Real Property Gains Tax is making a comeback in 2010
The re-imposition of real property gains tax in the midst of the present economic recession, does not seem to be in line with the government policy of encouraging investments. It may in fact discourage some would-be local and foreign investors from investing in landed properties in our country.
The purpose of imposing gains tax under the RPGT Act 1976 on any disposal of real property is to curb speculative activities in the property sector.
But any disposal after withholding the property for a certain number of years (say 5 years or so) is certainly no “speculation”. It can hardly be described as “speculation”. It is in reality an investment. In the circumstances, such disposal ought to be exempt from payment of gains tax. It is far from being reasonable to impose gains tax on investments.
The Straits Times in Singapore on 27-10-2009 reported that a 2010 Post Budget Dialogue was jointly organized by several bodies (including the Malaysian Economic Association and University of Malaya’s Faculty of Economics and Administration) and supported by Standard Chartered Malaysia Berhad.
After the Dialogue, Siti Halimah Ismail, Under Secretary of the Finance Ministry (Tax Analysis Division) revealed to the reporters that the government is expected to collect some RM500 million from the real property gains tax in 2010, while RM240 million will be lost in individual income tax, due to the reduction of 1% of income tax, from 27% to 26%.
It may be difficult not to come to the conclusion that, as far as the re-imposition of the real property gains tax is concerned, it is more a revenue-collecting exercise rather than an attempt to curb speculation.
As to the rates of gains tax payable, if there is confusion in the drafting of the relevant legislation, it is for the Ministry of Finance to see to it that the Exemption Order 2009 and the Finance Act (No.2) 2009 are amended accordingly, so that they are in line with the policy statement made by the Prime Ministers on the Budget Day.
There was a turn of event recently. The Star on 24 December 2009 carried a piece of news with the heading: “RPGT to apply only for sales within five years of purchase”.
The move is a boon to all property owners, becauseno gains tax is now payable after 5 years of the purchase of any real property. It is a departure from the 2010 Budget speech. The Star reported:
“The real property gains tax (RPGT) announced during the 2010 Budget will now only apply to property sold less than 5 years from its purchase. Datuk Seri Najib Tun Razak said.”
“The Prime Minister said the 5% tax would now only be imposed on property sold within 5 years of date of purchase … the decision would cause the government to lose about 200 mil in revenue. adding the move was made following appeals from the Federation of Chinese Associations of Malaysia (Hua Zong) and the business sector”. (Hua Zong is the national umbrella body for Chinese guilds and associations).
On the same day, Malaysiakini also carried a similar piece of news with the heading: “Real property gains tax only those sold within 5 years”. The announcement was made during the Prime Minister’s speech at dinner in Putra –jaya. The first page of the Chinese newspaper Sin Chew Jit Poh also gave it a brief coverage.
However, the New Straits Times on the same day made a big blunder in its press report, carrying a misleading heading: “Property gains tax only after 5 years of ownership” [emphasis added] .
Paragraph 1 of the report said: “The real property gains tax next year will only be applicable to properties disposed of after five years of ownership.” [Emphasis added] … It further said: “The houseowners, in return, would also benefit as their property value would have increased after 5 years.” It is rather surprising how such misreporting could have taken place.
The present departure from the 2010 Budget speech reminds us of the earlier move to waive the mandatory tests on 15-year or older vehicles, as announced in the 2010 Budget. These moves are certainly most welcome.
The impression created is that our Prime Minister seems to be amenable to sensible suggestions from the populace, keeping in mind the next General Election which may be held by 2013 at the latest.
Article source: MalaysianBar.org.my