Real Property Gain Tax: Flip-Flop Flux

ARCHIVES 2009

By admin-s On Dec 8, 2009

On 1st of April 2007, without any prank intended, the former Prime Minister Abdullah Badawi announced the full exemption of the sliding 30% to 5% of the Real Property Gains Tax (RPGT) rate. The headlines trumpeted “No RPGT” rule. Builders, property agents, property owners and foreign investors celebrated. To quote the former Prime Minister, “… this is an incentive to drive the property market…”

By Kow Sai

Fast forward to October 2009, a mere 18 months later, our new Prime Minister cum Finance Minister in his Budget 2010 speech proposed a fixed rate of 5% on gains from the disposal of real property irrespective of the holding period. It looks like those who relied on the words of the former Prime Minister and purchased properties after 1st April 2007 were fooled.

There was actually a great deal of skepticism from foreign investors when the “No RPGT” rule was announced in 2007. This tweak from 0% to 5% – though small in absolute terms – in psychological terms is like a chill down the spine of skittish property investors in the Malaysian market.

They just don’t get it, do they? Investors hate abrupt changes because it creates uncertainty. Though they are prepared to make a loss on their investment they certainly do not want to be taken for a ride. The budget planners seem to have lost their way too. The RPGT Act 1976 was introduced as an anti-speculation and not a revenue-raising legislation. If the intention is to curb speculation, then it begs the question: where is the speculation in the abyss of a recession?