THE launch of the Shared Prosperity Vision 2030 signalled a new era of development in Malaysia.
The new vision entails three main objectives: to restructure the economy into more knowledge-based, to address economic disparities across income groups and to build Malaysia as a united and dignified nation.
This vision needs to be applauded as income disparity is finally acknowledged.
For years, this has not been the biggest concern. However, the plans and strategy in redistributing wealth seemed to be lacking in discussion.
Reasons for inequality can be derived from income and wealth disparity.
At the moment, Malaysia has only witnessed the implementation of tax on income and consumption and not the wealth and inheritance tax.
The wealth tax imposes levies on an individual’s accumulated assets. This includes vacation homes, art collections, shares, bonds and fixed deposit.
Inheritance tax or estate duty is imposed on property inherited from the deceased.
Prime Minister Tun Dr Mahathir Mohamad recently made a statement that new taxes shall be introduced. ‘We may also have to introduce new taxes, but it must not be a burden to the people.’
This caused outrage as the introduction of taxes is considered burdensome.
Wealth and inheritance tax should have a high threshold value such as assets worth more than RM4 million.
This will ensure that this tax only affects those who are extremely rich (Friday’s 2020 Budget had announced a new personal income band for taxable income in excess of RM2 million to be taxed at 30 per cent).
And the rates imposed were five per cent on estates worth RM2 million, and 10 per cent on everything else above RM4 million.
Inheritance tax is usually found in developed nations.
Japan has the highest rate at 55 per cent, South Korea at 50 per cent, France at 45 per cent, and the United Kingdom and the United States at 40 per cent.
In addition to inheritance tax, there has been heated debate in the US among the Democrats between senators Elizabeth Warren and Bernie Sanders who proposed a model of wealth tax in combating the inequality in the US economy.
This is to redistribute the fortunes of the richest Americans to ordinary people through this model tax.
For instance, Warren proposed that wealth tax be implemented on households worth over US$50 million (RM200 million), with a two per cent tax applied on net worth above US$50 million and three per cent tax applied on net worth above US$1 billion.
On the other hand, Sander’s proposed a one per cent tax on net worth from US$32 million to US$50 million for married couples.
Additionally, an eight per cent tax should be implemented for individuals that have a net worth of over US$10 billion.
Essentially, the wealth and inheritance taxes are not something new.
Even in Islam, zakat is necessitated on wealth.
Using the same model, the government should consider the implementation of wealth and inheritance taxes as a tool to achieve a fairer society by reducing the wealth gap between the rich and the poor, and simultaneously aligning with the principles of Shared Prosperity Vision 2030.
NORDIANA IZZURA MOHD AZHAR AND DR MOHD ARIFF MOHD DAUD
Institute for Research and Development of Policy