PETALING JAYA: The introduction of a capital gains tax (CGT) on listed shares would have a devastating impact on the Malaysian stock market, said Rakuten Trade today.
The online equity broker’s research head Kenny Yee said now is not the time for such a tax. Instead, it is time to attract funds and make it easier for foreigners to do business in Malaysia.
He said when the going gets good, the authorities tend to implement measures such as taxes that “make foreigners shun away from our local market”.
“If it (CGT) is implemented, it will definitely kill the equity market,” Yee said in response to a question on the impact of CGT on the equity markets at Rakuten’s fourth quarter market outlook media briefing.
Rakuten equity research vice-president Thong Pak Leng said should the tax be implemented, “nobody will come to invest in Malaysia”.
Recently, Prime Minister Anwar Ibrahim said in Parliament that the government is considering additional taxes to boost revenues to achieve its goal of halving its fiscal deficit by 2025. “Among the new taxes being formulated for implementation in 2024 is the capital gains tax,” he said.
During the retabling of Budget 2023 in February, Anwar, who is also finance minister, said the government plans to study the introduction of a low-rate CGT on the disposal of unlisted company shares from 2024.
He subsequently clarified that the sale of unlisted shares through an approved initial public offering (IPO) will not be subject to the proposed CGT.
Thus far, the existing tax that most closely resembles the proposed CGT is the real property gains tax (RPGT) that is levied on individuals and companies which have made gains on the disposal of their properties.
On the proposed introduction of fractional share trading, Yee said its effects would be rather muted, considering the size of the lots. A fractional share is a portion of a stock that is less than one standard board lot.
“The impact of fractional share trading in Malaysia would be rather muted because the prices of our local equities are unlike in Hong Kong or the US where they are expensive,” Yee said in response to another question.
In July, Anwar announced that the government will allow the trading of smaller share lots and fractional shares to boost retail participation in the stock market.
On Sept 7, the Securities Commission outlined the requirements that would allow stockbrokers to offer fractional share trading services on Bursa Malaysia.
This came after the government lowered stamp duty for shares traded on the local bourse on July 12 to 0.1% from 0.15% of the contract value, subject to a maximum cap of RM1,000 per contract.