Dividend suppression seen with prosperity tax in Budget 2022 — Maybank Investment

Dividend suppression seen with prosperity tax in Budget 2022 — Maybank Investment
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KUALA LUMPUR (Nov 3): Investors should expect dividend suppression after the government unveiled the one-off "Cukai Makmur (prosperity tax) in the recently announced Budget 2022, according to Maybank head of Malaysia and regional equity research Anand Pathmakanthan.

Speaking in Maybank's post-Budget webinar on Wednesday (Nov 3), Anand highlighted that some companies may be delaying their normalisation of dividend payouts to 2023. 

“I think it’s very natural to expect some dividend suppression on the back of this [prosperity tax]. 

“There are some cases where I say for the banks, regulators have played a part in suppressing dividends during the height of the Covid-19 pandemic for banks to conserve capital. 

“But as we come to recovery, the banks should have a lot more freedom to pay and go back to historical dividend payouts,” he stressed. 

Meanwhile, according to Anand, some companies have the privilege of being extremely cashed up during the pandemic and he expects these companies to maintain their dividend payouts to shareholders. 

“Some companies, like glove stocks or specific corporates which have billions in cash piles — they have to be taken into account as well.

“When we look at these companies, we would say these companies do pay more taxes because of the one-off tax measure but you have this huge cash pile, [so] you should be able to continue with your capital management uninterrupted.

“But in general, yes, investors should expect some adjustments to dividend payouts due to the prosperity tax measure introduced by the government,” he shared.

Under the prosperity tax, which will be imposed for the assessment year 2022, the first RM100 million in chargeable income will be taxed at a rate of 24%, while any amount above that will be taxed at 33%.

See more Budget 2022 highlights here.
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Lam Jian Wyn