Prosperity Tax a one-off measure – Tengku Zafrul

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According to Finance Minister Datuk Seri Tengku Zafrul Tengku Abdul Aziz, the Prosperity Tax is a one-off tax measure amid analysts’ fear of its reintroduction in the future. In reiterating, he added that it would not impact more than 250 companies – only companies with more than RM100 million in chargeable income would be taxed. The Prosperity Tax is one-off in this extraordinary time and it will be implemented in that spirit. It will be used to ensure the public health system is more resilient in the face of any threat in the future. Speaking at the Invest Malaysia 2021 Series 2 virtual event, he said that several large corporations have stated that the Prosperity Tax will not affect their dividend payments, citing Telekom Malaysia, Tenaga Nasional and Axiata that have supported the effort. There are more than 900 listed companies on Bursa Malaysia, of which 145 made over RM100 million in their financial year 2019. But in the financial year 2020, only 125 listed companies earned more than RM100 million. According to Bloomberg data, only 130 companies achieved the same pre-tax earnings level across the last two financial years. It is a very small number of companies on the stock exchange. Different countries have decided to permanently increase their taxes in the future as they recover from the Covid-19. For example, in the UK, corporate tax is increased permanently. Saudi and Indonesia have increased value added tax (VAT). In the medium term, the government is considering options to reduce the reliance on direct taxes and to widen the revenue base including shifting to a consumption tax base. There will be more discussion on this when the Fiscal Responsibility Act is tabled next year which will cover the medium-term revenue strategy and outline the stages of revenue measures. We want to review tax legislation and modernise revenue administration. The Prosperity Tax certainly does not fall in that spirit. More reliable consumption tax will be explored as new taxation revenues such as taxation on the digital economy. As part of the 12th Malaysia Plan, the government is now looking into imposing the carbon tax. The finance ministry is working with the environment and water ministry on the imposition of the carbon tax, adding that the government will continue to assess the entire revenue ecosystem. 

Malaysia’s Q3 2021 e-commerce income increases to RM279b – DOSM 

According to the Department of Statistics Malaysia Chief Statistician Datuk Seri Dr Mohd Uzir Mahidin, Malaysia’s e-commerce income surged to RM279.0 billion, a jump of 17.1% year-on-year, in Q3 of 2021. Commenting on the Malaysia Digital Economy 2021 report, he said that in terms of quarter-on-quarter growth, it maintained a positive trend of 4.3%. From January to September,   e-commerce income recorded RM801.2 billion, an increase of 23.1% y-o-y. E-commerce was driven by industrial centres such as Selangor, Kuala Lumpur, Johor, and Penang. In terms of industry, manufacturing and services remained the key drivers of growth. The improved performance was attributed to the adoption of new normal during the Covid-19 pandemic, in which it boosted digital usage in Malaysia. On e-commerce income by market segment in 2019, the local sector dominated with a contribution of 87.6%, generated from sales in Malaysia, compared with the international sector’s 12.4%. The value of the income generated was RM591.8 billion and RM83.5 billion, respectively. E-commerce income by type of customers via business-to-business registered the highest income of RM449.6 billion with a 66.6% contribution, followed by business-to-consumer at RM194.0 billion, or 28.7%. In the meantime, business-to-government recorded RM31.8 billion (4.7%) adding that digital technology has the potential to propel Malaysia’s economic growth. The Malaysia Digital Economy Blueprint (MyDigital), which was launched by the government in February 2021, is the foundation for the country’s transformation into a “regional digital pulse” which is expected to boost productivity, stimulate innovation, and improve livelihoods by harnessing the internet, Big Data, the Internet of Things, artificial intelligence, and other technologies. 

Malaysian healthcare sector to benefit from progressive reforms – Fitch Solutions 

According to Fitch Solutions Country Risk & Industry Research, the spread of the Delta variant had stretched the healthcare system in Malaysia. It said that Malaysian hospitals were overstretched, while Covid-19 bed utilisation was consistently beyond 100% during its peak in August 2021, leading to the construction of field hospitals. As the virus now progresses from the pandemic to endemic stage, Malaysia aims to invest in regional disease centres, vaccine development and develop better understanding of communicable diseases. And, as the Covid-19 pandemic has shown, infectious diseases threaten a blow to health systems already facing significant pressure on their capacity to care for patients. Malaysia’s public healthcare system is mainly financed through federal government taxation and general revenue. Although government spending on healthcare as a percentage of the country’s gross domestic product had been gradually increasing over the years, the World Health Organization still considers this to be below global as well as regional standards. The pandemic had underscored the need to increase funding for the healthcare system both in terms of facilities and working conditions for staff. Citing Finance Minister Tengku Datuk Seri Zafrul Tengku Abdul Aziz, it said Malaysia will undertake a medium-to long-term reform of its healthcare sector while gradually aiming to increase healthcare spending every year. Fitch Solutions added that among other policy directions being considered is increasing public healthcare charges for higher-income earners, and incentivising people to buy health insurance. Social protection schemes will also provide health benefits for informal workers. Moreover, looking beyond the pandemic, it believes that the Malaysian government will remain firmly committed to improving health quality and access across the country. Noting that in recent years, the healthcare sector has seen a rise in government expenditure, with an increase in medical facilities and higher-quality treatments. The implementation of the B40 healthcare scheme is one of the key initiatives that will expand healthcare access to the nation’s lowest earners. In 2020, healthcare expenditure in Malaysia grew 6.9% year-on-year, with an estimated value of RM63.1 billion. In 2021, it’s growth is expected to accelerate to 9.6%, reaching RM69.2 billion. It forecasts health expenditure to experience a five-year compound annual growth rate of 7.6% in local currency terms and 8.9% in US dollar terms, reaching RM91.1 billion by 2025. While reforms are under way to secure the long-term sustainability of the public healthcare system, challenges remain. Fitch Solution remains sceptical about the progress of the reforms and any alteration of the funding structure of the healthcare system will require a revision of its healthcare expenditure forecast. It will not incorporate this into their forecast until the reforms are officially approved and it notes that it is likely that the funding structure will change. Public healthcare expenditure will increase considerably in the short term. Its longer-term forecast reflects that the growth in spending will decelerate as cost-containment measures will inevitably be introduced to maintain sustainable levels of funding. 

Eye On The Markets 

This week, on Friday (12Nov), the Ringgit opened at 4.1675 against the USD from 4.1545 on Monday (08Nov). Meanwhile, the Ringgit was 3.0764 to the Sing Dollar on Friday (12Nov). On Monday (08Nov), the FBM KLCI opened at 1534.21. As at Friday (12Nov) 10:00am, the FBM KLCI is down 6.46 points for the week at 1527.75. Over in US, the overnight Dow Jones Industrial Average closed down 158.71 points (-0.44%) to 35,921.23 whilst the NASDAQ added 81.60 points (+0.52%) to 15,704.30.  

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