Barjoyai Bardai of Universiti Tun Razak said the windfall tax was “not a productive move” as it could affect foreign investment sentiment.

Companies may also shift the tax increase to consumers, he said.

However, he said the government should tax rich individuals through capital gains tax. “This group has been enjoying tax-free money for a long time,” he added.

The windfall tax was part of the 2022 budget measures announced yesterday.

Finance minister Tengku Zafrul Aziz said a 33% prosperity tax would be levied on companies with profits that were over a RM100 million threshold. The usual company tax rate is 24%.

Another economist, Geoffrey Williams of Malaysia University of Science and Technology, said the threshold was too low. “As a general rule, windfall taxes should be avoided. They don’t raise much revenue and they act as a disincentive to business and investment,” he told FMT.

Williams said companies were likely to find ways to avoid paying the tax and wouldn’t raise their investments.

“RM100 million is only US$24 million or 21million euros, which is peanuts to a foreign investor but they don’t want to be taxed heavily,” he said.

He said that the budget did not have the feel of a budget for growth and recovery, “nor did it appear to be generous enough to be an effective pre-election budget”.

He said the government missed an opportunity to provide help to a wide range of people and instead had taken ‘the same old approach” of targeting special groups and projects with relatively small amounts.

The budget does offer some good news for SMEs, he said, with RM14.2 billion to support the expansion of SMEs, RM2 billion in targeted relief and recovery facilities for businesses and the RM3 billion to support companies affected during the pandemic.

“The RM30 billion to strengthen GLCs is intriguing and many people will ask how, where and why this money will be spent,” he said, adding that there should be transparency to ensure SMEs along the supply chain get opportunities.