The government is contemplating and studying the implementation of a one-off higher tax rate to be imposed on companies that have generated extraordinary profits during the Covid-19 pandemic.

Lim Wai Yin, Executive Director of Corporate Tax at KPMG in Malaysia foresees that an introduction of a windfall tax may be more likely as compared to capital gains tax (CGT) as the latter may trigger negative reaction from investors and further dampen the equity market.

She said CGT could also trigger an outflow of foreign funds, which would counteract the measures implemented by the government in last year's budget to increase foreign direct investments (FDI) through the granting of incentives to encourage foreign investments into Malaysia.

She added "Windfall tax, on the other hand, is a one off tax which could provide immediate relief to the government but has a lesser adverse impact on the broader economy as it is more narrow and sector specific.

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