AffinHwang: Unlikely for CGT, inheritance tax in Budget 2019

KUALA LUMPUR: As the Tax Reform Committee (TRC) has just been established, Affin Hwang Investment Bank Bhd (AffinHwang Capital) believes it is unlikely for the government to announce the inheritance tax and capital gain tax during the Budget speech on November 2, 2018.

In the mid-term review of the 11th Master Plan (11MP), government revenue has not kept pace with the economic growth as evident by the downward trend of tax buoyancy since 2012, dropping from 2.2 in 2011 to 0.5 in 2017.

Both Prime Minister Tun Ma hath ir and Finance Minister Lim Guan Eng previously acknowledged recently that new tax measures will be announced in the upcoming Budget 2019 to support Government finances. There are market speculations that a number of possible taxes include inheritance tax, capital gain tax, health and environment tax( soda and carbon taxes) as well as digital tax.

However, AffinHwang Capital in its Budget 2019 expectations report yesterday believed they would not likely introduce both taxes yet as studies will be ongoing and implementation may not be so soon.

“The inheritance tax was previously implemented in Malaysia under the Estate Duty Enactment 1941, which was repealed on November 1, 1991 during Tun Ma hath ir’ s premier ship ,” it detailled.

“At the time, estate duty was charged at scale rates of zero, five and 10 per cent. It was not applicable to estates with a value below RM2 million, while the highest tax rate of 10 per cent applied to estates valued at over RM4 million.

“Most developed economies implement the inheritance tax, where the collection contribute approximately 0.5 to one per cent of their total Government revenue.”

Meanwhile, the capital gain tax, where investors are taxed on the amount of profits gained from disposal of their investment assets, is a common tax system in most advanced economies.

The tax is usually differentiated between short-term and long-term investment gains, where long-term investment is defined by assets

In Malaysia currently, the capital gain tax is only imposed on real estate, where the RPGT is imposed on 30 per cent of profits if disposed in the first three years, 20 per cent if disposed in the fourth year and 15 per cent if disposed in the fifth year and no tax will be imposed if disposed afterward.