What caused the sevenfold tax increase since 2018?

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The implementation of 'substance requirements' regulation in 2019 caused the sevenfold tax increase since 2018.

The tax collection from the Labuan International Business and Financial Centre (Labuan IBFC) in 2022 reached its highest point since 1990, marking a sevenfold increase compared to 2018. This significant rise in fiscal revenue is directly attributed to the government's introduction of the 'substance requirements' regulation in 2019, which applies to institutions and companies operating within the financial centre.
'Substance Requirements' Regulation Implementation

The 'substance requirements' regulation, enacted in 2019, mandates that institutions and companies operating under the Labuan IBFC framework must adhere to specific operational and economic substance criteria. This regulatory change was designed to enhance the legitimacy and economic contribution of entities within the financial centre, thereby impacting the tax revenue generated.
Labuan IBFC's Fiscal Contribution

In 2022, Labuan IBFC contributed over RM1 billion to the nation's fiscal revenue. This figure represents the highest tax collection since 1990, underscoring the financial centre's growing importance to the country's economy. The substantial increase in tax revenue since 2018 highlights the impact of the regulatory adjustments implemented by the government.
Labuan IBFC's Position in Asia Pacific

Labuan IBFC is recognised as one of the three primary international financial centres in the Asia Pacific region, alongside Singapore and Hong Kong. It specialises in external banking, reinsurance, and captive insurance companies. As of the reporting period, Labuan hosts 70 banks engaged in external banking, 237 insurance and insurance-related companies, including 71 captive insurance companies.

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What caused the sevenfold tax increase since 2018?

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