KUALA LUMPUR: Finance Minister Lim Guan Eng says the government may introduce a windfall tax for banks unless they turn more flexible in giving out loans.
Lim said there was a lot of complaints that banks were very conservative in approving loans, while making huge profits every year.
The minister’s remarks come on the heel of a 17 per cent drop in domestic direct investments (DDI) for 2018 to RM121.2 billion from RM146.2 billion in 2017, which reduced DDI’s share of the approved investments pie to 60 per cent from 72.9 per cent previously.
Foreign direct investment (FDI) during the same period jumped 48 per cent to RM80.5 billion.
“We want to ask the banks to be a bit more flexible in terms of lending arrangement because we get complaints that they are being very conservative. Banks had last year recorded huge profit - some of them recorded largest profit ever.
“In Malaysia, we do not have windfall tax for banks. Maybe now it is time for you to start lending unless you prefer windfall tax,” he said during a panel session at Invest Malaysia 2019 here today.
Windfall tax is a tax levied by governments against certain industries when economic conditions allow those industries to experience above-average profits.
Currently, the oil palm industry in Malaysia is subjected to windfall tax, where oil palm planters in Peninsular Malaysia pay a windfall levy of 15 per cent if palm oil price is above RM2,500 per tonne.
Planters in Sabah and Sarawak, however, pay this levy at a lower rate of 7.5 per cent if the price crosses RM3,000 per tonne.
Lim said the jump in FDI last year indicated foreign investors’ confidence in Malaysia’s strong fundamentals despite the change of government on May 9 last year.
“This is very significant. This shows that the foreign investors continue to have confidence in the new government in terms of managing the economy and our commitment towards institutional reforms outlined earlier by the Prime Minister.
Meanwhile, Lim reiterated that the special dividend of RM30 billion paid by Petroliam Nasional Bhd (Petronas) to the government will be solely used to make Goods and Services Tax (GST) and income tax refunds of RM37 billion and not to deal with fiscal deficit.
Lim said the government was making the refunds over 10 months from January.
“We are not relying on the one-off Petronas’ dividend to reduce deficit. It will allow us to make GST and income tax refunds.
“Having said that, I believe that next year will be our main challenge to bring down fiscal deficit to 3.0 per cent from 3.4 per cent. However, I am confident that we could achieve this with continued growth of the Malaysian economy, the inflows of investments and the outlined reforms that are being carried out,” he said.