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Showing posts with label IRB. Show all posts
Showing posts with label IRB. Show all posts

Wednesday 28 April 2021

Digital way to declare and pay income tax

e-Filing counter facilities are no longer available since last year following the new norm SOP.


 LET’S Click HASiL is a convenient programme for taxpayers to declare their income and pay taxes to the the Inland Revenue Board (IRB).

What is Let’s Click HASiL

Let’s Click HASiL enables taxpayers to submit their income tax return or make payment through the convenience of the easy, accurate and secure MyTax app.

MyTax is the primary access to ezHASiL services such as e-Filing, e-Register, ByrHASiL and other services accessible to all taxpayers with a single sign-on.

Taxpayers can file their return form electronically while ensuring the details are accurate.

Additionally, the programme also provides advice to taxpayers through virtual briefings held in accordance with new norm SOP set by the government.

Submission deadline

The Let’s Click HASiL programme runs from March 1 to June 30,2021.

For individuals without business income, they have until April 30 to submit their BE Form.

People who receive income from business have until June 30 to submit their B Form.

However, e-BE submission via e-Filing allows taxpayers to submit the form by May 15 – an extended period compared to paper submission by April 30, while the deadline for e-B is July 15.

 

Tax refund

For individuals without business income, their employer would have made monthly tax deduction off the monthly salary, reducing the burden of employees as they don’t have to pay a lump sum for their annual income tax.

You are eligible to receive a tax refund if you have paid excess monthly tax deduction than the actual tax levied. The income tax imposed can be reduced through tax reliefs and tax rebates.

The e-Filing service gives taxpayers the advantage of receiving their tax refunds within 30 working days as opposed to 90 days for form submissions by post or hand delivery.

ezHASiL simplified taxation

ezHASiL enables taxpayers to manage their taxation online through e-Filing, e-Register, e-Update, e-Ledger and ByrHASiL without having to visit IRB branches physically.

e-Filing counter facilities are no longer available since last year following the new norm SOP.

The e-Filing system can be accessed via the IRB’s official website at www.hasil.gov.my > MyTax > ezHasil Services > e-Filing.

First-time users are required to obtain the PIN number by filling in the feedback form on the website.

Once you have the PIN number, you can start your e-Filing, make payments using ByrHASiL, access payment review through e-Ledger or update personal details via e-Update.

Declare and pay your income tax at mytax.hasil.gov.my. Let us all do our part to ensure prosperity for the country.

Inquiries can be made through the Customer Feedback Form or call the HASiL Care Line (03-8911 1000). Visit www.hasil.gov.my for further information.

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Tuesday 14 October 2014

Ma'sian immigration blacklists: PTPTN loan defaulters among 1.14 mil barred from travels



PUTRAJAYA: A wide net has been cast on those barred from leaving the country by the Immigration Department.

And it is not just tax offenders and those with criminal records who face a rude shock at border checkpoints or at the airport.

The latest figures show some 85,000 National Higher Education Fund (PTPTN) beneficiaries who did not repay their loans on the department’s travel blacklist.

They are among 1.14 million people on the list which includes 701,266 Malaysians.

The department has advised Malaysians to check their Immigration status prior to making holiday plans overseas to avoid problems.

“It is the responsibility of the traveller to first check if they are cleared to leave the country.

“It doesn’t matter if you are planning to leave by flight, road, rail or sea.

“As long as you are on the blacklist, you will not be allowed to pass the Immigration checkpoint, even if you have a valid flight ticket,” Immigration security and passport division director Ibrahim Abdullah told The Star.

As of Sept 3, the department’s overseas travel restriction orders included those who have been declared with outstanding debt issues. There were 277,693 such Malaysians named by the Insolvency Department.

Malaysians who have violated a foreign country’s immigration laws, such as by overstaying or abusing their travel visas, are also not spared.

Ibrahim said the countries concerned may bar the defaulters from re-entering the country and this information would be shared with the local Immigration department, such as Malaysia’s, which would then put the defaulter on a watchlist.

A total of 32,516 Malaysians were in this category for having overstayed in another country, alongside 115,803 foreigners who have similarly overstayed in Malaysia and are now barred from leaving the country.

“If any Malaysians on the watchlist try to leave the country, they will be stopped and taken in for an interrogation until it is satisfied that they will not commit the same act in another country again,” said Ibrahim.

Stubborn tax defaulters make up a sizeable group on the travel blacklist, with 135,111 persons named by the Inland Revenue Board.

