About a week ago, at the open forum, Tun Dr Mahathir and our Finance Minister Lim Guan Eng were answering questions after Tun delivered his speech about our pathetic financial position and how to revise our tax laws on profits gain from properties investment, inheritance profit for doing nothing, increase death duties so that their children do not have too much money to spoil themselves and he might consider profit gain tax on share investment of listed companies.
Allow me to explain the fundamental of doing business and how to do more business because almost all the politicians who are making rules and regulations that affect the citizens, have not done business before.
Small businesses like selling kacang putih, vegetables or hawkers do not need much capital. Bigger businesses like manufacturing computer chips or large scale planting oil palms or property development need more capital. One easy way is to borrow money from the bank but all banks require solid collateral which normally business men do not have.
In fact, I sold my one and only house to start doing property development and construction contracting businesses. How could I borrow money from the banks when I did not have any unmovable asset? Unfortunately, banks did not and do not accept construction equipment like bull dozers or excavators as collateral.
The only way for me is to ask my family members or my friends for financial help. This was the beginning of IGB, Mudajaya, Gamuda and IJM Corporation.
After Ipoh Garden Sdn Bhd made increasingly more profit and could comply with all the stipulated conditions by the Securities Commission, the company was listed in the KL stock exchange by issuing more shares to sell to public investors. In fact, IGB issued shares to buy up Mudajaya and Jurutama to form IJM Corporation Bhd. Currently IJM Corp’s market capital is about Rm 12 billion. Public listed companies always require more capital to expand their operation by issuing more shares to sell to the public investors.
I think the Pakatan Harapan Government should not change the existing law on share investment profit for the following reasons:
1 Ever since our Securities Commission and the Stock Exchange were founded, profit from share investment is not taxable.
2 All the countries in South East Asia including Thailand, Taiwan, Singapore, India, Hong Kong, Indonesia and Malaysia do not tax on profit from share investment.
3 The main reason is that all these countries are not fully developed nations and whenever their companies need additional capital they can issue more shares to sell to the public investors. Profit gain tax will discourage investors.
4 Under the existing tax laws, companies have to pay tax on their profit and share appreciation is not taxable.
5 Tax on share appreciation will definitely discourage foreign and local investors from wanting to buy our public listed shares. As a result, our companies will not be able to raise capital so easily to expand their businesses.
6 If Malaysia implement capital gain tax on share investment, foreign fund managers will not buy shares via KLSE, they will buy shares through Singapore stock exchange which is not taxable. As a result, all brokers in Malaysia will lose out all share investment business to Singapore stock exchange.
7 I strongly believe KLSE will definitely crash if this unfriendly tax law is implemented.
8 Remember the Government collects most taxes from public listed companies to pay all the civil servants and politicians.
9 The KLCI has been dropping continuously in the last few weeks from 1820 to close at 1735, especially today when more than 80% of the listed shares dropped in price. I think investors are fearful of the Government’s intention to tax on profit from share investment which is partially responsible for the continuous slump in the stock market.
I trust Tun Dr Mahathir will discuss this article with his cabinet and I hope the Government will not tax investors of public listed shares.