Capital gains tax will harm share market, warns Najib

PETALING JAYA: Former prime minister Najib Razak is against the federal government introducing a capital gains tax (CGT) for the sale and purchase of shares, saying the “populist” move will lead to investors losing confidence in Malaysia.

In a Facebook post today, Najib, the former finance minister, said the CGT idea was nothing new and had been brought up by Pakatan Harapan (PH) several times in its previous alternative budgets. However, he questioned its rationale in doing so now.

“Although the government will lose RM40 billion annually due to PH’s populist measures, including switching from the goods and services tax (GST) to the sales and services tax (SST), they should not introduce the CGT tax for shares,” Najib said.

He said the impact would be huge, with the economy of the country and ordinary people hit.

Najib, who was referring to reports that the finance ministry may implement the CGT, warned that doing so would drive foreign and domestic traders to other markets where there is no such tax.

Putrajaya recently urged Malaysians to prepare themselves for sacrifices in Budget 2019, expected to be revealed on Nov 2.

Both Finance Minister Lim Guan Eng and Prime Minister Dr Mahathir Mohamad have said new taxes may be added to meet the shortfall incurred by scrapping the GST.

Najib said neighbouring countries like Singapore and Hong Kong, with share markets more active than that of Malaysia, were doing much better without CGT.

He said Bursa-listed companies would also have problems raising more capital through issuance of shares.

“Due to the difficulty in gaining capital through additional stock issues, their business cannot expand. Employment opportunities and economic activity will then be undermined,” Najib, who is also the Pekan MP, said.

“In this era of globalisation, it is very easy for Malaysian companies to choose to be listed on other countries’ stock exchanges. Those who have been listed can move to another country while those who have not been listed may choose not to trade on Bursa Malaysia.

“The largest share investors in Malaysia are also our own institutions, such as EPF, Tabung Haji, PNB and private equity parent companies.

“When demand to buy shares in Malaysia falls, the share prices will fall and this will result in losses to these institutions.”

Najib said he did not consider introducing the CGT tax for the share market during his time as finance minister because he was sure about its negative impact. Instead, he said he only introduced the CGT for the real estate market.