Any impact on the market caused by the implementation of the capital gains tax (CGT) will be temporary, experts say in welcoming the proposal recently mooted by Putrajaya.
They said most developed countries had already implemented the CGT, and that it was time for Malaysia to embrace a progressive tax system that is more efficient.
“If you look at most developed countries, their taxation system is more progressive where the higher income groups pay more taxes,” analyst Zulkiply Omar told MalaysiaNow.
He said in Malaysia, the taxes imposed on wealthier groups were not appropriate.
“So in terms of wealth distribution, it is not very balanced and this will affect economic growth,” he added.
“If foreign investors want to invest in developed country markets, they will also be subject to CGT.”
Last month, Deputy Finance Minister II Yamani Hafez Musa said the government was considering imposing a one-off higher tax rate on companies that made extraordinary profits during the Covid-19 pandemic.
The move drew opposition from former finance minister Lim Guan Eng, who said it could make the Malaysian market less competitive.
Zulkiply said while a CGT would have an impact on foreign investors and the stock market, it would only be temporary.
“If foreign investors want to invest in developed country markets, they will also be subject to CGT. So it is not a cause for worry.”
He said it was also mere speculation to suggest that foreign investors would shun Malaysia due to a CGT.
Prominent taxation expert Veerinderjeet Singh said any negative reaction to the market caused by CGT would be expected.
“Market reactions will always be negative especially involving announcements of new taxes as it means the profits generated will be taken by the government.
“Generally, it means fewer returns to investors,” Veerinderjeet, who heads the Malaysian Institute of Accountants, told MalaysiaNow.
But Veerinderjeet said the implementation of CGT should start with other assets such as real estate, rather than shares listed on the local exchange.
He suggested that the current real property gains tax be combined with income tax under one legislation.
He said by doing this, the corporate income tax, which now stands at 24%, could be reduced to 10%.
He also said that as the country records higher growth and revenue, the government could then consider extending CGT to stock transactions.