Malaysia will not implement wealth tax – for now – so economy can recover, says Finance Minister

Wealth, inheritance and capital gains tax are some of the taxes Malaysia has decided not to implement for fear of “massive” capital flight.
Reuters
  • Malaysia will not implement wealth taxes – which generally affect the rich – so as not to “shock” financial markets

  • Financial entities like Securities Commission Malaysia and Bank Negara Malaysia said these taxes could cause the country to lose its competitiveness 

  • The government is focusing on recovering from a US$47 million debt, and won’t tackle overall deficit immediately

Malaysia will not implement new wealth taxes for fear they could derail government efforts to help the economy recover, Finance Minister Lim Guan Eng said in Parliament on Wednesday (Nov 14), Bernama reported.

These include wealth, inheritance and capital gains tax – taxes that generally affect wealthier individuals.

Wealth tax – which is different from income tax – includes assets like cars and bank deposits in its tax calculations, while capital gains tax imposes a tax amount on income from the sale of shares and property.

Earlier this year, Malaysia PM Mahathir said the government was mulling the introduction of new taxes to help the economy recover from a staggering RM1 trillion (US$47 million) debt.

According to the New Straits Times (NST), the Finance Minister said introducing these taxes now could shock financial markets, given the country’s “current challenging fiscal situation”.

“That is why the government foresees three years to tackle overall deficit and not immediately,” he added.

Financial entities like the Finance Ministry, Securities Commission Malaysia and Bank Negara Malaysia raised concerns that implementing these taxes could cause Malaysia to lose investments to neighboring countries without such taxes, NST reported.

This “massive capital flight” could also outweigh the revenue collected from these taxes, Lim was quoted as saying.

Read also: Malaysia’s closing a donation account for the country’s RM1 trillion debt on December 31