KUALA LUMPUR (Nov 16): The government will provide further clarity on whether deals involving unlisted shares by private equities (PE) and unit trust funds will be subjected to the 10% capital gains tax (CGT) from March next year, said Treasury secretary general Datuk Johan Mahmood Merican.

The matter was raised at the Deloitte TaxMax seminar on Budget 2024 on Thursday, with Socio-Economic Research Centre executive director Lee Heng Guie cautioning that subjecting parties like PE to CGT might dampen Malaysia’s attractiveness as an investment destination.

“Certainly, there is no intention to extend capital gain tax to listed shares, it would be very detrimental. [The government] already collects income through stamp duty in every transaction [of listed shares]. The unit trust and PE treatment, I think that needs to be clarified,” said Johan.

The government had announced in Budget 2024 that CGT will be imposed on net profit derived from the disposal of local companies' unlisted shares, with an exemption for initial public offerings, internal restructuring and venture capital companies.

During the seminar, Lee asserted that while there is a need for the government to broaden its revenue base in its bid to narrow decades of budget deficit, Putrajaya should tax consumption by way of goods and services tax (GST), instead of imposing tax on entrepreneurs’ bid to build successful businesses.

Johan, however, explained that the current administration’s priority is to address the blanket subsidies’ disproportionate benefit to the people, before looking into broad-based consumption tax.

“You don’t want to create a double whammy to the rakyat, by doing both subsidies rationalisation and GST. Ultimately, we have to accept that GST is regressive by nature, they will always have an impact on the people,” he said.

“Also, because our GST [if introduced] will not be an additional tax, it will be a replacement of the sales and services tax (SST), so when we do our simulation, say it is 4%, our view is that it is not worth it for the amount of effort you need to go through all those difficulties.

“Even 5%, then there is a pool of exemptions, and with more exemptions, it is also complicated and confusing,” he added.

During the announcement of Budget 2024, the government made no mention of the reintroduction of GST, bucking market expectations that Putrajaya would at least reveal a timeline for GST's eventual implementation to broaden tax revenue.

Speaking to reporters on the sideline of the seminar on Thursday, Johan reiterated that the government will continue to look at improving its tax base.

“There is no decision made on GST, but we continue to study whether we can improve SST or what are the ways to continue to increase tax base,” he said.