Govt didn’t tax the rich to avoid loss of investment

KUALA LUMPUR: The government’s decision not to introduce new taxes, or increase existing ones, on the rich is to avoid having investments being pulled out of the country.

Finance Minister Lim Guan Eng said the government’s tax reform committee had, prior to the tabling of the 2019 Budget, held discussions with stakeholders to discuss the matter, and had been advised against doing so.

He said Bank Negara Malaysia (BNM) and Securities Commission Malaysia (SSM) in particular had expressed worry that should new taxes, including a capital gains tax, be introduced, it would affect the country’s finances.

“They were worried that the returns the government would receive (through taxes on the rich) will not be balanced to the impact it will have on the capital market and our financial standing.

“If we went on and introduced in a time where our fiscal position is quite challenging, it will only spook the market.

“This is why BNM and SSM were against the idea of a capital gains tax or even an inheritance tax, as we would incur more losses from capital outflow,” he told the Dewan Rakyat, here, today.

He was responding to a supplementary question from Hassan Abdul Karim (PH-Pasir Gudang) on why the government was not willing to introduce new taxes on the “super-rich” despite the ever-increasing wealth disparity between the rich and the poor.

Lim also pointed out that other neighbouring countries in the region also did not have such taxes imposed on those in the higher income bracket.

“We must be too eager until we affect our own finances. That is why when trying to control our deficit, we decide to take about three years, and not immediately. Otherwise, it will only spook the system,” he said.

Earlier, when commenting on the excise tax on sweetened beverages that would be introduced beginning April 1 next year, Lim said the rate of 40 sen per litre was not as burdening to the rakyat while allowing the government to generate extra income.

He said the introduction of the tax was not to stop Malaysians from consuming sugared drinks altogether, but merely to discourage them.

“We know that this is the only step we can take to reduce consumption of sweetened drinks. We want to allow the public to consume them, but moderately.

“At the same time, we get to generate further revenue for us,” he said.