MANY POTENTIAL TAX AVENUES
However, experts call for govt to engage with businesses and stakeholders before introducing changes
THERE are many tax avenues the governmentmay consider to bridge the gap between the country’s revenue and deficit level, say tax experts.
Among the avenues are on vehicle ownership, luxury goods, sugar, inheritance, windfall, state consumption, Real Property Gains Tax (RPGT), digital tax, as well as tax on high-income earners.
However, before making fundamental changes to the tax system, the experts said engagements with a wide range of businesses and other stakeholders should be made to enable a thorough review of the proposed new tax to ensure it is not counterproductive.
Last week, Prime Minister Tun Dr Mahathir Mohamad said the government intended to introduce new taxes to generate additional revenue in an effort to repay its high debt.
He said the new tax would be “different tax but it would reduce the people’s burden”.
Ernst & Young Tax Consultants Sdn Bhd director Jalbir Singh said the government could consider introducing a system where only drivers with certificate of entitlement (COE) might be entitled to buy or own a car in Malaysia for a number of years, where the rates would be based on the engine capacity of the car.
He said based on a rough online statistic, Malaysia had about 15 million registered drivers this year.
Assuming that 10 per cent of the registered drivers own a car with the engine capacity which exceeds 1,600cc, the government may expect to receive about 45 billion every three years.
New consumption tax mechanism like sin tax can be levied on luxury goods imported or manufactured in Malaysia, such as car, cigarette, liquor and sugar tax ,which can be levied on the consumption of foods and beverages with high sugar level.
He said another form of tax, which is inheritance tax, could be levied on property and money acquired by gift or inheritance, regardless if a person was alive or deceased.
“Windfall tax can also be levied on windfall income like money from gambling, which is currently not taxed, whereby franchise tax can be levied at the state level against businesses and partnerships chartered within that state,” he said.
On the RPGT, Jalbir said the government could consider having a fixed rate tax for three years, where the rates will gradually decrease over a period of time (if the property is sold within the first three years the rate would be 40 per cent, and the rate will decrease to 25 per cent in the fourth year).
“Alternatively, the government may consider lifting the threshold for locals and placing a threshold for foreigners in the Klang Valley of RM2 million (worth of properties) and increase import duty and excise duty rates for luxury items.”
Meanwhile, Deloitte Malaysia Country Tax Leader Sim Kwang Gek said with the recent boom in digital and e-commerce services, the government might want to consider a form of digital tax in view of technological developments, where business can be carried out anywhere without the need for a physical presence.