The topic of introducing a capital gains tax surfaced last week when Inland Revenue Board CEO Datuk Seri Sabin Samitah suggested that such a tax should be considered as a means of increasing government revenue.
Right now, only gains on the sale of property and property companies attract a capital tax under the Real Property Gains Tax Act 1976.
Sabin said the capital gains tax would be a good way of ensuring equity and fairness in the tax system, with those in the higher-income bracket seen as more likely to have capital income compared with those in the lower-income group.
Certainly, the idea is noble and even populist in nature. But it could stifle domestic investments and blunt Malaysia’s competitive advantage as a business-friendly destination for foreign investors. This could affect economic growth, leading to lower income tax collection.
Of late, a comeback of the Goods and Services Tax has also been discussed. While unpopular, it is seen as more efficient and fairer as it is subject to one’s own consumption.
The timing for new taxes may not be right given the economic impact from the ongoing pandemic, but a healthy debate on and studies of their effectiveness can only be good.