WHILE tax experts agree that the Government should expand its revenue base, they disagree on the need to implement the capital gains tax and inheritance tax.
“I disagree on bringing in the capital gains tax because it’s an outdated way of taxing people. It’s very difficult to compute as well,” K Consult Group CEO Koong Lin Loong told FocusM.
Recently, news daily The Star reported Inland Revenue Board (IRB) chief executive officer Datuk Seri Sabin Samitah as saying that Malaysia should consider introducing the capital gains tax to increase revenue so that the nation can on par with other countries in the region.
Another expert has called for the Government to introduce the inheritance tax in order to curb capital flight.
Malaysia used to have the Estate Duty Enactment 1941 which served like the inheritance tax. However, it was abolished 1991. At the time, assets of a deceased individual, valued beyond RM2 mil, was subject to an estate tax between 0.5% and 10%.
Elaborating on capital gains tax, Koong said the new proposed tax system would spook investors and erode business confidence in Malaysia.
“Even if the Government decides to go ahead with it, it has to be a targeted scheme like buying and selling particular type of assets.
“If you push it across the board, it will definitely affect foreign-direct investments (FDI),” he said.
Boost business confidence first
On inheritance tax, Koong said there was no point to reintroduce something that was abolished back in the 1990s.
“And I reiterate, if the Government decides to go ahead with, please have a higher taxable threshold so that the middle-income group and below can transfer assets to their loved one without being affected.
“My suggestion will be to tax assets above RM10 mil as it makes more financial sense in this era. Plus, the percentage should not be too high as our currency is not as strong as what it used to be.
“Perhaps, we can start with 0.5% and have a higher quantum based on the asset value,” he said.
In general, Koong said he was against any new tax regime and urged the Government to improve its delivery and procurement systems, in order to attract new businesses to flourish.
“In simple terms, we should look into ways to retain domestic-direct investments (DDI) and attract FDI. When we have that, the Government’s revenue will increase from corporate taxes.
“And with more businesses coming in, more jobs will be created for the locals. With that, the Government’s revenue will also increase from income taxes,” he noted.
With the arrival of expatriates to work in Malaysia, it will also increase the Government’s revenue as the former would be paying taxes too.
“Transfer of technology will happen and salaries will increase. Sooner or later, we will become a high-income nation.
“For all that to happen, it is also important for the Government to curb corruption and plug leakages, which will help businesses to grow stronger,” added Koong.
Stem corruption, be accountable
Tricor Malaysia Sdn Bhd chairman Veerinderjeet Singh said that the Government should overhaul its taxation system to make it more sustainable, instead of introducing new ones.
“Timing is very important when it comes to introducing new taxes and this is not the right time.
“The Government should also allow people to have a proper transition period before imposing a new tax. Don’t just announce it today and say it will be implemented next year,” he pointed out.
If there is a need to introduce the capital gains tax, Veerinderjeet said it should be at a lower threshold so that investors would not lose confidence in Malaysia.
“Some nations exclude trading of shares under capital gains tax to boost investors’ confidence,” he said.
On inheritance tax, Veerinderjeet said it would help the Government earn more revenue but it would not be that much.
“What is needed now is to cut down corruption and greater accountability on how taxpayers’ funds are being spent,” he added. – Dec 8, 2020
