Abolishing RPGT to help the rich?

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constructionAliran is alarmed that the government is reportedly seriously mulling the possibility of abolishing the tax on profits from the sale of properties. The abolition of such a tax would be retrogressive as it would cut taxes for the rich, especially the propertied classes, who can afford to pay such taxes.

 theSun reported yesterday that the proposal to abolish Real Property Gains Tax (RPGT) had come from the “industry”, which was concerned about the “sluggish” property market, after a series of meetings with the government. It said that abolition of RPGT was high on the wish-list of the Real Estate and Housing Developers’ Association Malaysia (Rehda).

Of course, they would want such taxes abolished, as that would allow them to keep all their profits. The question is, is it in the national interest (especially the interests of the poor) to abolish a source of revenue for the government which would help it to address the problems of the poor. 

Please note that RPGT is collected mainly from those who are involved in the business of buying and selling properties. The vast majority of Malaysians do not pay RPGT. It is largely a tax on the rich – those with lots of property or those who profit from buying and selling property frequently.

In fact, there is no tax imposed for individuals who dispose of their properties more than five years after acquiring them. If the property is disposed of in the first five years, tax is only imposed if there is a chargeable profit. The tax rate itself drops from 30 per cent in the first year to a minimal rate in the fifth year. Moreover, there is currently an exemption of RM5,000 or 10 per cent of chargeable gains (whichever is greater) on the profit from the disposal (according to the Income Tax Department’s own website). There is also a once-in-a-lifetime exemption on profit arising from the disposal of one’s own private residence. All these provisions mean that most ordinary and low-income Malaysians do not have to pay or pay very little RPGT.

So why should the government even consider removing RPGT – a move which would only slash taxes for the rich and worsen the gap between the rich and the poor? The government is always complaining that it has to privatise essential services because it cannot afford to run them itself. And yet, here it is thinking of slashing its own revenue even further by seriously considering the proposal to abolish property taxes. In 1991, the government abolished estate duty, another tax principally borne by the wealthy and the propertied classes. Will the government fall completely in line with the neo-liberal mentality of slashing taxes for the rich while essential services deteriorate or are privatised?

If the property market is sluggish, isn’t it more likely a structural problem rather than a question of RPGT? Is there an overhang in the supply of more expensive residential and commercial properties, which many low-income Malaysians cannot afford to buy? There are hundreds of thousands of Malaysians who cannot even afford a house of their own. The housing and construction industry must recognise this problem and do something about it as a matter of social obligation – even if it means profits are reduced.

If the government goes ahead with this “industry” proposal to abolish RPGT, questions will be asked as to who the government is really working for. The rich and propertied classes who currently pay RPGT or the majority of ordinary Malaysians who are already exempted from such taxes?


Anil Netto

Hon Treasurer

3 March 2007

 

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