Tan Wi Ming
KUCHING: Introducing a capital gain (CG) tax on share trading/investment would worsen the performance of the local stock market, comments the Sarawak Remisier Association, and may lead to more capital flight.
This was in response to a proposal by the government to study and set up the implementation of a one-off higher tax rate to be imposed on companies that have generated extraordinary profits during the Covid-19 pandemic.
According to president Tan Wi Ming, this comes as Bursa Malaysia has been one of the worst performing markets and its foreign shareholding is at an all time low as reported in August 2021.
“Imposing a capital gain tax on share trading/investment would worsen it and lead to more capital flight not only by foreign funds but local funds/retailers as well,” Tan told The Borneo Post.
“Other Southeast Asia markets such as Singapore, Indonesia and Thailand do not impose capital gain tax on shares trading. Online trading allows investors to trade most stock market from anywhere in the world and Bursa has definitely lost local investors who begin trading in bigger stock exchanges such as HK and US.”
Recently, the Securities COmmisssion launched a five-year Capital Market Masterplan (CMP3) which serves as a strategic framework for the growth of Malaysia’s capital market. Imposing new tax such as capital gain tax on shares trading would definitely put a spanner on CMP3, Tan said.
“Will the proposed capital gain tax be similar to real property gain tax (RPGT) model? If so, traders would be less tempted to trade frequently which will result in much lesser trading volume,” Tan added.
“The current stamp duty on shares trading enabled government to collect more as trading volume increased. A service tax of six per cent is also imposed on brokerage.
“There is also the issue of the complexity of imposing capital gain tax on share trading. Is there proper study or understanding on trading activities before proposing a capital gain tax on share trading?”
Tan went on to explain one of the reasons for the increase in trading activities in Bursa Malaysia was because of low commissions besides the ease of online trading using computers or mobile apps.
“A trader may make a few trades per day or short period of time and not all trades are going to be profitable. Government will receive revenue through stamp duty and service tax regardless of whether it is profit or loss.
“By imposing a capital gain tax, will the trader be able to deduct his losing trades against profitable trades? As a rule of thumb the more frequent a person trades the more likely he will end up losing over the long term,” Tan explanied.
“There is perception by some that trader can easily make a few thousands ringgit daily trading and should pay a capital gain tax. Anyone who can use a smart phone trading online is as easy as ABC and very low capital is needed to start trading.
“If profit can be made so easily through trading they would be not be so many people in financial difficulties from raising white flags to seeking financial assistance.
“Capital gain tax on stock market would not only result in government collecting less revenue but deprive the capital market of the much needed fund.”