KUALA LUMPUR: The government did not introduce capital gains tax on shares and other taxes on the wealthy in order to prevent capital flight from Malaysia, said Lim Guan Eng.
The Finance Minister said that such a move would be a “shock to the system”, which would hinder Malaysia’s fiscal and financial recovery.
He noted that the Tax Reform Committee had advised against the move over concerns expressed by Bank Negara Malaysia (BNM) and the Securities Commission (SC) on its negative repercussions on the country’s capital and financial markets.
“If that move was done in the present challenging fiscal environment, it would be a shock on the capital and financial markets.
“Bank Negara and the Securities Commission opposed the move such as introducing capital gains tax on shares and inheritance tax, as the revenue (to government) would not commiserate with the loss from the massive capital flight that may occur,” he said.
Lim was answering a supplementary question from Hassan Abdul Karim (PH-PKR-Pasir Gudang) on why the current and past governments seemed afraid to tax the rich via capital gains tax on shares and inheritance tax, among others.
During the Questions for Oral Answers session, Lim pointed out that the move was not implemented in order to safeguard Malaysia’s competitiveness in the capital and financial markets.
He noted that neighbouring countries has no such forms of taxes such as capital gains tax on shares.
“We must not get too carried away to the extent that it shocks the system. That is why the government foresees three years to tackle overall deficit and not immediately.
“If it (taxation) is done too suddenly, the system would be in a state of shock. That would jeopardise fiscal and financial recovery (of Malaysia).
“We need to get back on track, ensure Malaysia is free from kleptocracy and it (Malaysia) recovers to become a normal democracy,” he said.