No Plans To Lower Corporate Tax Rate Says Putrajaya

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The finance ministry said the lower tax rate for micro, small, and medium enterprises was aimed at enhancing their competitiveness and support economic growth.
PETALING JAYA: The government does not intend to lower the corporate income tax rate to attract more foreign investment to Malaysia.
In a written reply to Senator Lau Hui Yew, the finance ministry said the government remains committed to improving tax services and administration to enhance efficiency and service quality for taxpayers.
“The government must also ensure that future studies or reviews of income tax rates do not jeopardise the country’s fiscal position, while maintaining a more equitable and progressive taxation system,” said the ministry.
Lau had asked whether the government plans to reduce the corporate tax rate to attract foreign investment.
The ministry also noted that the government had previously reduced the corporate income tax rate from 25% to 24%, effective from the 2016 assessment year.
Additionally, the government has lowered the tax rate for micro, small, and medium enterprises to enhance their competitiveness and support economic growth.
The effective tax borne by companies is lower than the standard rate, said the ministry.
However, this depends on various factors such as tax incentives, deductions, exemptions, reliefs, and capital allowances available to each company.
“This ensures that Malaysia’s corporate income tax rate remains competitive compared to other countries in the region, while tax incentives for various sectors continue to support overall economic growth,” the ministry added.
Currently, companies with paid-up capital of RM2.5 million and below as well as less than RM50 million in income would be taxed 15% on the first RM150,000 they make, followed by 17% (RM150,001 to RM600,000) and 24% (RM600,001 and above).
The tax rate is fixed at 24% for other companies.
Calls to raise the corporate income tax rate are not new, but economists have warned in the past that such a move could deter investments and economic growth.
Last December, a backbencher proposed that the government raise the corporate income tax rate on large corporations from 24% to 27%.
Hassan Karim (PH-Pasir Gudang) told the Dewan Rakyat this was necessary to ensure greater government revenue could be distributed to Malaysians, with tax collection crucial for Putrajaya’s coffers. - FMT

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