates declares the negative and critical effect of tax collection however its effect is
heterogeneous over the foreign direct investment dissemination. Investment related with
country pairs at the tails of the dissemination is liable to perceptibly distinctive levels of tax-
sensitivity. This underlines the significance for giving policymakers with a far reaching
comprehension of the impacts of tax collection rather than concentrating just on the impact at
the mean. Another imperative finding is that the economic significance of the tax is moderately
smaller than that of work productivity and rule of law.
 Last but not least, Ahmed and Giafri (2015) carried out an investigation on the role of
double taxation treaties on attracting foreign direct investment. Double taxation treaties are of
principal significance to cancelling the negative effect of double taxation and to attracting
foreign direct investments to developing countries. In any case, implementing a double taxation
treaty is not something that occur without any forethought. Actually developing countries
invested energy, efforts and other scarce resources to examine, execute and conclude the double
taxation treaties with developed countries. Besides, they do without potential tax revenues, as
such treaties typically considered bargains residence-based over source-based. The forgone tax
incomes and the money invested into invalidations with developed countries in addition to
other execution cost can only make sense if the normal advantages as far as foreign direct
investment out-weight such expenses. A few investigations have uncovered that there is a
positive effect of executing double taxation treaties and attracting foreign direct investment to
developing nations.
References
Ahmed, S. S., & Giafri, R. (2015). The Role of Double Taxation Treaties on Attracting Foreign Direct
Investment: A Review of Literature. Research Journal of Finance and Accounting, 6(12).

Cheng, S. K., & Lalchand, G. (2014). A review on sustainable power generation in Malaysia to 2030:
Historical perspective, current assessment, and future strategies . Renewable and
Sustainable Energy Review 29, 952-960.

Kamaruddin , H., Khalid, R. M., Supaat, D. I., Shukor, S. A., & Hashim, N. (2016). Deforestation and
Haze in Malaysia: Status of Corporate Responsibility and Law Governance. International
Conference on Business and Economics, 374-383.

Mosbah, A., & Saleh, A. M. (2014). A Review of Tourism Development in Malaysia. European Journal
of Business and Management, 6(5).

Muthitacharoen, A. (2017). Assessing the Importance of Taxation on FDI: Evidence from South-East
Asian Developing Countries. Puey Ungphakorn Institute for Economic Research(65).