Economist Jomo Kwame Sundaram says companies making huge profits during the pandemic should pay a windfall tax.
PETALING JAYA: Economist Jomo Kwame Sundaram has proposed a raise in corporate tax, saying “it won’t pinch now” as most companies are not making enough profits.
Jomo also said the government should introduce a windfall tax on corporations making enormous profits during the pandemic.
Speaking in a forum organised by the Malaysian Institute of Economic Research (MIER) today, he said the government should not have any problems raising taxes on corporations “since it would not impact a lot of companies that are still not making enough profits at the moment”.
“The best time to raise tax rates is now, because it won’t pinch. Most companies, except for a few, that should be taxed are not making big money. So, they won’t feel the tax rates.
“There is another compelling reason to raise corporate tax. The world tax regime is changing. Janet Yellen, the treasury secretary of the Biden administration, has advocated a global minimum corporate tax rate of 15%.
“If we give tax breaks to the companies, it means nothing to the corporations since they would still have to pay other taxes, except that the money will go to somebody else. So, what is the point of giving them tax breaks?
“We need to rethink our taxation strategy overall.”
Jomo also suggested the formation of an integrated tax authority in Malaysia since, he said, the taxation authorities were too fragmented.
“We have a curious situation where Malaysia has a lot of tax authorities. We have the Inland Revenue Board with its own tax system, we have the Customs department with its own system, and so on.
“We should have an integrated tax authority with much more spine and much more capacity.”
The Dewan Rakyat unanimously passed the Windfall Profit Levy (Amendment) Bill 2020 on Tuesday to amend provisions under the Windfall Profit Levy Act 1998 (Act 592) and introduce new provisions.
Second deputy finance minister Mohd Shahar Abdullah said the amendments were aimed at improving the administration of the windfall profit levy through the provision of remission, refund of levies, as well as penalties that can benefit those who pay the levy.
However, he said the government had no plans to impose a windfall tax on companies making extraordinary profits during the pandemic, despite being pushed by a number of MPs to do so.