Penang’s proposed 20pc tax redistribution faces setback

Malay Mail

GEORGE TOWN, June 24 — The Penang state government’s proposal to review the federal tax distribution system to benefit the states cannot be implemented at this time due to Putrajaya’s fiscal constraints.

Penang Chief Minister Chow Kon Yeow said Deputy Finance Minister II Datuk Seri Amir Hamzah Azizan informed him that the state’s proposed 20 per cent tax redistribution is unfeasible at this time.

“On the proposal for a 20 per cent tax redistribution back to Penang, the Ministry of Finance indicated that due to the country’s fiscal constraints, it is unable to do so but that there are other mechanisms which can assist states in obtaining more grants,” he said during a press conference at his office in Komtar today.

Chow said this was one of the topics discussed during a meeting between the state government and Amir Hamzah last Friday.

He had asked that the federal government review the tax distribution system to return at least 20 per cent of the taxes collected from Penang back to the state during the recent state legislative assembly.

He said the state had highlighted to the minister that the state needed more funds to develop the state due to its limited revenue base.

“Although tax redistribution is not in the constitution, it doesn’t have to be a constitutional allocation, there are other avenues such as grants,” he said.

He said the constitution can also be amended or the federal government can agree on the tax redistribution as a policy.

Meanwhile, Chow also expressed hope that the federal government would look into providing matching grants to support the establishment of an integrated circuit (IC) design park and a chip design academy in Penang.

He said the IC design park would bolster Penang’s semiconductor ecosystem with highly skilled engineers.

“There are currently 18 IC design semiconductor companies in Penang out of 20 in Malaysia, and we have a very robust ecosystem along with dedicated industrial parks, particularly in Bayan Lepas,” he added.

He said InvestPenang is now developing a chip design academy at a cost of RM120 million and hoped the federal government will give a matching grant of RM60 million.

Chow said the other matter discussed with Amir Hamzah was the Juru-Sungai Dua Elevated Highway project which is estimated to cost RM1.8 billion.

“I stated that the project is a critical project, and the matter is still being discussed at federal level,” he said.