Moving from GST to SST

Goods and Services Tax (GST) is a tax on most products and services for domestic consumption at every level in the production process.

Sales and Services Tax (SST) are covered by two separate tax laws on a wide variety of goods and services at a single level. Prior to replacement by GST, the sales tax was at 10% and service tax was at 6%.

GST V SST

	GST	SST
Tax revenue	RM45b	RM20b
Tax base	Narrow	Broad
Transparency	High	Low
Tax rate (%)	6	6-10
Tax stage	Multi	Single

Impact of GST to SST will be lower collection to be covered by streamlining expenditure, prioritizing projects and examining new avenues for revenue generation from GLCs and GLICs. SST will be reintroduced on 1 September 2018. SST will be 5% or 10% for sales (goods) and applies to certain manufactured or imported goods at point of manufacturing or import. SST for services is 6% and only for certain services.

Small businesses with turnover of RM0.5 million and above will fall within the SST threshold. This is the same threshold for GST. It is advisable to consider a higher threshold as many small and medium-sized businesses will be impacted. In Australia, the Government increased small business entity turnover threshold from AUD2 million to AUD10 million. It is a major relief for genuine small businesses who just need to get by.

Why don’t we do RM2 million as the new turnover threshold for SST instead of the present RM0.5 million?

Hot Deals for Monday WW31'2018

Welcome to Hot Deals for Monday, where you have opportunities to Buy or Sell!

Opportunity 1

Company dealing in outdoor and gym equipment, has been in business for 15 years.  NTA around RM7.5 mil.  Profit ranging from RM0.5 mil – RM1.0 mil.  Profit guarantee is feasible.  Offering price RM5.0 mil.

Opportunity 2

College in hospitality sector for sale (asking price RM 5 mil).  3 licenses (Penang, KL, and JB)

Opportunity 3

Client looking for profitable assets in consumer products - hair care, home care and personal care.

Opportunity 4

Client looking for confectionery manufacturing and stores in ASEAN - Cakes, Cookies, Ice-creams, Biscuits, Chocolates etc.

Opportunity 5

Lender available for share margin financing, transaction at reasonable terms.

Opportunity 6

We at MP Capital Advisory have a funding institution who is interested to finance property projects of upto RM 30 million over 5 years and at an indicative interest rate of 8%.  Security required is property valued at 2 times or more of the loan.

If you are interested in the above opportunities or would like to offer your hot deals, please contact info@mpcap.com.my or 603 - 2283 1170 for further details!

Bitcoin Block Hashing Algorithm (Part II)

In our previous article (Read more here), we have illustrated the basic core hashing algorithm of Bitcoin using SHA256.  It can cryptograph input messages of any size into a unique 64-character code.  Thus, contracts or transactions could be hashed and distributed on the Blockchain network.

This article will provide an overview of the Bitcoin hashing process using real-world example.  Each Bitcoin transaction info is publicly available on the internet.  One can use the Bitcoin Block Explorer (Read more here) to view the transaction info of every block (ledger) that was registered onto the Blockchain.  For example, the first Bitcoin block was created by the Bitcoin inventor, Sathoshi.  The block info is accessible on the internet and it is commonly regarded as the Genesis Block (Read more here).

As you may have already learnt from the previous article, input message is required to generate the unique hash for this transaction block.  The input message (block header) of Bitcoin transaction comprises of

• Version info
• Hash of Previous Block
• Hash of Merkle Root
• Time
• Bits
• Nonce

For the Genesis block,

• the version info is 1;
• the hash of previous block is 0 because there was no previous block;
• hash of merkle root is ‘4a5e1e4baab89f3a32518a88c31bc87f618f76673e2cc77ab2127b7afdeda33b’, which is the hashing results of the transaction details such as someone sending some bitcoins to another party. (Read more here);
• the time when the transaction was accepted, which was 2009-01-03 18:15:05;
• the bits that was provided by the algorithm to adjust the difficulty of the “mining” task, depending on the number of “miners” participating in the process, for this case was 486604799; and 
• finally the nonce, which is a guessing number that was “mined” by the miners.

