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Malaysia stocks fall as government announces ‘windfall’ tax on companies

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Face-mask wearing people walk before the Petronas Twin Towers, Kuala Lumpur (Malaysia), Jan. 29, 2021.

Xinhua News Agency | Getty Images

Malaysian stocks dropped Monday after the government declared a “windfall tax” on businesses to increase revenue in the next year.

This is the benchmark FTSE Bursa Malaysia KLCI indexThe stock market performed poorly in Asia-Pacific, with a 2.2% drop.

Tengku Zafrul Aziziz, Malaysia’s Finance Minister presented Friday the budget of the government for 2022. largest ever spending planTo jumpstart an economy that has been hampered by the Covid-19 epidemic, it would be worth more than 332 billion Ringgit (or $80 million).

Zafrul announced several initiatives to boost government revenue. These included increasing the tax rate for corporate income exceeding 100 million ringgit, from 24% to 33% by 2022.

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According to analysts, tax hikes would be the main focus for investors.

The government’s high spending requirement due to the pandemic is making the windfall tax a temporary initiative. However, some businesses would find it quite difficult to swallow,” Wellian Wiranto said, an economist from Singapore’s OCBC bank.

Wiranto said that Malaysia’s economy will continue to recover if the government spends more.

According to the International Monetary Fund, Southeast Asia’s economy will grow 3.5% and 6% this year. Malaysia’s economic growth was 5.6% in 2020.  

This country needed to reimpose lockdown measuresThis year, the government fought a sharp increase in Covid cases which slowed economic activity. While the number of Covid cases reported per day has fallen, the vaccine rate has increased. This led the government to remove most social-distancing programs.

Malaysia seems on track to fully reopen by the early 2022’s, according to Denise Cheok of Moody’s Analytics.

“The Malaysian economy is brightening with the support of an expansionary budget next year.” This is the resumption of domestic and international travel,“As well as increasing commodity prices, this will lift the economy from its pandemic-induced depression,” Cheok stated.

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