Inheritance tax is causing a stir

The reintroduction of inheritance tax may not be a successful as anticipated. 

Inheritance tax came to a grinding halt in Malaysia 26 years ago. Levied at either five or ten percent for estates valued in excess of MYR 2 million and MYR 4 million respectively. Recently there have suggestions that the tax should be reintroduced. Partly to help decrease the gap between the rich and the poor in the country particularly as Malaysia has one of the biggest disparities between the two social classes in the region. But conflicting views suggest that inheritance tax will have negative effects on the economy.

Those against its reintroduction have cited how investments and personal savings will be impacted. People will have to save even more for their children’s future to allow for potential tax implications. This could steer people away from saving which would not bode well for the economy. Banks rely on savings in order to partake in investments as capital is needed in the form of bank loans for businesses to invest.

Additionally many Malaysians already invest overseas. Whether this is in the form of property, shares or savings in an foreign bank. There is expected to be an increase of this in a bid to avoid local inheritance tax. Subsequently the domestic housing market will suffer as property becomes less lucrative asset to pass onto children. And for those who have inherited property they could be forced to sell in order to meet the inheritance tax.

Despite these concerns the issue of wealth distribution does need to be addressed. Wong Chen of the People’s Justice Party has suggested that a inheritance tax should not be so clear cut. He said that various factors would need to be considered, such as family houses being exempt and also to give a tax free allowance.


Only time will tell as to whether inheritance tax will be reintroduced. The topic has been on the cards for sometime but there is an apparent need to look at it in more detail for it to work.

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