The nonce is a moving target and depends on time, bits and merkle root, which are updated roughly every ten minutes.   The successful miner is the one who could guess the nonce that will produce the output hash of certain length of leading zeros.   For the Genesis block, the nonce is 2083236893.  The following diagram shows the flow of the hashing and mining process.

The hash for Genesis block is ‘000000000019d6689c085ae165831e934ff763ae46a2a6c172b3f1b60a8ce26f’.  It has 10 leading zeros.  At the time of this article was written, the target leading zero for new hash was 18.

As we can see from the above diagram, every new block incorporates the info from a previous block.  Thus, changing a small info from a block that sits in the middle of the blockchain without impacting the entire chain is impossible.  As such, once the transaction is registered on the blockchain, it is theoretically irreversible. 

How to Prepare Your Company for Artificial Intelligence (AI) and Big Data Era?

The 2018 NewVantage Partner’s annual executive survey, published on 8 Jan 2018, represented about 60 Fortune 1000 or industry-leading companies.  The survey showed that 97.2% of executives report that their companies are investing in building or launching AI and big data initiatives.  About 76.5% of the executives agree that extensive availability of quality data is what has empowered AI and more so cognitive initiatives within their business.

In a recent survey conducted by IDC titled IDC Asia/Pacific Enterprise Cognitive/AI survey, 34% of organisations in Malaysia have plans to adopt AI within two years.  The Malaysian government also plans to develop a National Artificial Intelligence (Al) Framework, an expansion of the National Big Data Analytics (BDA) Framework.

The two key obstacles that hinder companies from adopting AI and big data are high cost of investment and lack of skillsets.  However, companies could prepare themselves to be “AI and Big Data ready” instead of adopting a “wait-and-see” approach.

Tang, General Manager of TechCode's Global AI+ Accelerator Program, listed out “5 Steps to Adopt Artificial Intelligence in Your Business” which are as follows:

1.      Get Familiar With AI (links at the bottom of this article)

2.      Identify the Problems You Want AI to Solve

3.      Prioritize Concrete Value

4.      Acknowledge the Internal Capability Gap

5.      Bring in Experts and Set Up a Pilot Project

Step 1 to 4 do not require large investment cost, it is part of your organization’s process.  Step 5 may incur some minimal investment and the cost could be further reduced by engaging a local consultation firm.  We at MPCA could help your company to follow through the above steps, please contact info@mpcap.com.my or 603 - 2283 1170 for further details.

Online AI and Big Data Resources:

·        Udacity's Intro to AI course and Artificial Intelligence Nanodegree Program

·        Stanford University's online lectures: Artificial Intelligence: Principles and Techniques

·        Intel AI Academy

·        Follow MY MPCA blog 😊

No Bespoke Brexit Deal?

Theresa May’s bespoke (“made to order”) Brexit deal may not happen with weeks to go in negotiations. The U.K. may have to choose between a Norway-style Brexit or a Canada-style Free Trade deal. In the Norway-style Brexit, the U.K. will remain in the single market and accept EU rules with little influence in shaping it. In the Canada-style free trade deal, it would please Brexiteers but British businesses will strongly oppose it.

Downing Street wants to do a modified Norwegian model. The idea is to have frictionless trade (for goods) and an open Irish border whilst satisfying the Brexiteers. Theresa May has to water down her previous insistence that with Brexit, the European Court of Justice will have no influence in the U.K. The reverse is the case with a closer relationship with Brussels after leaving the bloc.

What is the cost? Each of the government’s four Brexit scenarios, including a bespoke deal would leave Britain poorer and cost the taxpayers millions of pounds each week. Global Futures estimates the government’s preferred option – bespoke deal will cost about £40 billion per year. A summary table shows the following:

	Net Additional Borrowing in 2033/34 (£)	Cost per week in 2033/34 deflated to 2018 prices (£)
1. EEA (European Economic Area)	17b	262m
2. FTA	57b	877m
3. WTO	81b	1.25b
4. Bespoke Deal	40b	615m

                              Source: Global Futures

Already British households are more than £900 worse off after the vote to leave the EU (Governor, Bank of England).

