KUALA LUMPUR – Imposing a windfall tax on glove makers that have benefited from the Covid-19 pandemic is an inconsistent policy that will send the wrong signal to investors, said Datuk Seri Tengku Zafrul Tengku Abdul Aziz.
The finance minister said should it be imposed, it would make investors think twice about investing in Malaysia, or even opt to invest in neighbouring countries like Vietnam and Singapore, which do not impose such taxes.
“You can (impose the tax), but you might send the wrong signal, especially for an open economy like Malaysia,” he said after appearing as a guest on Bernama TV's Ruang Bicara programme here today.
He said policies cannot be formulated based on short-term gains.
Former youth and sports minister Syed Saddiq Syed Abdul Rahman has urged Putrajaya to impose a windfall tax on glove makers, saying they are making huge profits amid the virus crisis.
Tengku Zafrul expressed optimism that Malaysia’s 2021 gross domestic product will grow within the 6.5% to 7.5% range, as projected by the government.
He said the forecast is based on various assumptions, such as a pick-up in economic demand, as well as the Covid-19 vaccine that is widely expected to be available in the first quarter of next year.
“I am optimistic that the GDP for 2021 will fall within the range of 6.5% to 7.5%, and I am not alone, this is not my projection, but the projection of the Finance Ministry and Bank Negara Malaysia.
“And, our forecast is in line with that of the International Monetary Fund, World Bank, Asian Development Bank and other ratings agencies, which falls within the range of 6% to 8%.”
To achieve the growth target next year, he said, the most important thing is to execute policies well.
On the GDP projection for the fourth quarter, he admitted that there will be an adverse impact especially on the retail and tourism sectors due to the reimposition of the conditional movement control order (CMCO) in Kuala Lumpur and Selangor since mid-October.
He said these two states contribute about 40% to Malaysia’s GDP.
“But it will not (be) as bad as the MCO in March, when the daily impact cost about RM2 billion to RM2.4 billion a day. During the CMCO, the daily impact is about RM300 million, as economic activities, manufacturing and exports are operating as usual.”
The country’s economy contracted 17.1% in the second quarter as it bore the brunt of the MCO, but improved to -2.7% in the following quarter as businesses reopened in stages.
The economy is expected to contract 4.5% this year. – Bernama, November 28, 2020
