As a sign of solidarity for the frontliners and Malaysians, ministers and deputy ministers will not be receiving their salaries for three months from June 2021 but to be contributed to the Covid-19 Disaster Trust Fund (DTF).
Then, the Chief Secretary to the Government Tan Sri Mohd Zuki Ali announced that a portion of 800,000 civil servants' fixed allowances would be channelled to the fund for the same duration estimated to be more than RM30 million.
For former deputy secretary-general of the Treasury Tan Sri Ramon Navaratnam, the entire corporate sector should emulate these acts of solidarity.
Perhaps it is time for the government to impose a windfall tax, especially against companies that have enjoyed extraordinary profits since the outbreak of the Covid-19 pandemic, especially rubber glove makers.
Finance Minister Datuk Seri Tengku Zafrul Tengku Abdul Aziz, however, rejected the proposal, saying it would send the wrong signal to investors.
Let's explore what is windfall tax. According to the Cambridge dictionary, windfall tax means "an extra tax that a government charges a company when it makes a large, unexpected profit, especially if they have been helped by economic conditions".
Are the rubber glove manufacturers making 'a large, unexpected profit'? For the financial year 2020, Top Glove Berhad, the world's largest rubber glove maker, recorded a net profit of RM1.79 billion, an increase of 384 per cent compared with that of 2019 (RM370 million).
To put it into context, it is RM530 million shy of Selangor state government's 2021 budget of RM2.32 billion.
Apart from Top Glove, three other rubber glove makers — Hartalega Holdings, Kossan Rubber Industries and Supermax Corp — recorded cumulative net profits of RM1.17 billion in 2019.
In 2020, they recorded a cumulative net profit of RM3.84 billion. In other words, these four enjoyed almost a four-fold increase in profits (371 per cent) since the Covid-19 outbreak.
Although analysts believe that rubber glove demands will soften in the short-to-medium terms, as of the third quarter of 2021 (3Q2021), Top Glove recorded a net profit (before tax) of RM4.13 billion.
Interestingly enough, profit before tax (PBT) in 3Q2021 alone is much larger than the cumulative PBT for the previous five years combined (2016 to 2020 or RM4.09 billion).
SECOND, was the profit gained 'helped by economic conditions?' Yes. Because almost no experts expected the Covid-19 outbreak, which later led to a sudden demand for rubber gloves worldwide.
These gains are on top of the surge of more than 500 per cent of Top Glove's share price since early 2020. For the record, the windfall tax is not an entirely foreign concept to the Malaysian taxation system.
It has already been imposed on oil palm industry players. A case in point, from Jan 1, 2020, a levy of three per cent is charged if the price of crude palm oil reaches RM2,500 per tonne (RM3,000 in Sabah and Sarawak).
According to the Plantation Industries and Commodities Minister Datuk Dr Mohd Khairuddin Aman Razali, the government expects to receive a windfall tax levy of more than RM1 billion from a series of crude palm oil price hikes.
Thus, the above two criteria of windfall tax simultaneously addressed concerns raised by the finance minister.
But, credit should be given when it is due as the four companies have already agreed to donate RM400 million to the Covid-19 DTF.
Notwithstanding, by adopting the benchmark windfall tax of 30 per cent imposed on profits made by independent power producers in 2008, mathematically, the government may receive a potential windfall of RM1.12 billion, which is almost triple the promised donation.
Consequently, the tax can also be used to build Field ICUs. For example, the Field ICU at Kepala Batas Hospital in Penang, which houses up to 27 beds to treat Covid-19 critical patients, cost RM2.04 million.
Theoretically, the remaining RM800 million could build up to 400 Field ICUs across Malaysia.
Alternatively, the potential windfall can be used to cover the mandated quarantine costs. For instance, the cost for one person quarantined for 14 days is RM4,700, which the government bears more than half of it.
Hypothetically speaking, the extra RM800 million can be used to cover the cost of more than 300,000 quarantined people.
Now is the time for rubber glove makers, who enjoy supernormal profits during these trying times, to ask what (more) can they do for their country.
The writer is a Senior Lecturer at the Department of Finance & Banking, Faculty of Business and Accounting, University of Malaya