Limit CGT to shares of listed companies, says Wong Chen

 

Wong Chen said the capital gains tax would not hinder the performance of Bursa Malaysia as claimed by some financial experts.

PETALING JAYA: A government backbencher has suggested imposing a capital gains tax (CGT) on shares of listed companies rather than unlisted ones.

Wong Chen (PH-Subang) questioned whether the government’s plans for CGT in the 2024 budget will use a flat 10% rate or a more time-sensitive method, similar to the real property gains tax (RPGT).

Currently, Malaysia imposes RPGT on gains arising from the sale of real estate or property, at a starting rate of 30%.

“I have reservations about it because (CGT) is not efficient and may lead to various disputes, including the issue of double taxation,” he said when debating the 2024 budget proposals in the Dewan Rakyat.

In tabling the budget last Friday, Prime Minister Anwar Ibrahim said the government will impose CGT for the disposal of unlisted shares by local companies based on the net profit at a rate of 10% from March 1, 2024.

The CGT was first announced by Anwar in the revised 2023 budget in February this year.

Wong acknowledged that financial experts and wealthy individuals might oppose the idea of CGT on listed shares, but challenged their argument that such a tax would hinder Bursa Malaysia’s growth.

“Allow me to reverse the question: why, at the present time when we do not have any capital gains tax, has Bursa not experienced rapid growth?” he asked.

Pointing out that Bursa has faded from the investment radar of most institutional investors over the past few years, Wong said the exchange holding company’s primary issue is the lack of good governance.

“The infamous 1MDB scandal is known worldwide, and the Serba Dinamik scandal has been quite severe,” he said.

“Therefore, the primary issue with the lack of investment is weak governance, not whether or not there is a capital gains tax.”

As such, Wong proposed a low tax rate, potentially starting at 3%, accompanied by improvements in governance, transparency, and accountability within both Bursa and the Securities Commission.

“As for investments in listed shares by government bodies that safeguard the interests of the people, such as EPF and Permodalan Nasional Berhad (PNB), this tax could be refunded as a full rebate at the end of a financial year,” he added. - FMT