KUALA LUMPUR (Oct 6): The Edge Malaysia asked this question as part of its cover story this week: Will we see new taxes on inheritance and capital gains?
“Talk of new taxes being introduced normally intensifies as the tabling of the annual budget approaches. However, this year might be different, given that Malaysians are painfully aware of the country’s RM1 trillion debt, not to mention the missing RM19 billion Goods and Services Tax (GST) refunds that have yet to be repaid,” wrote the business weekly.
One of the experts the publication spoke to was Baker Tilly Malaysia tax partner Anand Chelliah.
He said that fresh taxes will add to the country’s revenue base, especially in a time of shortage but “having said that, I do not see a likelihood of new taxes being introduced at this point in time for two reasons. Firstly, following on from the recent past, there is a need for the government to be seen trying to manage the economy without burdening the people and new taxes are not something that will please the masses”.
“Secondly, to bring in new taxes without being certain of the benefits versus costs, the return on investment (ROI) is something that needs to be carefully considered. With the current timeframe (from the change of government to the tabling of the budget in November), it is too short a period to study the ROI yield from new taxes and to have them implemented,” he added.
Anand told the weekly that if an inheritance tax were to be reintroduced, the taxable threshold would be very important. “It could be a good way for the government to raise revenue, but it can also cause hardship for the people. This is because estate taxes need to be paid in cash over a short period of time, but the assets they are levied on, like property, can be quite illiquid.”
The weekly informed that an inheritance tax was implemented in the country under the Estate Duty Enactment 1941 — the estate of a deceased was liable to a 5% tax if it was valued above RM2 million, and 10% above RM4 million. It was repealed in 1991.
As for capital gains tax, the authorities impose taxes on just one type of capital asset: real property, under the Real Property Gains Tax Act 1976.
“In tax jurisdictions like Australia, a tax on capital gains forms part of the income tax regime. While gains are taxed, losses incurred during the disposal of a capital asset can be used to offset current or future capital gains.
“In countries like the US, the capital gains tax is more complicated as it segregates the gains into short term and long term. Short-term capital gains — those held for less than a year — are taxed at the prevailing income tax rate. Long-term capital gains are taxed at 0%, 15% or 20%, depending on the taxable income of the taxpayer,” wrote The Edge Malaysia on the subject.
Adeline Wong of Wong & Partners told the weekly that the introduction of a capital gains tax will make the country uncompetitive as an investment destination countries in the region such as Singapore and Hong Kong do not have such a tax.
“A capital gains tax will not only impact individuals but also corporations seeking to expand and invest in Malaysia,” she said.