Capping income tax at 10% won’t stimulate economy, says economist

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An economist says it is better to give money to the lower-income group to spend as any tax cut for high-income taxpayers is likely to go into their savings.PETALING JAYA: An economist has poured cold water on a proposal by the Federation of Malaysian Manufacturers (FMM) for the personal income tax rate to be fixed at 10% at most. Yeah Kim Leng, a professor of economics at Sunway University, said cutting taxes was less effective in stimulating the economy and would only give a significant increase in disposable income for middle and upper-income households. He told FMT that direct government spending such as through cash handouts to the lower-income groups would be more effective in stimulating the Malaysian economy. “This is because a higher portion of the tax cuts will likely be saved rather than spent by the high-income taxpayers. “In the absence of an offsetting tax revenue sou…