PUTRAJAYA should use Budget 2018 to conduct tax reforms, including moving towards progressive taxation where high income earners and corporations are taxed more, economists and an opposition politician said at a forum today.

Economist Jomo Kwame Sundaram said the current system allowed corporations and the rich to pay very low taxes while wage earners paid higher taxes in terms of percentage.

He said big corporations and the rich ought to be taxed not just locally but globally, as done under the US tax system.

“The Malaysian tax structure is basically inequitable. After taxation, income distribution is worse than before taxation and this inequity or regression has increased overtime, especially since the mid-80s and more recently, with the introduction of the goods and services tax (GST),” said Jomo, who is the Tun Hussein Onn Chair at International Studies at the Institute of Strategic and International Studies (ISIS) Malaysia

He was speaking on a panel about Budget 2018 “Is Malaysia Finally on Track” hosted by iMoney.com that was broadcast on Facebook Live earlier today. The budget will be tabled by Prime Minister Najib Razak in the Dewan Rakyat on October 27.

Jomo said the GST of 6%, which was introduced in 2015, was inequitable and it was still feasible to scrap it now as “it is still in its early days”.

Kelana Jaya MP Wong Chen, who was also on the panel, said Pakatan Harapan would scrap GST and replace it with another form of consumption tax if it formed the next government.

He said Malaysia’s tax base among the population needed to be broader in order for the GST not to be a burden. However, Malaysia’s tax base is only 15% of the working population.

“We need tax base of 60% to 70% so that with GST, there can be reduction in (income) tax. Instead another RM26 billion is sucked from the people.  There should be have been a reduction in other taxes but that didn’t happen,” said the chairman of PKR’s Investment & international trade bureau.

He added the GST can be done away with getting RM7 billion from a consumption tax with a lower rate and by eliminating RM20 billion in corruption and leakages.

“No one wants to pay new tax. PH will eliminate corruption and wastage and see if the current tax system pays for itself. Otherwise will look at the tax system.

“Capital Gains Tax (CGT) and inheritance tax is something to look at. We are committed to progressive taxation.

“This country is highly unequal. In 2016, corporations in Malaysia paid RM72 billion in taxes and workers paid RM30 million. In Europe, it’s the other way round. Corporate Malaysia is making excessive money,” said Wong.

Wong added that if PH did not form the next government, Barisan Nasional at the very least should commit to retaining GST at 6% for five years.

“This would give stability to people and corporate to plan their finances,” he said.

DM Analytics chief economist Muhammed Khalid also advocated tax reforms, noting that the poor and wage earners were taxed but those who made money from investments were not taxed.

“The real property gains tax is only for five years. After that you will not be taxed when you dispose your property,” he said, stressing that the current system was unfair. – October 17, 2017.