Use persuasion for glove makers to pay windfall tax, Putrajaya told

 

An economics lecturer says a top-down approach on a windfall tax might not work.

PETALING JAYA: Rubber glove manufacturers might be persuaded to accept a windfall tax being imposed on their profits if they are called to the bargaining table, says an economics lecturer.

Goh Lim Thye, a senior economics lecturer at Universiti Malaya, suggested that rubber glove companies might be agreeable to the idea if the government explains the need for the tax by holding dialogues with the companies.

“I think a top-down approach is not appropriate, but it (windfall tax) could work through dialogues and negotiations,” he said.

The government has come under pressure over the windfall tax from several MPs

Among the most vocal proponents for the tax is Muar MP Syed Saddiq Syed Abdul Rahman, a former minister, who said the companies have racked up billions in profits in recent months thanks to a surge in demand during the Covid-19 pandemic.

Subang MP Wong Chen of PKR and Kota Kinabalu MP Chan Foong Hin of DAP had also urged that the windfall tax on palm oil be scrapped so as to create a level-playing field among all industries in the country.

However, HELP University economist Hui Hon Chung said the two industries were not comparable.

The windfall tax on palm oil is based on CPO (crude palm oil) prices which are publicly available and transparent, Hui said, whereas rubber gloves are manufactured goods which do not have a transparent or uniform average selling price.

“One is upstream, the other downstream,” he said.

Hui said the rationale for the windfall tax on palm oil was to subsidise the development of biodiesel consumption. However such a windfall tax on manufacturing might inhibit the growth of the sector.

Palm oil producers are subject to a 3% levy when crude palm oil prices exceed RM2,500 per tonne in Peninsular Malaysia and a 1.5% levy when prices surpass RM3,000 per tonne in Sabah and Sarawak. The government last month announced it expects to collect RM348 million in palm oil windfall tax this year.

Bank Islam chief economist Mohd Afzanizam Abdul Rashid said that instead of taxing rubber glove companies, the government should focus on leveraging these “global champions” to help boost the country’s overall economy.

Highlighting the various opportunities in respect to rubber industries, Afzanizam called on the government to ensure Malaysia’s rubber gloves companies procure their raw materials from local producers.

“This way, we should be able to resuscitate the rubber industries in a more holistic way by integrating the upstream and downstream sectors,” he told FMT.

“At the same time, this will help us diversify our economy and improve the income of rural communities.” - FMT