Malaysia Says Mulling New Taxes Once the Economy Recovers

Malaysia’s government will pay more attention to economic sectors most affected by the pandemic such as tourism and retail, and will wait for the recovery to gain traction before considering any new taxes, the country’s finance minister said Friday.

The Finance Ministry is studying the possibility of a consumption tax, but “we have decided this is not the right time to introduce any new form of taxation,” Tengku Zafrul Abdul Aziz said in an interview with Bloomberg Television. “After the economy has recovered, we really need to relook at widening our revenue base.”

Bank Negara Malaysia will disclose its gross domestic product forecast in its annual report due March 31, but Zafrul said that for now the government is maintaining its expectation that the economy will grow 6.5%-7.5% this year after contracting 5.6% in 2020.

Malaysia Says Mulling New Taxes Once the Economy Recovers

“The focus of the government today is on the economy’s revival, we would like to jumpstart the economy,” he said. “We have to balance between short-term fiscal injection to the economy with medium- to long-term fiscal consolidation.”

The World Bank in its regional projections released Friday said it expects Malaysia’s economy to expand by 6% in 2021, slower than the 6.7% forecast previously, after factoring the recent spike in Covid-19 infections, political uncertainty and slower than expected vaccine rollout in developed economies.

Malaysia announced a 20 billion ringgit ($4.8 billion) package last week to revitalize the economy as the pace of new Covid infections slows and vaccines are rolled out. The plan included 11 billion ringgit in direct fiscal injection, which Zafrul said would be funded through domestic borrowing.

Other points from the interview:

  • Malaysia remains in discussions with auditors and legal firms to recover assets lost in the 1MDB scandal
  • Zafrul ruled out a capital gains tax on stocks
  • The government will soon start the bidding process to build 5G infrastructure, and currently is going through a process to ensure “all the right governance is in place”
  • Malaysia sees no need to list Petronas on the stock market, as it can raise funds in the bond market

©2021 Bloomberg L.P.

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