PETALING JAYA: The unity government will look at reducing the subsidy bills sequentially, says newly appointed Treasury secretary-general Datuk Johan Mahmood Merican.
He noted that it will not be an easy job to move towards the targeted subsidies, although talks have been ongoing for some time.
“In terms of sequencing, we have already seen the government maintaining electricity pricing for all households and small and medium enterprise (SME) businesses, but increased for all large companies,” he said at the annual post-Budget 2023 debate organised by the Malaysian Economic Association here yesterday.
Johan indicated that the government might be looking at reducing its electricity tariff subsidy for the higher income households in the second half of this year.
“If we release all of our subsidies (in one go), inflation will then go double digit,” he pointed out.
He also believes that the recently retabled Budget 2023 has provided some information on the shift in policies in several directions, particularly in tax structures.
This includes the introduction of luxury goods tax on items such as luxury watches and fashion items, with more information which still have yet to be revealed.
On this note, he said the government needs time, at least till the middle of this year, to decide on the list of items as well as the threshold value that is characterised as luxury goods.
Meanwhile, the government is also looking to conduct a study to introduce a low-rate capital gains tax for the disposal of unlisted shares by companies from 2024.
According to Johan, the introduction of capital gains tax comes back to the question of social justice, which is one of the three main pillars in the unity government’s maiden budget.
“Is it fair that almost all wage earners pay tax, whereas entrepreneurs who are able to structure their gains as capital gains pay no tax?” Johan asked, suggesting that there is a disparity.
Of the 15 million labour force, he noted that Malaysia only has 2.5 million taxpayers.
Additionally, he said there are only about 150,000 people that earn RM20,000 and above a month.
“I am fairly sure there are more than 150,000 entrepreneurs who are earning more than RM20,000 a month,” he noted.
On the goods and services tax, Johan said the government had no plans to introduce it owing to the rising cost of living, which might be an additional burden to the B40 group.
Commenting on ways to attract foreign direct investments (FDIs), Johan believes that tax incentives are no longer the top most factor looked at by foreign investors.
“They are looking at ease of doing business, talent availability as well as infrastructure for trade.
“But we can’t just discard tax incentives because every country is fiercely competing for FDIs,” he said.
Source: https://www.thestar.com.my/business/business-news/2023/02/28/govt-looks-at-reducing-subsidy-bills-sequentially