Permanent wealth tax is not an option, according to MICPA and Deloitte

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KUALA LUMPUR (October 12): A permanent wealth tax may not be an option for Malaysia, say the Malaysian Institute of Chartered Accountants (MICPA) and Deloitte Malaysia in a jointly produced report titled: “Tax Reforms: The Way Forward for the Malaysian Tax System Thought Leadership Report”.

The view is based on the observation that other countries around the world have gradually lowered wealth taxes over the years as governments realize that income

Instead of a permanent wealth tax, according to the report, one option that can be considered is a one-time wealth tax to help rebuild the country. He cited the example of a

arising from such a tax may not be significant.
In addition, it can also result in the displacement of the wealthy out of Malaysia, the report noted. Single tax on net worth by Argentina which was recently adopted in December 2020.

Wealth tax is defined as a tax on an individual’s stock of assets, and not on income, profits or transactions. Its aim is to redistribute the fortunes of the richest in the country to ordinary people, in order to achieve a more just society and reduce wealth inequalities.

However, there are risks in introducing a wealth tax. The report said that taxing the wealthy has always been a difficult task, given the ability of the wealthy to move their wealth from one tax jurisdiction to another.

Another problem comes from the ability to track wealth held abroad.

“A wealth tax could be imposed only on domestic assets, but that would create a strong incentive for the rich to hold their assets abroad.

“So governments would likely impose the tax on global assets, but that would create a big incentive for evasion,” the report said.

It is difficult for tax authorities to audit assets held globally and to pass judgment on the correctness of valuations of foreign assets.

The report also states that the wealthy have better access to wealth planning services, it is easier for them to protect themselves from the tax authorities and thus make the wealth tax less painful compared to those whose return on their assets. is lower.

In particular, according to the report, only three OECD countries currently levy a wealth tax, against 12 thirty years ago.

Nonetheless, he added that wealth tax may not be necessary if there is a global tax on capital income, including capital gains tax.

“After all, political decisions in Malaysia should be driven by what is appropriate for Malaysia. A problem identified or a solution developed in another country is not necessarily a problem or a solution for Malaysia.

“We could learn from the experience abroad, but any introduction of significant taxes in Malaysia must be carefully considered. Further study is needed before a conclusion can be drawn on whether to introduce wealth tax. Any comparison with other jurisdictions should also look at the economic development and income structure in those jurisdictions compared to that of Malaysia, ”the report said.


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