Inheritance tax could make a comeback in Budget 2025: But what is it and why are some Malaysians for and against it?
The colonial-era Estate Duty Enactment in 1941, which was repealed in 1991, functioned similarly to inheritance tax – the common trait is that both are triggered by death. — Picture by Yusof Mat Isa
Friday, 11 Oct 2024 7:00 AM MYT
KUALA LUMPUR, Oct 11 — Budget 2025 to be tabled October 18 could see the introduction of several new taxes to raise Malaysia’s revenue and (perhaps) close the wealth gap.
Among the five reported by Utusan Malaysia – unhealthy food tax, carbon pricing tax, inheritance tax, high-value goods tax, and Artificial Intelligence tax – the levy on inheritance has generated debate, with some government lawmakers vocally opposed to it.
But first, what is inheritance tax?
Inheritance tax is a state levy on assets received as part of an inheritance, varying in application and rate.
Malaya had the colonial-era Estate Duty Enactment in 1941, which was repealed in 1991 after the formation of Malaysia; it functioned similarly to inheritance tax, the common trait is that both are triggered by death.
Estate taxes are levied on a deceased person’s net property value, while inheritance taxes are imposed on the beneficiaries.
“Malaysia has had an estate duty on property inherited from the deceased person in 1941. There were 28 tax brackets, with the scale rates ranging from 0 to 40 per cent and the highest rate was imposed on estate value more than RM5 million,” economist Lee Heng Guie told Malay Mail.
Why does the Anwar administration want to bring it back?
Whether or not it’s true that the same tax could be reintroduced or a completely new form of levies on inheritance would be tabled remains to be seen, but Prime Minister Datuk Seri Anwar Ibrahim has repeatedly said he wants to reduce the fiscal gap by raising government revenue, and that includes through boosting tax collection.
Anwar has also been consistent in pointing out that the country’s top income earners are not paying their due share of taxes.
Under his leadership, the government will tax gains from sales of shares under the Income Tax Act 1967. Since mostly the rich hold their wealth in shares, a capital gains tax (CGT) acts doubly as a mechanism for social equitability.
Still, the new CGT will only levy profits from the sale of unlisted shares and foreign capital assets, which has prompted some criticism that Anwar is not aggressive enough when it comes to taxing the country’s super rich.
Where else is inheritance tax implemented?
Many countries, including richer nations, have inheritance taxes. Even if studies of the tax showed revenue from inheritance tax collection tends to be very small relative to GDP size, the levy serves other purposes such as reducing inequality by redistributing wealth.
In countries that levy wealth and asset inheritance, the tax usually gets broad support, especially from low and middle income households.
In Malaysia, the debate around tax is still less developed and has not been the subject of election campaigns even when income disparity is often played up by candidates.
Who is opposed and why?
The issue has garnered some attention after five Sarawak MPs from DAP said they will vote against the proposed inheritance tax if it is tabled in Parliament.
The state’s DAP chief, Chong Chieng Jen, claims that it’s unfair for parents who have already paid income tax on their assets to face additional taxation upon transferring wealth to their children.
Friday, 11 Oct 2024 7:00 AM MYT
KUALA LUMPUR, Oct 11 — Budget 2025 to be tabled October 18 could see the introduction of several new taxes to raise Malaysia’s revenue and (perhaps) close the wealth gap.
Among the five reported by Utusan Malaysia – unhealthy food tax, carbon pricing tax, inheritance tax, high-value goods tax, and Artificial Intelligence tax – the levy on inheritance has generated debate, with some government lawmakers vocally opposed to it.
But first, what is inheritance tax?
Inheritance tax is a state levy on assets received as part of an inheritance, varying in application and rate.
Malaya had the colonial-era Estate Duty Enactment in 1941, which was repealed in 1991 after the formation of Malaysia; it functioned similarly to inheritance tax, the common trait is that both are triggered by death.
Estate taxes are levied on a deceased person’s net property value, while inheritance taxes are imposed on the beneficiaries.
“Malaysia has had an estate duty on property inherited from the deceased person in 1941. There were 28 tax brackets, with the scale rates ranging from 0 to 40 per cent and the highest rate was imposed on estate value more than RM5 million,” economist Lee Heng Guie told Malay Mail.
Why does the Anwar administration want to bring it back?
Whether or not it’s true that the same tax could be reintroduced or a completely new form of levies on inheritance would be tabled remains to be seen, but Prime Minister Datuk Seri Anwar Ibrahim has repeatedly said he wants to reduce the fiscal gap by raising government revenue, and that includes through boosting tax collection.
Anwar has also been consistent in pointing out that the country’s top income earners are not paying their due share of taxes.
Under his leadership, the government will tax gains from sales of shares under the Income Tax Act 1967. Since mostly the rich hold their wealth in shares, a capital gains tax (CGT) acts doubly as a mechanism for social equitability.
Still, the new CGT will only levy profits from the sale of unlisted shares and foreign capital assets, which has prompted some criticism that Anwar is not aggressive enough when it comes to taxing the country’s super rich.
Where else is inheritance tax implemented?
Many countries, including richer nations, have inheritance taxes. Even if studies of the tax showed revenue from inheritance tax collection tends to be very small relative to GDP size, the levy serves other purposes such as reducing inequality by redistributing wealth.
In countries that levy wealth and asset inheritance, the tax usually gets broad support, especially from low and middle income households.
In Malaysia, the debate around tax is still less developed and has not been the subject of election campaigns even when income disparity is often played up by candidates.
Who is opposed and why?
The issue has garnered some attention after five Sarawak MPs from DAP said they will vote against the proposed inheritance tax if it is tabled in Parliament.
The state’s DAP chief, Chong Chieng Jen, claims that it’s unfair for parents who have already paid income tax on their assets to face additional taxation upon transferring wealth to their children.
Stampin MP Chong Chieng Jen explained that it is a tradition and culture of Asian parents to leave something for their children, deeming the inheritance tax as a double taxation and a financial burden on a family. — Bernama pic
It’s unclear what had prompted Chong’s views but in countries that have inheritance tax, exemptions are made for the middle class by exempting taxation on wealth and asset transfers that fall below a certain value.
It’s unclear what had prompted Chong’s views but in countries that have inheritance tax, exemptions are made for the middle class by exempting taxation on wealth and asset transfers that fall below a certain value.
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