Focus View
Time to cut corporate taxes
FocusM team | 02 Feb 2018 00:30
When delivering his inaugural State of the Union address, US President Donald Trump boasted about the effect his bold corporate tax cut has had on the economy. By bringing down corporate taxes from 35% to 21%, “Trumponomics” is showing the rest of the world how to stimulate the economy quickly.

Immediately after the announcement, dozens of companies began sharing their “gains” by giving bonuses to their employees. Some companies have announced the opening of new plants and even giving a pay rise. Some three million Americans are said to have benefited from the bonuses.

Back home, our economic situation is nothing to shout about. The inflation rate rose to 3.5% in December. Last week, the central bank raised the overnight policy rate (OPR) to 3.25%.

Retail petrol prices increased by two sen while retail diesel prices went up by three sen on Feb 1. In January, the Malaysian Employers Federation said more than 50,000 Malaysians may lose their jobs this year.

All these are putting undue strain on the man in the street, shrinking household disposable incomes.

Despite many assurances by the authorities, our economy is still not on firm ground yet. Perhaps it is time the folks at the Ministry of Finance take a leaf out of Trump’s book by considering a cut in corporate taxes?

At 24%, our corporate tax is at its lowest historically and has been maintained at this level since 2015. However, the rate is still considerably higher than in regional peers such as Singapore and Hong Kong. Since most other economic strategies are having slow results, lowering corporate taxes may have an immediate impact.

Companies may be more willing to share their gains with their employees, increasing disposable income in the process. Lower corporate taxes will also spur both domestic and foreign direct investments, giving a huge fillip to the economy.

“Trumponomics” seems to be working in the US. The concept may well work in Malaysia too. After all, the government is already collecting billions through the Goods and Services Tax. So, there is little excuse not to bring down corporate taxes.