The Star has reported on Aug 26 that defaulters will not be allowed to travel abroad until they have settled their tax obligations.

The treatment will be the same for those with outstanding issues with the Employees Provident Fund (EPF), such as those who failed to file their EPF contributions. There were 10,219 Malaysians and 532 foreigners listed under this category.

Another 133,314 non-citizens have been barred from leaving the country for having their citizenship revoked or application rejected by the National Registration Depart­ment.

This is on top of 88,830 foreigners who had entered the country illegally and have been classified under the Immigration’s Kes Tanpa Izin.

An unusual cluster of 210 Malaysians were also placed under this category which, according to Ibrahim, had referred to those who have been identified by the Home Ministry as having been involved in activities involving illegal foreign workers.

Several other categories were criminally-linked, including those under police observation (15,699 cases) and for drug-related charges (7,673 cases) or crime (5,090 cases).

There were also 4,953 Malaysians barred from overseas travel for violating Customs regulations.

To find out if you are barred from travelling abroad, one needs only to enter the MyKad number on the department’s travel status check portal at http://sspi2.imi.gov.my/

“If they have been barred, they must be present in person at the nearest Immigration passport and security division, where they will be told why they are not allowed to leave.

“This is to avoid identity abuse by a third party as we do not want private information to be divulged to an impostor,” Ibrahim said.

Almost 85,000 PTPTN study loan defaulters barred from leaving Malaysia

PETALING JAYA: Almost 85,000 National Higher Education Fund Corporation (PTPTN) recipients have been barred from leaving the country to date.

PTPTN chief executive officer Agos Cholan said the corporation had to resort to barring the defaulters from leaving because they had been ignoring repeated reminders to repay their loans.

He said the corporation would send borrowers a reminder to begin repaying their loans six months after graduation.

“If there is no payment after two months, the first notice would be sent,” he said.

This, he added, is followed subsequently by a second and third notice if there was still no repayment.

Agos said after this, the corporation would send a legal notice and subsequently blacklist the borrowers.

To lift the travel ban, Agos said they would need to make some payment immediately, depending on their income.

“They would also need to sign papers committing to pay monthly instalments and arrange for a bank’s standing instruction or salary deductions. Restructuring is allowed if they wish to vary instalment amount,” he said.

Agos said the number had reduced from some 130,000 in 2007 who were barred.

Since Prime Minister Datuk Seri Najib Tun Razak’s announcement that borrowers could expect a 20% discount if they repay their loans in full by March 31 next year, Agos said there had been a few enquiries on the dates.

Najib, when tabling Budget 2015 last Friday, said borrowers who were unable to do so could still get a 10% off their loans if they made continuous payments for 12 months until Dec 31, 2015.

Borrowers were given similar discounts under the Budget 2013.

The travel ban is also imposed on 277,693 Malaysians listed under the Insolvency Department for failing to settle their debts.

Tax defaulters are also on the blacklist, with 135,111 persons named by the Inland Revenue Board.

Another 32,516 Malaysians who have violated laws in foreign countries, including overstaying, have also been barred from leaving the country.

Also blacklisted are 115,803 foreigners who have overstayed in Malaysia.

Immigration's security and passport division director Ibrahim Abdullah told The Star that as long as a person was on the blacklist, they would not be allowed to pass the Immigration checkpoint, even if they have a valid flight ticket.

"It doesn't matter if you are planning to leave by flight, rail, road or sea," he told The Star.

The report added that the travel ban will also be imposed on those with outstanding Employees Provident Fund issues, including those who had failed to file their EPF contributions. A total of 10,219 Malaysians and 532 foreigners are listed under this category.

Meanwhile, The Star also reported PTPTN chief executive officer Agos Cholan as saying that they had to resort to barring the study loan defaulters from leaving the country as they had ignored repeated reminders to repay their loans.

Agos had also reportedly said that to lift the travel ban, defaulters would need to make some payment immediately, with the amount determined by their income. – October 14, 2014.

Source: The Star/Asia News Network

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Wednesday 13 August 2014

US government monitoring its oversea citizens by Foreign Account Tax Compliance Act (FATCA)


Malaysia to ink pact in line with FATCA

KUALA LUMPUR: All local financial institutions will be required to declare their American customers to the United States Internal Revenue Service (IRS) under a new agreement to catch its tax evaders who hide their money overseas.

Malaysia will be entering into an inter-governmental agreement with the US in line with the implementation of its Foreign Account Tax Compliance Act (Fatca).

