'Wealth tax, capital gains tax may cause more damage than benefit'

PARLIAMENT | The government is concerned that the negative outcomes of imposing wealth tax, inheritance tax, capital gains tax and higher corporate tax would outweigh the revenue generated by these taxes.

Finance Minister Lim Guan Eng said this was why the government is not considering implementing these taxes right now.

"That suggestion is not being prioritised by the (tax reform) committee.

"After we received feedback from various stakeholders, including Bank Negara Malaysia, Securities Commission and the Finance Ministry itself, the concern is that the returns (from these taxes) for the government would not be equal to the negative effects on the capital market and financial situation," Lim said in the Dewan Rakyat today.

He was responding to a question from Hassan Abdul Karim (Harapan-Pasir Gudang, photo), who questioned why the government appeared to be "afraid" of imposing or increasing taxes on the rich.

Lim explained that Malaysia is currently facing a challenging fiscal situation and imposing such taxes would shock the capital market.

Specifically, he said, Bank Negara and the Securities Commission are concerned that a capital gains tax and inheritance tax would cause a higher capital output relative to the government revenue from these taxes.

It is not just the country's fiscal situation they are worried about, Lim said, but also about keeping Malaysia competitive with its neighbours.

"If you look at our neighbouring countries, our neighbours do not have such taxes, specifically the capital gains tax.

"What we need to do now is not to be too excited until we shock the system.

"That is why when it comes to controlling the deficit system, the government decided to take three years to do so and not immediately.

"If we do this suddenly, it will shock the system (and) if it is in a state of shock, it will damage the healing process of our fiscal situation," he said.

However, Lim suggested that Hassan could submit his own proposals to the tax reform committee on this.

Earlier, Ronald Kiandee (BN-Beluran) asked why the government decided to impose an excise tax on sugar-sweetened beverages as this would further burden the rakyat.

Lim defended the move, saying that this is done internationally, to encourage lower consumption of sugar.

The government wants to ensure that sugar is used prudently, he said, and it is also an effort to broaden the country's revenue sources.

"That is the message from the government, that we should move towards decreasing sugar content in our food and drinks," Lim added. - Mkini

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