Home » Blog » Will Malaysia’s low tax proposal be enough to attract foreign talent?
Malaysian Prime Minister Najib Razak in his annual budget speech has proposed a special 15% tax rate for foreign and local knowledge workers in Iskander Malaysia – the southern development corridor in the state of Johor. He has also proposed lowering the maximum personal tax rate from 27% to 26% for the rest of the country. The rationale behind the move is to attract foreign investment and foreign professionals to Malaysia and increase its appeal as an attractive destination to relocate to in comparison to Singapore and Hong Kong.
In today’s global business environment, attracting human capital is paramount and it has become increasingly important for countries to provide the right environment that matches the personal interests and professional goals of foreign professionals. The main drive for foreign talent to move overseas is a) better job opportunities b) exposure to a better quality of life and c) potential to earn more. In order to attract top-notch global talent, it is necessary for a country to have good governance, an efficient legal system, high quality of education system, affordable housing and a cosmopolitan environment.
Malaysia’s immediate neighbor Singapore is one of the few Asian countries that scores high on almost all of the above mentioned factors. Executives and knowledge workers from US, Australia, Europe and Asia are attracted to Singapore primarily due to the good quality of life it offers. The country has a stable political climate and an efficient legal system. It is often cited as one of the safest countries to live in. Moreover, there is a continued demand for foreign professionals and compensation packages remain attractive.
Although taxes are an important factor of consideration for foreign professionals contemplating a relocation, it is not the sole driving force. Malaysia will need to adopt a more holistic perspective in drawing up policies in order to attract talented foreign professionals.
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