Inland Revenue Board (IRB) chief executive officer Tan Sri Dr Mohd Shukor Mahfar said Malaysia would fully enforce all the requirements of Fatca by September next year.

“Fatca is a very interesting move by the US to monitor its citizens who have income outside of the country. The rest of the world is required to abide by Fatca or the US government will impose a withholding tax of 30%.

“So, IRB, as the tax authority for Malaysia, along with Bank Negara, will be signing the agreement,” he said at the National Tax Conference 2014 here yesterday.

The tax is imposed by withholding earnings on the funds in the account of the US citizen and paid to its government.

Under the Act, all foreign financial institutions must declare the financial holdings of any US citizen or cough up a 30% withholding tax on their own.

The US imposes income tax on its citizens, regardless of which country they reside in.

Many countries, including Switzerland which was previously considered a haven for those who sought to keep money overseas in secrecy, have signed the agreement.

Other countries listed by the US Treasury website are Britain, Australia and France while Indonesia, Thailand, Singapore and China are those which have consented to entering the agreement.

Earlier, Second Finance Minister Datuk Seri Ahmad Husni Hanadzlah said the proposed amendment to Inland Revenue Board of Malaysia Act would be tabled at the Dewan Rakyat sitting in October.

Previously, a controversy had erupted when it was alleged that the amendments would transform the tax agency into a firm that invested taxes collected on behalf of the Government.

The Finance Ministry later denied this, adding that all direct taxes collected by the board would be channelled to the Federal Consolidated Fund.

By P. Aruna The Star/Asian News Network

IRS Notes:

Foreign Account Tax Compliance Act

FATCA Current Alerts and Other News

The provisions commonly known as the Foreign Account Tax Compliance Act (FATCA) became law in March 2010.
  • FATCA targets tax non-compliance by U.S. taxpayers with foreign accounts
  • FATCA focuses on reporting:
  • By U.S. taxpayers about certain foreign financial accounts and offshore assets
  • By foreign financial institutions about financial accounts held by U.S. taxpayers or foreign entities in which U.S. taxpayers hold a substantial ownership interest
  • The objective of FATCA is the reporting of foreign financial assets; withholding is the cost of not reporting.
Individuals
Financial Institutions
Governments

U.S. individual taxpayers must report information about certain foreign financial accounts and offshore assets on Form 8938 and attach it to their income tax return, if the total asset value exceeds the appropriate reporting threshold.

Form 8938 reporting is in addition to FBAR reporting.


Foreign
To avoid being withheld upon, a foreign financial institution may register with the IRS, obtain a Global Intermediary Identification Number (GIIN) and report certain information on U.S. accounts to the IRS.

U.S.
U.S. financial institutions and other U.S withholding agents must both withhold 30% on certain payments to foreign entities that do not document their FATCA status and report information about certain non-financial foreign entities.

If a jurisdiction enters into an Intergovernmental Agreement (IGA) to implement FATCA, the reporting and other compliance burdens on the financial institutions in the jurisdiction may be simplified. Such financial institutions will not be subject to withholding under FATCA.

Monday 10 December 2012

Falling foul of the tax law

Many tax offences arise due to failure to correctly discharge filing obligation

MOST of us would not ever think of cheating when we file our tax returns. This does not however mean that one cannot fall foul of the tax law. This is in part due to the fact that tax laws generally are amongst the most complex of a country's set of laws, and our own tax law is no exception.

Often it is not the complexity of the law that catches one out but simple failure to follow procedures, the most common of which involves keeping to set time frames, whether in the filing of returns, paying of one's taxes or providing information to the tax man.

Thus the instances when one can be in breach of the tax law are quite varied and extensive. All such breaches are serious offences, some more serious than others.

Our tax law adopts the declaratory system one is required to declare income via the filing of returns to the tax authority. Many tax offences arise due to failure to correctly discharge this filing obligation.

The most obvious offence is not filing a tax return, or not filing within the stipulated time frame.

An Inland Revenue Board officer helping taxpayers filing their submission
.
In filing the return, an offence is committed if the return filed is incorrect. A return would typically be incorrect if income is omitted or a lesser than actual sum is included. Likewise, more deductions claimed than one is entitled to would result in incorrect filing.

An innocent mistake may not be regarded as cheating but it is still an offence especially when it results in less tax being charged. Generally the severity of penalties varies with the level of the offence's blameworthiness.

