From Charles Santiago
The response to my proposal for a 2% wealth tax is welcome.
The G20 endorsed the 2% figure in 2024 following economist Gabriel Zucman’s report, which proposed it as the minimum floor for effectively taxing ultra-high-net-worth individuals.
Economist Afzanizam Rashid argues that Malaysia’s personal income tax is already high, with top earners taxed at 30%.
But income tax and wealth tax are not the same. Income tax applies to what a person earns in a year, while a wealth tax applies to accumulated assets that often grow far faster than any worker’s wages ever will.
The claim that a wealth tax will worsen brain drain is also weak.
Small and Medium Enterprises Association of Malaysia’s (Samenta) president William Ng says Malaysia loses 135,000 citizens annually. But where are they going? Australia, Canada, the United Kingdom, New Zealand and Singapore.
Australia’s top marginal tax rate is 47%. Canada’s combined federal-provincial rates exceed 50% in several provinces. Britain’s is 45%, while New Zealand’s is 39%. Malaysia’s stands at 30%.
Malaysians are not leaving because taxes here are too high. They leave because wages are stagnant, meritocracy is compromised, and opportunities are unevenly distributed. Fix those problems first and our talent will return home.
Economist Yeah Kim Leng cites European countries that abandoned wealth taxes due to low revenue yields. France is often the example raised. Although France scaled back its wealth tax to cover only real estate, it still collected more than €2.2 billion in 2024.
Malaysia participates in the OECD Common Reporting Standard, which was strengthened this year to cover digital financial products through tighter due diligence requirements.
The draft UN Tax Convention also outlines fair taxing rights, high-net-worth individual (HNWI) taxation, mutual assistance, and measures against harmful tax practices and illicit financial flows.
What Malaysia needs is greater investment in the Inland Revenue Board (LHDN) so it can effectively use these tools and strengthen its administrative capacity.
A wealth tax alone will not solve inequality. It must be accompanied by beneficial ownership transparency, stronger trust and nominee reporting requirements, capital gains and dividend reforms, e-invoicing, and a serious crackdown on transfer pricing abuses and illicit financial flows.
A 2% wealth tax is not radical. If Malaysia can ask ordinary families to bear higher costs through consumption taxes and subsidy cuts, then it can also ask its wealthiest citizens to return a small fraction of the wealth this country has helped make possible.
Charles Santiago is a former three-term MP for Klang.
The views expressed are those of the writer and do not necessarily reflect those of FMT.