KUALA LUMPUR: ANALYSTS have cautioned the government against introducing new “long-term” taxes to strengthen its coffers.
Any move by the government to impose new blanket taxes in its bid to cover its debt should only be a short-term measure.
Instead, they said Putrajaya could consider imposing tax on property developers who hold on to their land banks for more than five years, similar to what is practised by Singapore.
They proposed that the government consider taxing inheritance valued above RM2 million.
Yesterday, Prime Minister Tun Dr Mahathir Mohamad said the government planned to introduce new taxes to generate revenue to pay down the country’s high debt.
In addition to the plan, Putrajaya is also mulling over disposing of some of its assets to reduce equity ownership of companies.
Putra Business School Senior Lecturer and Business Development Manager Dr Ahmed Razman Abdul Latiff said the government should give priority to coming up with measures that could continuously reduce debt commitments, especially international debt.
“The government also needs to reform the monetary system by ensuring that no credit disbursement is due to debts by commercial banks.
“Replacing fiat currency with a legal tender that has intrinsic value is one measure that will enable currencies in the market to be controlled,” he told the New Straits Times yesterday.
Economist and former Transport Ministry secretary-general Tan Sri Dr Ramon Navaratnam said it was crucial that Putrajaya stepped up the fight against grand corruption as well as expenditure wastage and leakages.
“There is no point in taxing more if we continue to suffer from widespread corruption and the waste of public funds... because if taxpayers lack confidence and worry if the new tax they are going to pay is going into the pockets of some people, then they will reject the tax.”
On the government’s need for a new tax, Ramon said the prime minister’s and finance minister’s fiscal approaches were realistic and could meet the country’s debt obligations, while keeping the deficit reasonable and under control.
He added that appropriate taxes (mechanisms) would have to be introduced sooner rather than later, as basic needs like better health, housing, education, environment, as well as safety and
security, had to be given priority.
“We need more tax funding. We can’t cut vital expenditures too much and we can’t borrow much more.”
He also argued on the need for a new taxation measure that was more progressive, including in the form of wealth taxes, estate and death duties.
“These are some potential tax possibilities that would be favourably considered. In fact, they were successfully undertaken in Scandinavian countries.”
Ahmed Razman, in his reaction to the freshly mooted plan by Putrajaya, said there was a pressing need to narrow the growing income disparity between the rich and the poor in the country.
“This widening income gap is not sustainable and potentially socially and economically unstable.”
He said while the government could always cope with financial deficiencies by imposing additional taxes on people, it must ensure that the extra taxes did not burden the people.
“The question is how to ensure the extra tax will not burden the people who are already facing problems such as the lower increments and salaries against the rising cost of living.”
He said any new taxes should only be temporary in this “current critical situation that the country is in”, while the government drew up long-term strategies to reduce its debts.
Ahmad Razman, who proposed the tax on developers with idle land banks as well as on inheritence, also suggested that new measures in maximising waqf contributions to the economy be introduced to help reduce the country ’s debts.
“With these initiatives, government’s spending can be controlled, while it increases its income so that the people will not have to bear with the government imposing additional tax.”