PETALING JAYA: Not more than 250 companies will be impacted by Cukai Makmur or the prosperity tax, which Finance Minister Tengku Datuk Seri Zafrul Abdul Aziz described as “a very small number of companies.”

       Over the past two financial years, he said only 113 companies achieved more than RM100mil in pre-tax earnings, out of over 900 companies listed on Bursa Malaysia.

       Cukai Makmur will only be applicable on super profitable companies with chargeable income of above RM100mil for the tax assessment year of 2022.

       In justifying the government’s decision to introduce the one-off tax under Budget 2022, Tengku Zafrul said many countries have permanently increased their taxes for the near future.

       “The United Kingdom, for example, increased its corporate tax permanently, Saudi Arabia increased its value-added tax and Indonesia increased the tax bracket for individuals, especially for the top earners, which has gone up to 35%.

       “Cukai Makmur, on the other hand, only affects those companies having more than RM100mil chargeable income.

       “The marginal increase in tax is only 9%,” he said at the virtual Invest Malaysia 2021 Series Two yesterday.

       Looking ahead, Tengku Zafrul said any potential impact of Cukai Makmur on the stock market could be partly outweighed by the broad-based economic recovery in 2022.

       He also pointed out that several large corporations such as Telekom Malaysia Bhd, Tenaga Nasional Bhd and Axiata Group Bhd have said that Cukai Makmur would not affect their dividend payments to shareholders.

       It is noteworthy that these corporations are government-linked companies.

       “Top Glove Corp Bhd has also said it is happy to contribute to Cukai Makmur. So far, the company has paid approximately RM2bil in corporate income tax this year and the Cukai Makmur is not expected to impact its dividend payment,” according to Tengku Zafrul.

       Over the medium term, the Finance Minister said the government wants to reduce the reliance on direct taxes and widen the federal government’s revenue base.

       “You will hear more about this when the Fiscal Responsibility Act is tabled next year, which will cover a medium-term revenue strategy that will outline the mobilisation of revenue measures, review of our tax legislation and the modernisation of tax administration.

       “Cukai Makmur certainly does not fall in that spirit,” he said.

       A key aspect of the medium-term revenue strategy would be a greater contribution from consumption-based tax.

       Hence, the government needs to look at reviewing the rates for the sales and service tax (SST), Tengku Zafrul said.

       In addition to introducing a “carbon tax”, he also added that Malaysia needs to opt for a “more reliable consumption tax”, namely the goods and services tax.

       “We need to also continue to explore new sources of tax revenue such as taxation on the digital economy.

       “The current priority of the government is to sustain the recovery of the Malaysian economy. Concurrently, improvements are being done to the existing SST regime as announced in Budget 2022.

       “The timing will be key on when we can introduce new taxes as the economy recovers and stabilises,” he said.

       Commenting on the Budget 2022 proposal to remove tax exemption on incomes derived from foreign sources, Tengku Zafrul said it would not discourage foreign direct investments.

       “The attractiveness of the investment ecosystem is not only determined by incentives.

       “Significantly, the ecosystem also depends on the comprehensiveness of the country’s tax system that is in accordance to the international tax standards,” he said.

       According to Tengku Zafrul, the removal of foreign sourced income tax exemption would ensure that the right parties are taxed and allow a fair distribution to the jurisdictions.

       He added that this will put a stop to tax evasion and tax avoidance.

       “We are sending out the message that we do not condone such practices,” he added.

       Tengku Zafrul was also asked to comment on the removal of the RM200 stamp duty cap on contract notes, alongside an increased stamp duty rate to 0.15%.

       Bursa Malaysia chairman Tan Sri Abdul Wahid Omar, who moderated Tengku Zafrul’s session yesterday, said that based on the volume of shares traded in 2020, the total stamp duty collected would be about RM500mil.

       “Assuming the same volume and the same trading pattern, with the removal of the threshold, the amount would go up to as much as RM2bil.

       “Many brokers are requesting for you to consider increasing the threshold as opposed to removing the RM200 threshold,” Abdul Wahid told Tengku Zafrul.

       In response, the Finance Minister described it as the “middle ground” as opposed to the imposition of the capital gains tax on profits made from the stock market.

       “While the government imposed a higher stamp duty on contract notes and removed the RM200 limit, it is important to note that the government also exempted the service tax on brokerage services related to the trading of shares listed on the stock exchange,” he said.

       Meanwhile, Tengku Zafrul expressed his confidence that the country is on track to achieving its 6.5% fiscal deficit target for this year.

       Nonetheless, this would depend on Malaysia’s revenue performance, its ability to reprioritise spending and the final gross domestic product outcome.

       “We rationalised our expenditure in 2021 to accommodate the increase in the Covid-19 Fund to RM39bil, which is to finance the additional assistance and stimulus packages.

       “So in total, the overall deficit for this year is expected to be RM98.8bil, up from the original budgeted amount of RM84.8bil,” he said.