What about trade? Does it matter? Over 43% of U.K. exports in goods and services are to other countries in the EU (about £240 billion) and 54% (£320 billion) of all U.K. imports is from Europe.

Does it matter to Malaysia? Yes, if you look at the free movement of goods and services in Europe via U.K. It may no longer be there with bespoke Brexit. In 2017 we exported RM9.65 billion to the U.K. and imported RM6.73 billion. Some of which may have been re-exported or re-imported with other European nations. EU (excluding U.K.) exported RM73.1 billion to Malaysia and imported RM85.6 billion from Malaysia. This second part may not be impacted by Brexit. But we need to be nimble to reduce impact of any form of Brexit, proceeding from March 2019.

"Helsinki Summit"

From NATO meeting in Brussels, President Trump left for Helsinki to meet Putin of Russia. No one knows what was discussed between the two men for one and a half hours. But we have the transcript from the translators present. And it goes like this:

Trump	:	Mr Putin, I am delighted to meet you here in Helsinki and especially when relations between our two countries are not at all cordial. Thank you for coming, even if it is a little late, I might add.
Putin	:	Of course, I am keen to meet you, especially now that you are the President. I tell you it was not that easy for us to fix your election. But I with my team of “cyber-scientists” did it. I was late because I had this new doll who did not want me to come. It took a little persuasion for me to be released.
Trump	:	Congrats on your World Cup performance. It was so well organised and no incident throughout. And what a performance by your Russian team.
Putin	:	It was not a problem. With my KGB background, everyone coming was screened. We have files on everyone. You know it may come useful someday in the future. And it was a great excuse to clean-up the cities and get Russians to smile again. You know Russians don’t like to smile, unless they have Vodka.
Trump	:	I am here to discuss three critical things:
		(i)    roll-over of my USD1.0b loan to 2021;
		(ii)  return of those dirty pictures you have about me with a prostitute in Moscow; and
		(iii) New Trump hotels in Russia
Putin	:	Listen, I have no problems with (i) and (iii), but (ii) is non-negotiable. I need it keep for our relationship to be cordial. We welcome more investments into Russia or we could do it your way – we build the hotels and then we pay you royalty for using your name – “Trump” on the hotels. How is that?
Trump	:	I think your idea on the hotels is great! I need USD10 million per year royalty on each hotel you build with my name on it! Is that okay? On (ii), could you just keep it your red file, please, please? Melania must not know of it! On (i), I appreciate your roll-over and rolled-in interest! That’s a great deal.
Putin	:	You have my word as a KGB officer and President of Russia, that your dark secret is safe with me. And your figure of USD10 million for royalty is tough but I accept it for good relations. Can I come over to Washington to confirm all the above?
Trump	:	I am delighted to invite you to the White House. What a pleasure to see you again. Mr President, when we leave this room, you and I will not speak of those three points I told you earlier. We will just talk about nuclear weapons, China, North Korea and easing tensions in Europe.
Putin	:	Of course, we keep private issues private. And we speak in generalities on other world matters for your American press. You just keep saying Russia never interfered in 2016. And I hope to see you soon.
Trump	:	Thanks for this lovely time and I really admire how strong you are! I would like to see you again!

That’s the end of the transcript (We don’t have an official version but that’s the figment of this writer’s imagination).

NATO Funding: What is the Issue?

President Trump accused America’s NATO allies of “....not paying what they should”. NATO is based on collective defence – an attack on one or more is considered an attack against all (something like “The Three Musketeers”!). Treaty members target spending 2% of economic output (GDP) on defence – but that is just a guideline. There is no penalty for not meeting the guideline. Each country (in the 28 member alliance) decides how much to spend and how to use the money.

The North Atlantic Alliance has its own military budget of Euro 1.29 billion. This is used to fund some operations, finance the command centre and also for training and research. The Alliance also has a civilian budget of Euro 234.4 million to fund NATO Hq. in Belgium and its administration.

Only 5 members meet the 2% target – the U.S. Greece, Poland, Estonia and the U.K. Among the rest, the larger economies like Germany, Italy and Canada are well below the target. In 2016, 22 of 28 NATO members increased their defence budgets. Overall, spending rose by 2.9%.