An offence involving willful intent to defraud would be amongst the most serious, bringing about the prospect of imprisonment if convicted. Details of the range of penalties for various offences are listed on the official website of the Inland Revenue Board (www.hasil.org.my).

An offence of “not taking reasonable care” was introduced with the implementation of the self-assessment system. This is entirely justifiable as the filing of a tax return is in law the making of an assessment on oneself upon which tax becomes payable.

The aim is to ensure that a “degree of care or conscientiousness” is exercised in connection with the preparation and filing of a tax return. It is intended to prevent the adoption of a reckless or careless approach to the task and to penalise any breach where it results in tax underpaid.

Thus with this standard, claiming a deduction for a capital expense would constitute an offence of not taking reasonable care, even where its capital nature is not quite obvious. The law presumes that a reasonable person would seek to determine the true nature of the expense.

The “reasonable care” requirement was also introduced by Australia when it implemented self-assessment some years before we did. Since the standard is derived from the common law on negligence, features of the “reasonable care” standard adopted in Australia should apply equally to the Malaysian provision.

However, a taxpayer who fails to take “reasonable care” under the Malaysian law is liable to prosecution and, if convicted, is liable to a fine of not less than RM2,000 and not more than RM20,000 or to imprisonment for a term not exceeding three years or to both. This is in fact harsher than an offence of willful intent to evade tax.

There seems to be an obvious anomaly here as the offence of failing to take reasonable care does not involve bad intent, what lawyers would term mens rea. Australia treats the offence as amongst the least culpable of tax offences, certainly less so than intentional disregard of taxation law.

A controversy resulting in considerable bemusement arose in Australia recently where its Appeals Tribunal in a tax appeal ruled that a taxpayer in seeking the advice of an accountant had not taken reasonable care; he should have used the services of a lawyer. Understandably, this resulted in consternation and dismay amongst both tax accountants as well as tax lawyers for quite different reasons; the latter over concerns that their numbers are fewer in this specialism.

A further difference is that the Australian law requires both the taxpayer and his advisor to take “reasonable care”, whereas the “reasonable care” standard under Malaysian law applies only to the “person who advises or assist” the taxpayer but not the taxpayer himself. Why this is so is not clear.

The Australian “reasonable care” standard is coupled with the “reasonably arguable case” standard.

Where the law is unclear and there is room for a real and rational difference of position between two views, and the taxpayer adopts the view, which ultimately is seen to be wrong, he would in strictness have made an incorrect return.

In Australia, no penalty is imposed where a “reasonably arguable case” is made out.
This recognises that the intricacies of tax law often does mean that the taxpayer could be forced to take a contentious position, one where the arguments could go either way. If the weight of arguments is fairly balanced, imposing a penalty for taking an incorrect position would seem manifestly unfair.

Our tax authorities do exercise discretion in considering the question of penalties despite the absence of the equivalent Australian standard.

However, this does not detract from the fact that the taxpayer will always prefer to see his right spelled out in the law. On the basis of balance of rights, there seems to be no cogent reason why the “reasonably arguable case” standard should be left out from the Malaysian tax legislation.

Kang Beng Hoe is an executive director of TAXAND MALAYSIA Sdn Bhd.The views expressed do not necessarily represent those of the firm. Readers should seek specific professional advice before acting on the views.

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Sunday 21 October 2012

Breaking the Goods and Services Tax (GST) taboo for a fairer Malaysian tax system


Tax-free necessities: People are still not aware that their basic needs will be protected under the proposed GST regime because essential food items like rice, meat, fish, seafood, chicken, vegetables, cooking oil and salt will be ‘zero-rated’, which means there will no GST imposed.
Tax-free necessities: People are still not aware that their basic needs will be protected under the proposed GST regime because essential food items like rice, meat, fish, seafood, chicken, vegetables, cooking oil and salt will be ‘zero-rated’, which means there will no GST imposed.  
 
When the Finance Minister tabled Budget 2013 and reduced personal income tax rate by 1%, some quarters have asked if this brings us one step closer to the GST.

EVER grumbled about having to pay the RM50 government tax for your credit card each year?

Well, the good news is there will be no more such tax if the proposed GST (goods and services tax) is implemented. And you will pay GST on the credit card only if your bank charges you for the card.

“These days, banks are offering credits cards for free and giving waivers on annual subscription. If the card is free, there will be no GST on it,” says Customs Department director-general Datuk Khazali Ahmad in an interview.

