MARC: NOT EFFECTIVE TO IMPOSE CERTAIN NEW TAXES

‘Not much gains in inheritance tax while capital gains tax can affect investor sentiment’

THE government may be in urgent need to raise additional revenue, but introducing certain new taxes will not be effective to make up for the shortfall from the abolishment of the Goods and Services Tax (GST).

Malaysia Rating

Corp Bhd (MARC) said imposing an inheritance tax would not be effective in generating much revenue, while taxes on capital gains for financial market transactions could affect investor sentiment.

MARC was commenting on reports that the government would be studying the viability of imposing inheritance and capital gains taxes.

This followed the urgent need to raise additional revenue in the medium- and long-term arising from the abolishment of GST in June. The estimated RM20 billion to RM25 billion gap in revenue would be met by additional taxes, according to the government. Economists said several options had been considered. They included taxes on foreign providers in the digital economy, higher property stamp duties for foreigners and sin taxes.

MARC said current tax incentives given to different industries could be made conditional, perhaps based on productivity improvements.

The rating agency said taxes on property transactions (higher stamp duty for foreigners) and foreign providers in the digital economy were likely to be introduced, although their effectiveness would depend on the details.