Why not tax the rich, asks think tank over looming SST expansion

Summary

• A think tank says the government can generate more revenue with a wealth tax rather than expanding the SST.

• It notes that a two percent tax on the 50 wealthiest Malaysians will generate about RM8.3 billion compared to the RM5 billion expected from the SST expansion.

• The think tank adds that the wealth tax revenue could then be used to fund projects for education or the needy.

With Putrajaya expanding the Sales and Services Tax (SST) to many other goods and services beginning next month, a think tank detailed how taxing wealth would generate more revenue instead of imposing a levy on consumption.

In a series of infographics, Monitoring Sustainability of Globalisation (MSN) research manager V Aishwarya pointed out that by taxing Malaysia’s ultra-rich, the government could generate 60 percent more revenue compared to what SST’s expansion brings.

“According to a Forbes report, Malaysia’s richest 50 currently hold RM414 billion in wealth.

“A two percent wealth tax would help the government collect RM8.3 billion, which is 60 percent more than the RM5 billion the government hopes to raise from the SST hike.

“So, why tax bananas and oil before mega mansions?” she asked.

Yesterday, the Finance Ministry said that fruits grown locally are exempt from SST.

Under the Sales Tax Act, only manufactured local goods are taxed, as well as any imported items.

“Agricultural produce grown in Malaysia is not manufactured; hence, it is not subject to sales tax.

“But if the fruits are imported, then they would be subject to the tax.

“This includes tropical fruits such as banana, pineapple, and rambutan,” it added.

The decision was ill-received by consumer groups, who warned that low-income families may reduce consumption of fruits, leading to nutritional risks.

Free meals, solar panels

Elaborating on wealth tax, Aishwarya said if one has RM100 million, a two percent wealth tax imposed would mean the individual would become RM2 million poorer, or not be able to purchase another Ferrari.

However, the RM2 million in revenue would help fund 500,000 free school meals.

In addition, she said the government could use some of the funds collected to install solar panels on low-cost houses, which would help reduce electricity bills, boost their disposable income and feed clean energy to the grid.

“According to a Unicef report, low-income families allocate 38 percent of their income to purchase food.

“Yet, we keep taxing consumption, not wealth,” Aishwarya added.

Fruits are essential, not luxury

MCA Youth secretary-general Saw Yee Fung reminded the government that Malaysia is heavily dependent on food imports, and imposing SST on imported fruits will burden households.

“Taxing imported fruits in a blanket manner means essential items like apples, oranges, and grapes - staples in many households - will now cost more.

“These are not luxury items; they are everyday necessities for millions of families,” he said in a statement today.

Saw added that according to the United States Department of Agriculture Economic Research Service, Malaysian households spent an average of US$1,940 (about RM8,208) on food in 2023 - the highest in Southeast Asia.

“This shows just how serious the burden of food costs already is for the average Malaysian family,” he added.

YOURSAY | Don't hike fruit prices, they're a necessity, not luxury

Local fruits not subject to sales tax, nor impacted by gazette order

Just reinstate 'efficient, fair' GST, MCA veep tells govt amid SST expansion

SST on imported fruits pose nutritional risks, consumer groups warn

Group urges rethink of SST threshold to shield SMEs

'Revising SST a pragmatic approach to fiscal sustainability'