KUALA LUMPUR (Feb 24): The absence of a prosperity tax in the revised Budget 2023 is a ‘huge relief’ for the corporate sector, said Bursa Malaysia chairman Tan Sri Abdul Wahid Omar.
Abdul Wahid said another round of prosperity tax could have potentially shaved off 5% to 6% of 2023 earnings for the constituents of the Kuala Lumpur Composite Index (KLCI).
“Without prosperity tax being imposed, analysts have a consensus forecast EPS [earnings per share] growth rate of 20.1% for 2023 compared to -1.3% for 2022. This augurs well for the capital market,” he said in a statement after the revised budget was tabled in Parliament on Friday (Feb 24).
Abdul Wahid lauded the government’s commitment to an expansionary budget but with long-term financial sustainability and fiscal responsibility by reducing fiscal deficit to 5.0% of gross domestic product in 2023 from 5.6% in 2022, and further to 3.2% in 2025.
“The first step towards any transformation or reform is to admit that we have a problem, to put the constituents on a burning platform for greater sense of urgency and to come up with appropriate solutions,” he said.
Abdul Wahid believes that the targeted budget deficits set by the government for the following years up to 2025 is achievable, by enhancing tax collection effectiveness and plugging leakages as well as broadening the revenue base with reintroduction of tax on luxury goods and capital gains tax on shares in unlisted companies.
“The latter is optimal as it will encourage more unlisted companies to list their shares on the stock exchange and spur growth in the capital market,” he said.
“The enhanced commitment towards nature conservation and sustainable development must also be lauded. Overall an inspiring Budget 2023,” he added.
Securities Commission Malaysia’s chairman Datuk Seri Dr Awang Adek Hussin also welcomed the measures and incentives in the revised Budget 2023, saying it enables the capital market and its supporting ecosystem to serve the needs of the domestic economy and businesses.
Awang Adek said Malaysia Co-Investment Fund (MyCIF) has been successful in securing financing needs for startups and micro, small and medium enterprises (MSMEs).
The government’s additional allocation of RM40 million to MyCIF will further enhance the liquidity of equity crowdfunding and peer-to-peer (P2P) markets to better serve the financing needs of this important segment of the economy, he said.
The government’s additional allocation will bring the availability of accumulated funds under MyCIF to RM300 million.
“Allowing dual-class share structures will also help high-growth, innovative companies to the Malaysian capital market, allowing investors access to more diversified investment opportunities,” said Awang Adek.
In the revised Budget 2023, the government announced that it will allow the issuance of dual-class shares to encourage the listing of local high growth technology companies.
The government will extend tax deduction of up to RM1.5 million on listing expenses on the ACE and LEAP Markets until the year of assessment 2025.
This tax deduction is also extended to cover the cost of listing of technology-based companies on the Main Market of Bursa Malaysia.
Other key measures for the capital market include a tax deduction on the cost of issuing sustainable and responsible investment linked (SRI-linked) sukuk that is approved or permitted or deposited with the SC for a period of five years. The SC will also facilitate more marketplaces for secondary trading of private market instruments to increase liquidity and enable better price discovery.
Awang Adek said the tax incentives on listing fees for the ACE and LEAP Markets, as well as technology-based companies on Bursa's Main Market would help increase trading interest in the market by allowing investors to capitalise on these companies’ growth potential.
“The SC also welcomes the tax deduction on the cost of issuing SRI-linked sukuk. This demonstrates the role of the capital market in enabling the country’s transition towards a greener and more sustainable economy, by mobilisation of capital towards initiatives that provide more positive impacts to society.
“The SC will work with the Ministry of Finance and the relevant stakeholders to operationalise them. Further details will be announced in due course,” he said.