Cukai Makmur: What Is It and Will It Affect Your Company?
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Yesterday, Finance Minister Datuk Seri Tengku Zafrul Abdul Aziz announced during Budget 2022 a one-off 33% "Cukai Makmur" (Prosperity Tax) would be placed on companies that profited more than RM100 million for the year of assessment 2022.
The federal government introduced the tax measure. Large companies will pay the current maximum tax rate of 24% for the first RM100mil taxable income, and the remaining earnings of over RM100 million threshold will be taxed at a 33% rate.
However, micro, small and medium enterprises (MSMEs) with annual sales below RM50mil and a paid-up capital below RM2.5mil would not be affected.
Prosperity tax covers all companies that make more than RM100mil.
Among the 900+ public-listed firms on Bursa Malaysia, 145 made over RM100 million in their Financial Year 2019. But, in the Financial Year 2020, only 125 such companies earned more than RM100 million.
According to Bloomberg data, only 113 companies achieved the same pre-tax earnings level across the last two financial years.
The obvious targets are banks and large plantation companies. Among the 113 companies that made more than RM100 million consistently across the two financial years were:
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Petronas Chemicals Group Bhd,
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Malayan Banking Bhd,
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Tenaga Nasional Bhd,
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Top Glove Corp Bhd, and
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Public Bank Bhd.
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The prosperity tax will only affect companies that make over RM100 million in profit.
Glove manufacturers such as Rubberex Corp (M) Bhd and Careplus Group Bhd, and semiconductor automated testing equipment (ATE) and packaging companies, such as Unisem (M) Bhd and ViTrox Corp Bhd, also recorded increased pre-tax earnings in Financial Year 2020 compared with Financial Year 2019.
It is uncertain whether the "Cukai Makmur" will apply to all companies. According to the Inland Revenue Board, the current assessment year differentiates tax rates depending on the paid-up capital.
For the year of assessment 2020, the government charged companies with paid-up capital of less than RM2.5 million a 17% tax rate for their first RM600,00, and the extra income would be subjected to a 24% tax rate. Meanwhile, companies with paid-up capital of over RM2.5 million would be subjected to a 24% tax rate regardless of their income generated.
Fiscal Responsibility Act
Tengku Zafrul also announced that the government is planning to introduce the Fiscal Responsibility Act to enhance fiscal governance, transparency and accountability.
The Parliament scheduled the act to be tabled next year.
The Finance Minister said that the government is collaborating with the World Bank to implement a public expenditure review. The review is to ensure the effectiveness and efficiency of public spending without jeopardising the public delivery system.
He said that the public expenditure review could increase the productivity of public spending to ensure the best benefits for every ringgit of the people's money.
Moving ahead, the government plans to publish a tax expenditure statement, which is crucial to determine the costs incurred by the government due to one-off exemptions, tax incentives and other tax policies.
Sources: The Edge Markets, The Star
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