In response to the suggestion by Pankajkumar Bipinchandra at the 15th Malaysian Property Summit 2023 today, National House Buyers Association (HBA) secretary-general Chang Kim Loong pointed out that the government could end up recovering the shortfall in revenue through an inheritance tax.
“It is wrong to impose taxes on the heirs upon the death of the property owner,” Chang said during the Q&A session.
In making the proposal Pankajkumar, non-executive managing director at economics and social policy think tank Datametrics Research and Information Centre Sdn Bhd (DARE), said the RPGT no longer made sense for Malaysia given that its property market was not as speculative now as it used to be.
He agreed that the repeal of the RPGT, which he said could be included in the wish list for Budget 2023, would lead to a reduction in government revenue but argued that there were many ways to recover the inevitable shortfall.
He said a seller stamp duty at a flat rate of 2% could be introduced for all transactions while the buyer’s stamp duty for properties priced above RM1 million be reduced to 1%.
Over and above that, he said, there should be no stamp duty during the sale or purchase of property that cost below RM500,000.
Apart from that, he said, rental income of up to RM30,000 per year should also not be subject to tax.
“We should also introduce a separate tax rate of 7.5% for net rental income of RM30,000 to RM100,000 a year, 10% for net rental income of RM100,000 to RM200,000 and 15% for net rental income above RM200,000,” he said.
Chang pointed out that if the inheritance tax was re-introduced, the heirs would end up paying a 40% tax upon the death of the owner for properties worth more than RM2 million.
In rebutting Pankajkumar’s argument, Chang said it was wrong to impose further taxes on the heirs upon the death of the property owner.
He pointed out that the estate duty had been abolished in 1991 so it was ridiculous to do away with the RPGT given that it was in fact an anti-speculation tax.
In his counter-argument, Pankajkumar said that calculating the RPGT for each transaction had become burdensome.
“We suggest it be replaced with a sellers stamp duty of 2%, so it can offset the loss in revenue from RPGT.
On the subject of new taxes, he pointed out that Malaysia still had one of the lowest revenues from taxes.
“Tax revenue accounts for only 11.3% of the GDP, and the government has been running a budget deficit for the longest time. There is an urgent need to come up with new taxes rather than raise the tax rates. It is something we need to do,” he added.