Careful study on impact of capital gains tax on economy needed, say experts
Inland Revenue Board (IRB) CEO Datuk Seri Sabin Samitah had suggested the government consider introducing a capital gains tax to broaden the tax base and increase revenue. While the introduction of a capital gains tax in Malaysia would broaden the tax net to include more capital assets, it could also adversely impact the income of genuine long-term investors who rely on dividends and capital gains.
According to KPMG in Malaysia’s Head of Tax, Tai Lai Kok, this can only be managed if a mechanism similar to the Real Property Gains Tax (RPGT) is introduced to reduce the capital gains tax rate after the investments have been held for a stipulated period.
He also notes that among Malaysia's competitive advantages compared to other neighboring countries is the absence of a capital gains tax apart from the RPGT.
“Should the capital gains tax on assets be imposed, Malaysia runs the risk of losing its attractiveness and competitive edge in the eyes of investors, particularly foreign ones. This could have an [adverse] impact on economic growth in Malaysia," he cautions.
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