PETALING JAYA: The government must find a way to widen its revenue base without compromising the country’s unique business environment that attracts investments, according to experts.
For instance, Deloitte Malaysia CEO Yee Win Peng said, the government has to decide if the introduction of the capital gains tax (CGT) would result in more Malaysian startups and entrepreneurs moving abroad to build their businesses.
“If that happens, we stand to lose more than we gain,” he said at the Chartered Tax Institute of Malaysia (CTIM) seminar on Budget 2023 here today.
The CGT and a luxury goods tax (LGT) are among a host of initiatives the government has announced under the new budget to increase its revenue.
Apart from that, high-voltage users and multinational corporations (MNCs) will now have to pay 20 sen per Kwh, up from three sen.
Yee pointed out that businesses that began as two-dollar companies eventually grow into billion-dollar enterprises. “They create job opportunities, invest in R&D and create far-reaching domestic supply chains,” he said.
He said the country needed to preserve these value chains. “If you want to introduce CGT, it must be at a more modest rate,” he said.
Socio-Economic Research Centre executive director Lee Heng Guie argued that simplifying the tax system to ensure that more individuals and businesses were able to come forward was more sustainable than raising taxes on the rich.
“We need a tax system that encourages SMEs to continue to want to invest and attract new companies to Malaysia,” he said.
Lee said it also has to be simple enough so that companies and individuals would come forward to pay their fair share.
“This ensures that revenue is generated to sustain government spending,” he said.
Only 1.3 million Malaysians currently pay taxes to support a population of 33 million people.
CTIM deputy president Soh Lian Seng urged the government to go further than just reducing corporate tax on SMEs.
“The reduction in the tax rate (to 15% on the first RM150,000 in income) is a big boost for SMEs and MSMEs,” he said. However, he added, the reduction should be extended for earnings of up to RM1 million.
Soh said the government would have to introduce a mechanism to enable tourists to reclaim the taxes they have paid on luxury goods to ensure that the country remains a preferred tourist destination.
“The government must also ensure that the CGT does not result in Malaysians going abroad to make luxury purchases,” he added.
Lee said that while the government’s tax framework seeks to make sure that the rich are paying their fair share, it is important that the rich do not feel like they are being targeted for their success.
Instead, he argued, cultivating an environment where businesses are allowed to flourish and productivity levels increased would deliver more sustainable and long-term revenue growth for the government.
Yee also stressed the importance of using the additional revenue from taxes to create a more supportive business environment.
“Moving forward, we need to use this revenue to upgrade our basic infrastructure: roads, airports, seaports because most MNCs are export oriented,” he said.
He added that the government could also use the increased revenue to expedite applications for government permits and licences by integrating more digitalisation into the processes.
Source: https://www.freemalaysiatoday.com/category/business/2023/03/13/raise-revenue-without-losing-investors-govt-urged/