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aws试用账号(www.2km.me)_Market reacts to prosperity tax

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CLICK TO ENLARGEPETALING JAYA: Blue chip stocks took a hit following the surprise announcement of higher taxes for very profitable companies under Budget 2022 to help the government alleviate its debt burden.

Last Friday, the Finance Minister said a one-off special tax, known as Cukai Makmur or “prosperity tax”, would be imposed on companies that have a pre-tax profit of above RM100mil. Profit above that threshold would incur a tax rate of 33% for the year of assessment of 2022.

This is expected to largely affect companies in the banking, brewery, tobacco, utilities, gloves, telecommunication, automotive, palm oil and technology sectors.

Additionally, the decision to raise stamp duties on stock trading contract notes may also dampen Bursa Malaysia’s trading velocity and add to potential market misery.

News of the prosperity tax sent the benchmark index 31.39 points or 2.01% lower to 1,530.92 at yesterday’s close.

Banks were among the top losers yesterday as well as food and beverage players, which were weighed down by the higher excise duties on sugary drinks.

In a note yesterday, RHB Research estimated that the windfall tax could have a worst-case impact of up to 12% on corporate earnings, although it added that this should be offset by the positive spillover to the broader economy from the expansionary budget proposals.

The research house pointed out, however, that such a tax is unprecedented in scope and scale and may be categorised by investors as a policy risk, reflecting the country’s narrow revenue bandwidth and limited fiscal headroom.

“While the ongoing domestic economic recovery story will be supported by the consumer-friendly Budget 2022, evolving policy risks and the market’s adjustment to the broad scope of the windfall tax will add to market volatility,” it said.

Meanwhile, CGS-CIMB estimated a smaller impact of 6.6% or RM4.4bil to 2022 FBM KLCI earnings.

“After considering the ‘prosperity tax’, FBM KLCI earnings could potentially fall by 6% in 2022 versus our current forecast of 0.5% growth. Also, there could be a downside risk to 2022 earnings if companies decide to front-load expenses, delay progress billings/income recognition and/or raise provisions to lower their tax expenses.”

Some companies could also reduce dividend payments due to the higher taxes.

PublicInvest Research said: “The windfall tax across the board could ensure a more equitable contribution from other industries towards helping the rakyat.”

Note that only banks previously bore the cost of interest waivers and the repayment moratoriums during the various periods of lockdown in the past 1½ years.

However, at 33%, the rate proposed appears high.

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