In the 2023 budget announced today, the government said luxury goods and watches will be taxed, and the income tax rate will be increased by 0.5% to 2% for those earning between RM100,000 and RM1 million a year.
The government would also study the possibility of introducing a capital gains tax in 2024, Prime Minister Anwar Ibrahim said.
No details on the luxury goods tax were given, leading some social media users to ask what would be taxed. “If I buy an iPhone 15 Pro Max Ultra or a Samsung S24 Ultra, will I be subject to the luxury tax?” asked IlliFadli on Twitter.
Muhd Ozz said: “It’s not specific, how much must an item cost for it to be subject to the luxury tax? RM1,000 and above? RM10,000? RM100,000? RM1 million?”
Twitter user #ryuki2517 said the luxury tax should cover expensive food, holidays, cars and houses, while Yusri Jaffar said electricity and water tariffs for those living in bungalows and condominium apartments should be increased.
Some social media users voiced concern over the increase in the top rate of income tax. Harris Zainul said those with taxable income of RM100,000 a year should not be treated the same as those with RM1 million income. “RM8,300 a month is not a life of luxury by any means,” he said.
Akim Dzumalin, said: “RM100,000 a year (threshold) is too low. Not even in the Top 20. Tax those who earn at least RM300,000 a year.”
On the planned capital gains tax, Twitter user @MHaffizJ welcomed the move, saying many rich people gained their net worth from their stocks. “That (large) amount of tax (gained through them) is a lot more beneficial than any luxury tax,” he said.
Prosperity tax would shave 2023 corporate earnings
However, Bursa Malaysia chairman Abdul Wahid Omar said the absence of a corporate prosperity tax had been a huge relief for the corporate sector.
He said the tax could have potentially shaved 5%-6% of the 2023 earnings of the stock market index component stocks.
“Without prosperity tax being imposed, analysts have a consensus forecast earnings per share growth rate of 20.1% for 2023 compared to a negative 1.3% for 2022. This augurs well for the capital market,” he said.
He welcomed the prime minister’s commitment towards reducing the government’s fiscal deficit to 5% of gross domestic product in 2023 and further to 3.2% in 2025.
He said the reduction could be achieved by enhancing tax collection, plugging leakages and broadening the revenue base through the tax on luxury goods and capital gains tax.
He added that the latter tax would encourage more unlisted companies to list on the stock exchange, which would spur growth in the capital market.