Why spend? Fear of Russian aggression. So the border states of Latvia, Lithuania and all splurged in 2016. But is there another Trump hidden agenda? To boost sales of U.S. defence manufacturers – Lockheed Martin, Northrop Grumman, Boeing and the like? We will never know for sure but a businessman is always a businessman.

What about Malaysia? We provide 1.1% of our GDP on defence. Under the previous Government, we had equipment that may not be combat ready, planes that may not fly and submarines that may not submerge. And who is our enemy? Singapore? Indonesia? Or, China? More likely it is the bandits from Mindanao!

Hot Deals for Monday WW30'2018

Welcome to Hot Deals for Monday, where you have opportunities to Buy or Sell!

Opportunity 1

Company dealing in outdoor and gym equipment, has been in business for 15 years.  NTA around RM7.5 mil.  Profit ranging from RM0.5 mil – RM1.0 mil.  Profit guarantee is feasible.  Offering price RM5.0 mil.

Opportunity 2

College in hospitality sector for sale (asking price RM 5 mil).  3 licenses (Penang, KL, and JB)

Opportunity 3

Client looking for profitable assets in consumer products - hair care, home care and personal care.

Opportunity 4

Client looking for confectionery manufacturing and stores in ASEAN - Cakes, Cookies, Ice-creams, Biscuits, Chocolates etc.

Opportunity 5

Lender available for share margin financing, transaction at reasonable terms.

Opportunity 6

J-V for solar plants totalling above 1,000MW.  Terms for discussion.

Also looking for new solar projects in Asia.

Opportunity 7

We at MP Capital Advisory have a funding institution who is interested to finance property projects of upto RM 30 million over 5 years and at an indicative interest rate of 8%.  Security required is property valued at 2 times or more of the loan.

If you are interested in the above opportunities or would like to offer your hot deals, please contact info@mpcap.com.my  or 603 - 2283 1170 for further details!

Bitcoin Block Hashing Algorithm (Part I)

By now, most people may have already heard about Bitcoin and Blockchain, knowing that it could be described as “distributed ledger”, with the characteristic of irreversible, pseudonymous, global and secure.  Another interesting characteristic of Bitcoin or Blockchain is the “mining” process.  The reason behind the irreversible and secure characteristics of Bitcoin and Blockchain is that for each transaction block to become valid, it requires huge computing power to solve the hash algorithm.

 

The “miner”, could be anyone whom has the computing power to solve the algorithm.  They are competing among each other to solve the hash.  The winner (the first one who solves the hash) will be rewarded with some amount of new Bitcoin, generated automatically by the Bitcoin Blockchain algorithm, and also transaction fees.

The core hash algorithm is based on SHA256.  Secure Hash Algorithm, is a set of cryptographic hash functions designed by the United States National Security Agency (NSA) (Read more here).  It is designed in a way that the input messages of almost any size (over 18 quintillion different values) are converted into a unique 64-character long code in hexadecimal format.  And the one-way process means it is impossible to obtain the input message by knowing the unique 64-character long code.  A simple analogy of this process is colour mixing.  One can produce a new unique colour by mixing various colours, but one cannot “unmix” the new unique colour back to their individual component.

Let’s look at some simple examples of SHA256 hashing using either the following Python script (a programming language) or an online hashing tool (Read more here)

 

The input message “abc” is hashed using SHA256 and the output of the hash is ‘ba7816bf8f01cfea414140de5dae2223b00361a396177a9cb410ff61f20015ad’.

A miniscule change to the input message will significantly alter the output hash.  For example, changing the ‘c’ of the input message to capital ‘C’ will produce an entirely new hash output '0a2432a1e349d8fdb9bfca91bba9e9f2836990fe937193d84deef26c6f3b8f76'.

Using the same approach, the entire Universal Declaration of Human Rights (Read more here) can be hashed into ‘c08345541d77c256c914d0ada1ea02497c7525efe0e5699d6ef6126a66b4ee59’.

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As such, any contracts, agreements or transactions could be cryptographed and distributed on the Blockchain network with its unique tampered proof hashing algorithm.  In the next article, we will illustrate more real-world examples of Bitcoin transaction algorithm.  Stay online!