The Malaysian government will not be introducing capital gains tax on shares and other taxes on the wealthy, said Finance Minister Lim Guan Eng. He said that this is to prevent capital flight from the country, and that such a move would be a “shock to the system”, which will not help with Malaysia’s fiscal and financial recovery.
The Tax Reform Committee had recommended against the move, over concerns expressed by Bank Negara Malaysia (BNM) and the Securities Commission (SC) on its negative repercussions on the country’s capital and financial markets.
“Bank Negara and the Securities Commission opposed the move to introduce capital gains tax on shares and the inheritance tax, as the revenue (to government) will not commensurate with the loss from the massive capital flight that may occur,” he said.
Lim said this during a parliament session, answering a supplementary question from Hassan Abdul Karim (PH-PKR-Pasir Gudang) on why the current and past governments seemed afraid to tax the rich via capital gains tax on shares and inheritance tax, among others.
He said that they should also be concerned about keeping Malaysia competitive with its neighbours. He noted that neighbouring countries has no such forms of taxes such as capital gains tax on shares.
“We must not get too carried away to the extent that it shocks the system. That is why the government foresees three years to tackle overall deficit and not immediately.
“If it (taxation) is done too suddenly, the system would be in a state of shock. That would jeopardise fiscal and financial recovery (of Malaysia).
“We need to get back on track, ensure Malaysia is free from kleptocracy and it (Malaysia) recovers to become a normal democracy,” he said.
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Source: NST, The EdgeMarkets