Govt should look into philanthropy economy to complement fiscal policy

He said that the government should take a serious look at waqf -- an Islamic endowment instrument typically linked with social development and philanthropic objectives.

"We need to do more in terms of the philanthropy economy and how it can complement the fiscal policy; perhaps the budget gap can be assisted by the philanthropy economy," he said during a panel session at the Malaysian Institute of Accountants (MIA) Conference 2021 today.

Mohd Afzanizam noted that the government has also prescribed incentives for waqf under Budget 2021, where tax deduction on donation for charitable and sports activities and projects of national interest is now capped at 10 per cent from the aggregate income for taxpayers, similar to the threshold given to companies.

The tax deduction is also expanded to cash waqf contribution to state religious authorities or a body established by state religious authorities to administer waqf; cash waqf contribution to public universities approved by the state religious authorities to receive waqf; and cash endowment contribution to public universities.

"It is almost impossible for the government to impose new taxes in the immediate term as the current situation is very fluid.

"Therefore, fiscal policy has to be responsive in dealing with the uncertainties, (so) I have been promoting the idea of cash waqf since taxation has its own limitations," he said.

Mohd Afzanizam noted that it can be very challenging to prescribe new taxes in the near future.

"But maybe this crisis opens up new opportunities for everyone, and for the policymakers to re-think the best means not just in terms of raising revenue, but also the best way to redistribute the wealth between the rich and the poor," he said.

Meanwhile, according to Khazanah Research Institute senior advisor Professor Jomo Kwame Sundaram, it is possible for the country to get revenue from windfall tax and other capital gains taxes.

"There is a broad appreciation for greater tax revenue, which is precisely why this is a good time to introduce new tax reforms as well as tax reforms which are more progressive and can yield much more revenue," he said.

Prof Jomo said this is the time for bold leadership, which will allow developing countries to spend much more but in a suitable fashion.

He also called for the government to try to adjust to the new reality and to stop offering tax incentives and tax breaks in order to attract foreign direct investments (FDIs).

"The world is changing. The G7 countries have just decided to set a global minimum corporate tax rate, and if you do not try to adjust to the new reality, if you continue to offer tax incentive, tax breaks and so on as a means to attracting FDI, you will be left behind," he said.

Recently, the G7 nations, comprising Canada, France, Germany, Italy, Japan, the United Kingdom and the United States signed a historic tax agreement to tackle tax abuses by multinationals and online technology companies, where the nations agreed to set a minimum global corporate tax rate of at least 15 per cent.