PETALING JAYA: The new approach to taxes proposed in Budget 2025 – a Sales and Service Tax (SST) expansion and a 2% tax on dividend income – has been viewed as targeting those who can afford to pay up, say experts.
However, they have called for more clarity on the implementation of these taxes, even though these measures do not burden the masses.
In tabling Budget 2025, Prime Minister Datuk Seri Anwar Ibrahim announced plans to expand the scope of SST by May 1, 2025, to include fee-based financial services and non-essential premium food items like avocados and salmon.
He also proposed a 2% tax on dividend income exceeding RM100,000 for individual shareholders, with exemptions for dividends from the Employees Provident Fund, Amanah Saham Nasional Bhd, Armed Forces Fund Board and unit trusts.
Desmond Anil, a member of the SME Association national council, described these tax proposals as a move to “tax the rich”.
However, he called for specific details on which premium foods and business fees will be subject to SST, as current information remains vague.
Desmond warned that the effects of these taxes could lead to increased prices for consumers.
“The short-term benefits are difficult to see with such taxes as it adds to the cost of doing business, potentially raising prices of goods and services. Taxation will always create inflation due to its cascading effects,” he explained.
As SMEs are interested in entering high-end markets, the government should prioritise the ease of doing business when implementing taxes on premium goods and financial services, he said.
Regarding the 2% dividend income tax, Desmond raised concerns about its exemptions and potential effects on foreign investment.
“Will this tax deter the interest of foreign investors? What about companies looking to go into artificial intelligence and automation and want to collaborate with foreign companies?
“Will this hinder the growth opportunities for SMEs, particularly in fields like sustainable green technology and data centres?” Desmond questioned.
Ernst & Young Tax Consultants’ Malaysia tax leader Farah Rosley noted that with GST not being reintroduced, other levers were being explored to bolster government revenue.
“It is encouraging that the government will involve stakeholders from the relevant industries to seek feedback before finalising the SST scope expansion and tax rates, which will smoothen the implementation of the progressive SST system and avoid any unintended consequences,” she said.
Datuk Richard Wee, president of the Federation of Chinese Associations Sarawak, cautioned that expanding the SST will likely raise overall business expenses.
He advocated for the SST to be structured similarly to the GST, which he considers a more effective tax system.
“The 2% dividend income tax, as I understand, is for individuals, but we need further clarification. If it applies only to individuals, the companies may remain unaffected.
“However, since shareholders are often individuals, this tax could lead to double taxation – income tax followed by the dividend income tax,” he pointed out.
Tan Sri Noor Azlan Ghazali, director of the Malaysian Inclusive Development and Advancement Institute at Universiti Kebangsaan Malaysia, expressed scepticism about the effectiveness of targeting the wealthy.
“I doubt that focusing on the ‘maha kaya’ (super rich) will have an impact on Malaysia. The total tax collected is the ultimate goal.
“Consumption of avocados and salmon is likely too small to have an impact. I am in favour of a larger tax base,” said Noor Azlan.
