Windfall tax will kill dynamism of private sector, say economists
PETALING JAYA: Economists have shot down the idea of imposing a windfall tax on glove companies which raked in billions in a short span of time during the Covid-19 pandemic, saying it will kill “the dynamism of the private sector”.
Hoo Ke Ping, an adviser at Kingsley Strategic Institute, said with vaccines on the way, the rubber companies would soon see their profits shrinking.
“It should have been thought of earlier. Now the rubber companies have donated RM400 million to the government. Squeezing the private sector will mean they will not be able to diversify their business,” he told FMT.
Furthermore, he said, the rubber companies had seen bad days too, before their business surged during the pandemic.
Former minister Syed Saddiq Syed Abdul Rahman had suggested yesterday that Putrajaya impose a windfall tax on glove companies that had raked in billions this year, primarily due to the increase in demand worldwide following the Covid-19 pandemic.
He named four companies – Top Glove Corp Bhd, Hartalega Holdings Bhd, Supermax Corporation Bhd and Kossan Rubber Industries – as being the biggest beneficiaries of this increased demand for rubber gloves, making millions more than they had last year.
But Hoo said the share prices of Supermax and Top Glove during their peak was at almost RM30 a share but had now fallen below RM10 a share.
“Top Glove had to buy a few hundred million shares on their own to support the price and to prevent it from going lower.”
Nazari Ismail, from the business and accounts faculty of Universiti Malaya, disagreed with Syed Saddiq, saying the government should not punish private companies for their success.
“If they want to give donations willingly, that is different. But why suddenly change the rule just because they are making big profits? That is unfair,” Nazari said.
Yeah Kim Leng, a professor of economics at Sunway University, said windfall tax would limit any expansion plan the private sector may have with the profits they make.
“They are already paying the maximum rates for income tax,” he told FMT, adding that owners could use the profits to diversify their business or safeguard themselves in the event their business falls sharply.
By diversifying their business, he said, these companies would offer job opportunities or go into automation.
“Windfall tax may kill the dynamism of the business.”
Furthermore, Yeah said, if a windfall tax is collected during the heydays of the company, the government should also bail these companies out if their businesses fail.