MP moots corporate savings tax of 2.5% per year

 

Permatang Pauh MP Fawwaz Jan said the proposed tax could be imposed on companies’ savings, some amounting to billions, as long as they remain untouched for a full year.

KUALA LUMPUR: An MP has urged the government to consider imposing a corporate savings tax of 2.5% annually on companies in line with Islamic principles of wealth-sharing.

Fawwaz Jan (PN-Permatang Pauh) said the proposed tax could be imposed on the savings of companies, some amounting to billions of ringgit, as long as they remain untouched for a full year.

“This could yield significant revenue,” he told the Dewan Rakyat in the debate of the 2024 supply bill.

Corporate savings tax is ordinarily imposed on profits or earnings that a corporation sets aside and retains within the company as savings, rather than distributing them as dividends to shareholders.

Fawwaz also said the rate imposed on firms need not be excessive to protect the rights and earnings of the wealthy and avoid burdening them.

The 2.5% rate is also in line with the zakat rate, he said.

He said the government can also impose a lower rate if the proposed rate can have a negative effect on investors’ confidence.

Fawwaz said 30% of the collection from this corporate savings tax must specifically be channelled to the people in the form of direct cash aid to increase the purchasing power of the lower-income population.

He added that 12.5% of the revenue from the tax should be channelled to the repayment of National Higher Education Fund Corporation (PTPTN) study loans to help alleviate the burden of borrowers.

“If possible, these tax collections could be channelled directly to PTPTN. This way, the youths’ debts to PTPTN will decrease gradually year by year,” he said.

Fawwaz said the remainder of the revenue from the corporate savings tax could be utilised by the government for other purposes, such as national housing. - FMT