Wealth tax will raise revenue without burdening lower-income groups, say activists

 

Former Klang MP Charles Santioago had previously proposed a 2.5% wealth tax on Malaysia’s top 50 wealthiest individuals. (Reuters pic)

PETALING JAYA: 

A wealth tax is an effective way of raising much-needed revenue without imposing additional tax burdens on middle and low-income groups, says an alliance of Asian activist groups calling for the tax to be implemented here.

Lidy Nacpil.

Lidy Nacpil, a coordinator for the Asian Peoples’ Movement on Debt and Development (APMDD), said the tax’s implementation should be accompanied by transparent proposals outlining how the revenue generated would be spent to address wealth inequality in the nation.

“Malaysia has a significant number of extremely rich individuals and is home to many multinational corporations, so a wealth tax is a promising source of public revenue.

“The revenue could be spent on public health, education and housing programmes as well as climate resilience-building initiatives,” she told FMT.

Unlike taxes based on annual income, a wealth tax is levied on an individual’s accumulated assets, including properties, land, vehicles, stocks, and paintings.

Former Klang MP Charles Santiago said the tax would not impact aspiring middle-class individuals but only the “ultra-rich” with assets exceeding RM100 million.

Charles Santiago.

He said it would directly uplift marginalised communities by funding child nutrition programmes and improving access to essential services such as water, electricity and internet in areas with high poverty levels.

Santiago had previously proposed a 2.5% wealth tax on the country’s top 50 wealthiest individuals, calling it a “modest step” towards generating billions for social, health and education development.

“Many companies in Malaysia have grown and prospered over the years thanks to substantial government support through subsidies and tax incentives.

“It is only fair and just for these beneficiaries of public support to contribute back to society,” he said.

According to Forbes, the combined wealth of Malaysia’s top 50 richest individuals this year is about US$83.4 billion (RM369 billion).

In 2022, T20 households accounted for 46.3% of the total household income nationwide, a slight decrease from 46.8% in 2019, data from the statistics department shows.

Goh Lim Thye.

Economist Goh Lim Thye cautioned, however, that a wealth tax requires careful planning with a robust asset valuation framework to avoid underreporting.

Goh said this was a problem Argentina initially faced when it introduced the tax in the 1990s, as it struggled with the valuation of offshore assets.

He said the government could counteract this form of tax evasion by negotiating bilateral agreements to facilitate tax information exchange and enforce global asset reporting.

Goh said another challenge is dealing with capital flight, or the relocation of assets to avoid taxation.

“The risk of wealthy individuals (doing so) is a genuine concern in an open economy like Malaysia,” he said, adding that France had to reform its wealth tax in 2018 because of a shrinking tax base. - FMT