Economist calls for new taxes next year

(FMT) – An economist has called for the speedy introduction of new taxes so that the country can avoid another economic downturn just when a boom is on the horizon.

Speaking to FMT, Barjoyai Bardai of Universiti Tun Abdul Razak said it would be good if new tax schemes could be launched by next year.

He said a global economic boom was expected in 2025 and the country might “miss the boat” if the government did not introduce new taxes on time.

“We may then have to face another market downturn and wait another 10 years” for another boom, he said.

Barjoyai said Malaysia’s tax-to-GDP ratio, at 12%, was currently lower than in neighbouring countries except for Indonesia.

He was commenting on finance minister Tengku Zafrul Aziz’s statement that Putrajaya would not, for the time being, impose new taxes to increase revenue.

Tengku Zafrul said the government would look at an efficient way to lift its revenue once the economy recovers while focusing on revitalising the economy and taking care of the people.

Barjoyai said the government might want to avoid imposing the goods and services tax (GST) again, describing it as “burdensome” to most taxpayers.

He said it could instead increase taxes on those in the T20 income group or tighten the income tax structure by taxing dividends, profits from personal or private share transactions and internet transactions.

Carmelo Ferlito, CEO of the Center for Market Education, suggested that Putrajaya look into better tax schemes instead of introducing more taxes.

“With new taxes, you simply add to existing ones,” he said. “With new schemes, you change the tax composition.”

He said a balance could be struck by introducing a reformed GST accompanied by slightly lower income taxes for both individuals and corporations.

He also said Putrajaya should have thought about the issue of debt and revenue before deciding to implement expansive fiscal policies and injections.

“It will be the future generations who will pay with lower purchasing power and higher unemployment,” he said.

“Let’s also not forget the aggressive reduction of interest rates that could lead to an asset bubble and to a boom-and-bust crisis.

“The best strategy to increase revenues is to create conditions for the economy to grow soundly, which means being driven by private investments and savings. With more economic growth, revenue will grow, too.”