15% tax on MNCs a good move, say business groups

 

Malaysia will start collecting a 15% global minimum tax from certain multinational companies from 2023. (Pexels pic)

PETALING JAYA: Malaysia will need to find other ways to attract foreign investors once a new global minimum tax (GMT) of 15% is imposed on certain multinational companies, says a business leader.

Malaysia would no longer have a tax advantage compared to other countries and must look into having skilled and proficient multilingual workers available, said Shaun Cheah, executive director of the Malaysian International Chamber of Commerce and Industry.

Other factors included good commercial law, available land and good infrastructure such as ports, roads, internet connectivity as well as stable water and power supply.

Federation of Malaysian Manufacturers president Soh Thian Lai said most Southeast Asian countries had agreed to implement the tax, and its implementation should not jeopardise Malaysia’s position as an investment and manufacturing hub, or cause multinational companies to relocate their operations.

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He agreed that multinational companies were motivated by factors such as proximity to materials and services, operational costs, and favourable tariff treatments.

Both Cheah and Soh agreed that the imposition of the tax, announced by the Inland Revenue Board on Monday, was a good move.

Cheah said there was a need for clarity about the new regulations, to prevent misinterpretation.

The new global tax was instituted by the Organisation for Economic Cooperation and Development, which said 136 countries including Malaysia were ready to undertake reforms in the global taxation system.

On Monday, Inland Revenue Board CEO Nizom Sairi said Malaysia had agreed in principle to implement the GMT on certain MNCs.

He said the international taxation system reform was expected to be implemented from 2023 globally and Malaysia would abide by the decision made at the OECD level.

Meanwhile, economist Nazari Ismail of Universiti Malaya viewed the GMT as a “reasonable” move, saying it would keep MNCs from manipulating their operation costs to capitalise on different tax rates in various countries.

“All countries will now receive 15% tax revenue from MNCs operating in their countries. The MNCs’ room for manoeuvring to minimise tax payments by practising transfer pricing will also be minimised,” he told FMT Business.

The new tax would prevent countries from competing with each other through the minimisation of tax rates, which benefit the MNCs at the expense of the hosting countries, he said. - FMT