PETALING JAYA: An economist has warned of harm to the business environment if the government decides to impose new taxes or raise the rates of current taxation.
Speaking to FMT, Carmelo Ferlito of the Institute for Democracy and Economic Affairs said new or increased taxes would discourage the growth of businesses and it might be better for the government to reduce expenditure if it was concerned over revenue shortfalls.
He suggested that the government focus on restructuring the public sector as well as government-linked companies.
Ferlito was commenting on a suggestion by Maybank Kim Eng senior economist Chua Hak Bin for an increase in stamp duties on property transactions.
Chua, speaking at a recent economic conference, proposed that the increase be applied to all property transactions without threshold limits or exemptions.
But Ferlito said any additional fiscal burden on the property market would worsen the already difficult situation it was in.
“The risk is that we may see a further decrease in property transactions and the revenue from the additional stamp duties cancelled out by a reduction in business.”
In June, National Property Information Centre figures showed that 34,532 completed residential units, worth RM22.26 billion, remained unsold in the first quarter of the year.
Henry Butcher Malaysia chief operating officer Tang Chee Meng agreed with Ferlito, saying increases in stamp duties would lead to higher prices. He suggested that the government instead tweak the real property gains tax (RPGT) to discourage speculation.
“Stamp duties affect all buyers while RPGT affects only sellers and is softer on those who keep their properties longer,” he said.
Currently, profits on properties disposed within the first three years are subject to a 30% real property gains tax. The rate goes down to 20% for properties sold within four years and to 15% in the fifth year. No such tax is imposed on properties sold after the sixth year of acquisition.
The National House Buyers Association (HBA) meanwhile reiterated its call for increases in stamp duties and RPGT to be imposed on those who own more than two pieces of property.
HBA secretary-general Chang Kim Loong proposed a flat stamp duty rate of 5% of the price of the third property, 7.5% for the fourth property and 10% for subsequent properties.
With regard to RPGT, he said, a 30% tax should be added for the third and subsequent properties if they were sold off within 10 years.
“The low stamp duty has resulted in speculators acquiring multiple properties at the same time, depriving genuine house buyers of the opportunity to own homes, while the weakness of the RPGT is that it kicks in from the date of acquisition and not the completion of a home.
“So speculators only need to hold on to their properties for three years before putting them back on the market and thus avoid paying the RPGT.”