PETALING JAYA: Malaysia’s tax system is regressive and needs to be progressive, said Rembau MP and “shadow finance minister” Khairy Jamaluddin.
He said there are many ways to make the tax system more progressive, for instance the income tax threshold for the highest income bracket should be increased.
“Other tax instruments like the capital gains and wealth tax need to be studied more detail as it can lead to capital flight and people evading taxes, so the tax reform committee in Treasury needs to look into it,“ he told reporters after speaking at a plenary session “Criteria to a strong financial outlook and implementation” at the Malaysian Strategic Financial Outlook Forum organised by the Asian Strategy & Leadership Institute today.
“Malaysia has a regressive tax regime in the sense that apart from income tax, most taxes are regressive, not progressive. It’s something that we need to look into. GST (goods and services tax) was regressive admittedly but you can’t get away from getting rid of all the rest of the taxes.”
He said one of the reasons the GST was unpopular was that it coincided with the 1Malaysia Development Bhd (1MDB) scandal.
“When you have a situation where the public is unsure where the tax revenues are going, it’s an issue. There are arguments that you can ring-fence certain tax revenue for certain expenditure items,” said Khairy, explaining that whatever the government collects goes into a consolidated fund and if it ring-fence the tax into certain trust fund, then the public can be clear where the taxation goes.
Khairy is also concerned about the inequality in income and wealth that is becoming worse.
“We’ve been too regressive we have to look at things like progressive taxation. We’ve to look at how to distribute wealth fairer.”
Meanwhile, he questioned the RM30 billion special dividend that Petroliam Nasional Bhd (Petronas) will be paying the government to settle the GST and income tax refunds, of which a large portion remained unverified.
“I’ve been told that out of RM19 billion (refunds to be paid back to companies), RM15 billion is still unverified. If a large proportion of the amount is unverified, why did the government ask for money from Petronas?
“If it’s verified, no problem. If it’s not verified, there’s a problem then. You’ve taken money from Petronas which you didn’t need to take yet or didn’t need to take,” he stressed, adding that the GST Act also gives the government six years to settle these claims.
He said the matter is still being discussed at the Public Accounts Committee (PAC) level and the PAC is expected to come out with a report on it in one to two weeks.
Khairy looks after the finance porfolio in the opposition party. He also sits on the Parliamentary Select Committee on the Budget representing Barisan Nasional.
The Malaysian Strategic Financial Outlook Forum brought together policy makers, thought leaders, the media, private sector leaders, youth groups, regulators, market makers and civil societies on how do government govern in times of heightened public scrutiny with a focus on financial outlook for Malaysia.
