PUTRAJAYA (Jan 9): Malaysia needs a holistic review and study of its tax system, according to tax industry experts.

In a panel session on the level of tax that should be paid at the International Strategy Institute's Malaysia Tax Forum, Ernst and Young Tax Consultants Sdn Bhd ASEAN and Malaysia Tax Leader and Business Tax Services Leader Amarjeet Singh said a review of the tax system as whole would help at this point of time, as part of the government's development strategy.

"We should do a holistic review and study of the tax system," said Amarjeet.

This is as there is difference between a headline tax rate and effective tax rate, and cited studies have indicated that a 10 percentage point reduction in the effective tax rate would result in a 2% to 5% rise in gross domestic product.

On corporate tax, Amarjeet said Malaysia needs to be more savvy in order to attract the right investments.

Former Minister of Finance II Tan Sri Nor Mohamed Yakcop shared Amarjeet's view regarding a need for a review and a policy rethink.

"There should be cost benefit analysis when it comes to tax policies and incentives," said Mohamed, who added that one policy consideration could be to adjust income tax brackets to account for inflation and the rise in cost of living.

Meanwhile, Inland Revenue Board (IRB) Tax Research Department Director Dr Gunasegaran Muthusamy said tax rates cannot be suddenly raised, and that there needs to be a plan for the government to raise more revenue.

"If you are earning RM1,000 a month — how are you going to afford a Mercedes Benz. You have to plan your income," he analogised.