This article first appeared in The Edge Malaysia Weekly on November 8, 2021 - November 14, 2021

Last Monday, the FBM KLCI closed 31.39 points lower —– its biggest one-day decline since March 31 when US bond yields and the greenback surged — in a knee-jerk reaction to the proposed Budget 2022.

The main negative surprises for listed companies and those who invest in them were the one-off Cukai Makmur, a higher stamp duty on share trading as well as the removal of the RM200 cap on the same per contract note.

To recap, on Oct 29, Finance Minister Tengku Datuk Seri Zafrul Aziz proposed a one-off 33% tax rate for companies on chargeable income of more than RM100 million for the year of assessment 2022.

This is an additional tax payable of 9% for many of the listed companies on Bursa Malaysia. For plantation companies, where the crude palm oil they produce already attracts a windfall levy when prices are above RM2,500 per tonne (raised to RM3,000 under Budget 2022) in Peninsular Malaysia and RM3,000 (to RM3,500) in Sabah and Sarawak, their coffers will be hit twice.

The Cukai Makmur is expected to bring in at least RM3 billion for the government’s coffers, according to Second Deputy Finance Minister Yamani Hafez Musa.

Meanwhile, RM33.8 billion was wiped out from the local bourse last Monday as investors reacted to the proposed measures.

Some choose to see the measures as the glass half full due to the absence of a capital gains tax that would have been harder to stomach. The increase in stamp duty on share contracts from 0.1% to 0.15% was seen as a lesser evil than a tax on capital gains.

While many understand the need for more taxes as the government takes measures to heal the economy and fund the recovery following the devastating effects of the Covid-19 pandemic and the resulting lockdowns this year and the last, one cannot help but ask whether the government will spend its revenue wisely or if austerity measures will be adopted within the halls of power.

Year after year, the Auditor-General’s Report reveals government largesse and it is unclear if anyone is ever punished for such profligacy. And what about plugging the leakages within the economy, for example, finding ways to capture the revenue lost from the shadow economy?

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