Anxiety over new taxes
Experts: Introduction should be progressive so that it doesn’t burden Malaysians
The Budget 2019 that will be unveiled in less than a month will introduce new tax measures. This has sparked off anxiety among businessmen, investors and fund managers who fear inheritance or capital gains tax, but welcome new taxes on those operating in the new economy.
KUALA LUMPUR: There will be new taxes in the upcoming Budget 2019.
Prime Minister Tun Dr Mahathir Mohamad, Finance Minister Lim Guan Eng and Bank Negara Governor Datuk Nor Shamsiah Mohd Yunus all spoke of the new forms of taxes to be introduced as part of the government’s effort to restructure the economy and to pare down its elevated debt levels in the one-day conference on “Malaysia: A new Dawn”.
They however did not go into details, which has left investors and fund managers scrambling for clues. They felt that matters on taxes should be implemented carefully so as not to restrict businesses.
RHB Research Institute vice-president and head of economics research Peck Boon Soon said that the introduction of new taxes should be a well thought out affair.
“For instance, a tax on inheritance or a capital gains tax is not recommended. These new taxes, if implemented, will be quite negative for Malaysia in the longer term as it will affect people’s mindset of Malaysia as an investment destination,” said Peck at one of the sessions held at the sidelines of the conference.
Apart from taxes, the government is also looking at other fiscal measures, including the sale of non-strategic assets such as shares and land, as well as the leasing of government assets and buildings to reduce the RM1 trillion national debt.
News of additional tax measures was the main topic of conversation among the participants at the conference.
Economists and fund managers support the government’s plan to widen the tax base for a sustainable public purse and to resolve the country’s RM1 trillion debt dilemma.
However, they felt that any new tax structure to be introduced by the government should be progressive in nature, taking into consideration the potential tax burden on the low- and middle-income earners.
Some of the suggestions for new tax measures that the government should consider are:
1) impose a stamp duty on foreigners who buy property in Malaysia;
2) a tax on business that operate in the new economy such as online sales of goods and services; and
3) a carbon tax to help the country reach the target of sourcing 20% of its energy needs through renewable energy.
Maybank Kim Eng Research senior economist Chua Hak Bin cautioned that not all types of taxes may be feasible for Malaysia.
He said that certain taxes such as the inheritance tax and the capital gains tax (CGT) may turn counter-productive on the economy.
Although the ruling government has not hinted on introducing an inheritance tax nor was it part of Pakatan Harapan’s manifesto for the 14th General Election (GE14), it is worth noting that the tax was part of the now defunct Pakatan Rakyat’s 2015 alternative budget.
Pakatan Rakyat, which was disbanded in 2015, is the predecessor of Pakatan Harapan.
As for the capital gains tax, Pakatan Rakyat proposed the measure in its 2015 alternative budget, although it was not mentioned in Pakatan Harapan’s GE14 manifesto.
Chua suggested that the government impose a higher stamp duty on property purchases of foreigners as one of the possible tax measures to raise national revenue.
“Currently, Malaysia has a threshold on the minimum property value allowed to be purchased by foreigners, but the government cannot collect any money based on this threshold.
“So, through the proposed higher stamp duty, the government could benefit from the previously untapped opportunity.
“Maybe the government can apply a higher stamp duty, say 20%, on foreigners’ property purchases below RM500,000. And for purchases above RM1mil, maybe a rate of 10%,” he said.
Another panellist, Asian Develop- ment Bank principal economist Bernard Ng, floated the idea of a “carbon tax” in Malaysia.
A “carbon tax” basically refers to a tax on fossil fuels, especially on major polluters, intended to reduce the emission of carbon dioxide.
Aside from strengthening the national revenue, Ng said that such a tax would benefit the environment and facilitate the country to achieve its aim of cutting carbon emissions by 45% by 2030.