Malaysia plans windfall tax for rich companies in new budget

Business
Ismail Sabri Yaakob

In this photo released by Malaysia’s Department of Information, Malaysia’s Prime Minister Ismail Sabri Yaakob, delivers the 2022 budget speech at parliament in Kuala Lumpur, Malaysia, Friday, Oct. 29, 2021. (Famer Roheni/Malaysia’s Department of Information via AP)

KUALA LUMPUR, Malaysia (AP) — Malaysia’s government on Friday proposed record spending for 2022 to bolster post-pandemic economic recovery, with various industrial incentives and cash handouts for the poor and windfall taxes for high-income companies.

Finance Minister Zarful Aziz put forward in Parliament the budget proposal of 332.1 billion ringgit ($80.2 billion), up from 320.6 billion ringgit ($77.4 million) this year.

He said the virus lockdown in the third quarter has set back the economic recovery. With 95% of adults and more than 60% of teenagers fully vaccinated, he said the budget is designed to “strengthen economic recovery, build resilience and drive reforms.”

The budget is the first under the administration of Prime Minister Ismail Sabri Yaakob, who took office in August after two changes of government since 2018 elections.

Ismail was the deputy prime minister under Muhyiddin Yassin, who resigned after less than 18 months following infighting in his coalition. Ismail’s appointment brought Muhyiddin’s alliance back to power.

It also returned the premiership to Ismail’s United Malays National Organization, which had led Malaysia since independence from Britain in 1957 but was ousted in the 2018 elections amid a multibillion-dollar financial scandal.

Zafrul said Malaysia’s economy is expected to grow 5.5%-6.5% in 2022, from 3%-4% projected this year after a contraction of 5.6% last year. Despite the increased spending, he said the government’s budget deficit is expected to narrow to 6% from 6.5% this year.

With many livelihoods hit by the pandemic, he said the government will dish out a total 8.2 billion ringgit ($2 billion) in cash handouts that will benefit 9.6 million poor households and individuals. Nearly 5 billion ringgit has also been allocated to create 600,000 new jobs, he said.

To boost state coffers, Zafrul said the government will impose a one-off special tax for high-income companies generating more than 100 million ringgit ($24.1 million) in profits. The first 100 million ringgit in taxable earnings will be taxed at 24% while the rest will be taxed at 33%, he said.

The budget in part is seen as an effort by Ismail and his UMNO party to win back public support, especially rural ethnic Malays, and to show that it can lead the country again. General elections are not due until 2023, but many expect polls could be called next year.

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