Prime Minister Tun Dr Mahathir Mohamad’s statement that Malaysians should brace themselves for new taxes has fuelled speculation that a capital gains tax (CGT) on public-listed shares is in the pipeline. But the truth is, there was no indication from Mahathir or Finance Minister Lim Guan Eng that such a tax is being considered.

We also think it is unlikely.

Firstly, any move to impose a CGT on listed equities should be done from a position of strength, and right now, Bursa Malaysia is not exactly a favourite destination for international fund managers. Equity investors are still digesting the policies of the Pakatan Harapan government and their impact on the economy and earnings of companies.

Secondly, such a tax is contrary to the clearly articulated intention of the government to reduce its holdings in certain listed companies, not just to raise much-needed cash for its coffers but also to make shares in these companies more liquid.

Hence, you would not do anything to dampen the valuation of the shares you want to sell. The government would surely want to sell at the best price it can.

A CGT will also impact the profitability of the Employees Provident Fund, Permodalan Nasional Bhd and Kumpulan Wang Persaraan (Diperbadankan), which collectively own a significant amount of shares on Bursa. These funds also adopt an active portfolio management policy, meaning they buy and sell frequently, and will thus end up paying a lot of CGT.