PUTRAJAYA should impose windfall taxes on glovemakers who made handsome profits during the Covid-19 epidemic to bolster its coffers so that the money can be used to provide continuous aid to people in need, said economist Dr Muhammed Abdul Khalid.

The DM Analytics managing director said the argument that imposing windfall profit levy on businesses that made extraordinary gains will dampen investor sentiment does not make sense.

“This is something that should be done. It can be done,” Muhammed told The Malaysian Insight.

He said the argument that it cannot be done as it will chase away investors does not make sense as there has been windfall tax on palm oil since 1998 and IPPs (independent power producers) since 2008.

“What’s so special about the super-profits of glove companies?

“It is not because they are super-productive but because of the pandemic and people dying that they are making money. It is not like they have found the cure for cancer,” Muhammed said.

He said not imposing windfall taxes on glovemakers is also seen as being discriminatory towards palm oil and IPP players.

Finance Minister Tengku Zafrul Tengku Abdul Aziz said recently that there were no plans to impose windfall taxes on glove producers as the exceptional gains made due to the surge in demand for rubber gloves during the epidemic have already created a spillover effect on the economy in the form of direct and indirect taxes.

He added that the companies could reinvest their profits into the business and this will encourage investors to further expand their businesses in the country.

Last year, Tengku Zafrul said imposing windfall taxes would send the wrong signal and cause investors to flee.

Muhammed said the country’s tax regime has to be reviewed to ensure that it is fair and the revenue should disbursed to provide continuous aid for the people.

“If we have a fair taxation system, the government can increase its revenue and help the needy and elderly through aid programmes,” he said.

He said lower income groups are under pressure while the rich are not heavily impacted under the current tax system, adding that taxation is something the 12th Malaysia Plan has failed to address.

As the country embraces endemicity, assistance such as cash aid and wage subsidy programmes have to continue for the lower income group, the self-employed and struggling employers, he said.

Muhammed noted that the current wage subsidy programme quantum is insufficient and the government should ideally subsidise more wages to help employers retain employees.

“We have to accept that the nation is still recovering, therefore two things have to be done.

“Firstly, aid has to continue. Secondly, it must be sufficient, don’t be stingy,” he said.

He said the government should also look at assisting those in need and who have depleted their EPF savings due to the withdrawal schemes that were allowed during the pandemic.

“We can’t just wash our hands. Assistance must be given,” he said.

He said assistance provided to the lower income group is good for the economy, with studies showing that the financial aid received are mostly used for household expenses and children’s education. – October 15, 2021.