Are New Taxes Good?

Joseph Stiglitz, Nobel Prize-winning economist, believes that there are many kinds of good taxes that could be introduced to stimulate Malaysia’s economy and tackle RM1 trillion debt. He has included inheritance tax, capital gains tax, property tax for large holding properties and a carbon tax.

An inheritance or estate tax is a tax paid by a person who inherits assets (money or property) of a person who has died. An estate tax is assessed on the assets of the deceased while an inheritance tax is assessed on legacies received by estate’s beneficiaries. Many nations have abolished this tax in more recent years. Malaysia abolished it 26 years ago. In the U.K., it is varies from 1% to 10% according to relationship with the deceased. For Malaysia, it was 4% for above RM2 million and 10% for net worth above RM4 million. One may consider to set the threshold higher at RM10 million and graduate it upwards.

There are no capital gains tax for equities in Malaysia. A real property gains tax (RPGT) was introduced in 2010 and applies to property sold less than six years from its purchase. And the rate is 30% (for less than 3 years), 20% (4^th year) and 15% (for fifth year).

A carbon tax is levied on carbon content (coal, oil, gas) on fuels. Malaysia does not have one yet. It is a form of carbon pricing. This tax could help cut greenhouse gas emissions. Levy is on a proportion of metric ton of CO2 emitted with a threshold of (perhaps) plants above 50MW.

Tax (direct/indirect) in general is not something readily welcomed by the public but it aims to raise revenue to fund expenditures on infrastructure and other economic activities of a government. Of all the above, carbon tax is the most promising if renewable energy is the focus.

1.      Good Taxes can spur Malaysia’s economic growth, Bernama.

2.      Carbon Tax Guide, World Bank Group.