Instead of windfall profit tax, govt will continue to implement measures proposed by BNM
By P PREM KUMAR / Pic By MUHD AMIN NAHARUL
The government has no plan to impose any tax on windfall profits earned by Malaysians or corporations, said Finance Minister Lim Guan Eng.
Lim said instead of windfall profit tax, the government will continue to implement measures proposed by Bank Negara Malaysia (BNM) to ease the challenges of owning a home.
“The government has informed BNM that the economy requires some leeway to facilitate certain loan purposes like home ownership, and as a result, they have come out with some measures that I announced in Budget 2019 to facilitate home ownership.
“Some of these measures include maintaining an interest rate of 3.5% and lengthening the maximum home loan tenure by five years,” he told the Dewan Rakyat yesterday.
He was responding to MP Datuk Seri Hasan Arifin (Barisan Nasional-Rompin) who asked if the government intended to introduce windfall profit tax to prevent speculative buying of properties.
A windfall gain is an unexpected gain in income which could be due to winning a lottery, unforeseen inheritance or shortage of supply. Windfall gains are transitory in nature.
For instance, when real estate property prices rise dramatically, the owner can make a substantial amount of profit by selling a property.
This sudden and unexpected rise in income is called windfall profit, from which many countries define proper laws to tax them.
Lim said he personally feels that the central bank could play a more significant role in enabling home ownership.
“Personally, of course, I would think BNM could do more, but the central bank has its own reason, where they might be concerned about household debt-to-GDP that may go out of control.
“Let’s give us some time to see the effectiveness of these measures, and I am confident that if these measures are less effective, BNM would implement other ways to facilitate home ownership,” he said.
Lim also told the august house that the household debt-to-GDP ratio fell slightly to 83.2% as at end-September 2018 from 83.8% at end-2017.
He said a large portion of the household debt is catered for asset accumulation such as buying residential properties (52.8%), non-residential properties (6.8%) and investment saving funds (5.7%).
He said most individual borrowers boasted a prudent debt level, while the overall debt service ratio (DSR) of accumulated financing was at 32%.
“However, there are still lending segments which have a weak financial position, that is 6.5% of the total borrowers with negative financial margin.
“Most of these borrowers earn less than RM5,000 per month and have a DSR level above 60%,” he explained.
Lim said the measures taken to reduce household debt are based on two principles, namely to nurture prudent credit practices among individuals and financial institutions, and to curtail households from piling up debts.
“These measures have been implemented since 2010 and the government will continue to monitor the household debt level and ensure that the household sector remains sustainable and resilient,” he added.