‘No point in offering tax breaks to multinational firms’
Proposed changes to the global tax system will means multinational corporations will no longer be attracted by tax breaks to invest in the country, according to Malaysia’s Inland Revenue Board (IRB).
Chief executive officer Mohd Nizom Sairi said the Organisation for Economic Cooperation and Development’s (OECD) proposed reforms could in fact make tax breaks disadvantageous for the destination country, as the multinational company’s country of origin could claim the tax difference.
“We need to come out with alternative or more attractive incentives for these companies to come to Malaysia,” Mohd Nizom told delegates to Malaysia’s National Tax Conference 2022.
Malaysia was among the 136 countries that had signed up to the OECD’s proposed reforms to the global taxation system.
Once the proposals are adopted, multinationals granted tax exemption will be taxed at a preferential rate of zero to 10 per cent for participating in promoted activities or producing promoted products for five or 10 years. The standard corporate income tax rate in Malaysia currently is 24%.
Deputy Finance Minister Mohd Shahar Abdullah, in his opening address to the Conference, said: “Malaysia always ensures a competitive environment to attract foreign and domestic direct investments and to prevent cross-border tax evasion activities.
“To ensure that multinationals pay the right taxes where they are due, the government, through the IRB, will continue to develop comprehensive strategies in dealing with international tax compliance risks that include calling for greater disclosures and transparency by multinationals.”
Mohd Shahar said that the OECD’s proposal would result in more than $125 billion in corporate profits from the largest and most profitable multinationals in the world being reallocated to all nations, ensuring that these businesses pay a fair share of tax wherever they operate and generate profits.
“Instead of attempting to end tax competition, the global minimum tax agreement imposes multilaterally agreed-upon restrictions,” he said.
“Malaysia, through the Ministry of Finance and IRB, via continuous engagements with relevant parties, is actively following the developments of this proposal to enact a global minimum corporate tax plan.”
Strengthening ties with the US
Malaysia and the United States have pledged to continue working together to ensure mutual economic prosperity and security.
Malaysian Prime Minister Ismail Sabri Yaakob met with the US House of Representatives Speaker Nancy Pelosi to discuss the economy, investment, health and defence.
In the defence sphere, the US has extended grant assistance worth $200 million, he said. “Like we all know, Malaysia and the US enjoy good relations and remain important partners in all fields. In economy, the US is the biggest investor in the country,” he said.
Also in attendance at the event was Malaysian Senior Minister for Defence Hishammuddin Tun Hussein and Foreign Minister Saifuddin Abdullah.
Speaker Pelosi said she and her high-powered delegation were willing to learn more from Malaysia and collaborate closely in terms of security and economic prosperity. “Malaysia is very important. We’ve had over 60 years of relationship between the United States and Malaysia. We value that relationship,” she said.
Kuala Lumpur was Pelosi’s second stop in the region after Singapore, with South Korea, Japan and Taiwan also in her itinerary. As part of her itinerary here, she paid a courtesy call on Dewan Rakyat Speaker Azhar Azizan Harun at the Parliament building.
The United States established diplomatic ties with Malaysia in 1957, following the then Malaya’s independence from Britain.
The US is currently Malaysia’s third largest global trade partner and export destination, while Malaysia is the US’ 17th largest trade partner.
Despite the challenging global economy and economic uncertainties following the outbreak of Covid-19, total trade between the two countries increased by 21.4% year-on-year to RM217.10bn ($52.37bn) in 2021.