He stresses that key sectors like the financial services, public transport, healthcare, education and residential housing will be exempt from GST.

This essentially means that education, medical care, bus and train tickets as well as highway tolls will still be just as affordable as today. Thus, the lower income groups will not be burdened by the GST.

When it comes to insurance, Khazali says, if it is a life policy (including education, investment-linked and endowment), no GST will be imposed. But if it is a general insurance policy for medical, fire, motor, burglary, then the normal GST rate (proposed at 4%) will apply.

Despite the GST being a fairer, more effective and transparent taxation system and one that has been successfully implemented in 146 countries, it has not been easy to push the idea through in Malaysia.

In fact, the government has been talking about the GST for more than two decades now (even when Datuk Seri Anwar Ibrahim was the Finance Minister in the 1990s).


In December 2009, the GST bill was tabled in parliament for first reading but it was withdrawn on April 19 this year for amendments.

The Finance Ministry on its website has asked the public for views and feedback on the proposed GST.

With public awareness still very low on how GST works, it might be years before it actually comes to fruition.

People are still not aware that their basic needs will be protected under the proposed GST regime because essential food items like rice, meat, fish, seafood, chicken, vegetables, cooking oil and salt will be “zero-rated”, which means there will no GST imposed.

Critical services like schools, financial services, hospitals, roads and public transport will be “GST-exempt”, which means the consumer will be exempted from paying GST on them.

And if you buy a flight ticket to a destination abroad, you will not have to pay GST.

“You will be charged GST only on goods and services (which are not zero or exempt-rated) that you consume in the country what you consume outside the country will not be subject to a local GST. A flight ticket abroad and overseas travel is consumption outside Malaysia, so you don't pay GST here on it,” says Khazali.

The GST is a consumption-based tax where the tax is borne by the person who consumes the goods or services.

Ultimately, it should reduce business costs because manufacturers, distributors and suppliers are able to claim back the GST they paid on goods and services acquired for the purpose of their business.

And these businesses are supposed to pass those savings down to the consumer, which should result in lower prices.

Khazali says people find it hard to accept the GST even though it benefits them because “tax” is never a popular subject.


“Generally, nobody likes to be taxed or, rather, the word “tax” is taboo to many.

“However, governments all over the world need to impose tax to get the revenue to provide their citizens with their social needs, employment, security and so forth.”

Educating consumers on the GST, he admits, is not easy because the moment you say that GST is a form of tax, “you will be faced with a wall of resistance”.

“So we have to explain the GST and its benefits to the people continuously to avoid or eliminate whatever misconception they have about it,” he adds.

Khazali also notes that most people do not know that the GST actually replaces the current sales and services tax which they have already been paying on a lot of goods and services because it is embedded in the price of what they buy.

Under the current system, by the time the goods reach the consumers, the sales tax that is paid at the manufacturers level would have cascaded at each level of the distribution and the supply chain, and this results in a higher price.

But with the GST, since businesses at every stage are able to get a refund on the GST paid on the goods and services acquired or used for the purpose of their business, this will eliminate the cascading effect suffered under the current sales and services taxes.

And because of this, an immediate reduction in prices should be seen for goods and services where people have all along been paying an embedded sales tax.

He also stresses that the government has repeatedly emphasised that the people will have to understand the GST first before the government actually implements it.

“The public should not have any fear over GST. It is a form of consumption tax which has been implemented in nearly 150 countries in the world, whether developed or developing, so there must be something good about it. “

He says the GST is also supposed to result in cheaper prices for imported goods. At present, unless exempted, imported goods are subject to an import duty and sales tax.

People find it hard to accept the GST even though it benefits them because ‘tax’ is never a popular subject. - Datuk Khazali Ahmad People find it hard to accept the GST even though it benefits them because ‘tax’ is never a popular subject. - Datuk Khazali Ahmad

With the GST replacing the sales tax (5% to 10%), imported goods will still be subject to an import duty and a GST; but because the proposed GST rate is lower than the existing sales tax, consumers should be paying less.

Before implementing the GST too, he says, the government will also educate businesses on the need to pass down the savings they get from the GST refund, and set up a mechanism to stop businesses from trying to profiteer from it.

For him, the GST is a good thing because it will reduce business costs, lead to more competitive pricing, make exports more competitive because exports will be zero-rated (meaning no GST), increase gross domestic production and reduce grey economy activities.

Khazali also believes there might be a change in consumption pattern with the GST because the GST works on the affordability concept.

“Consumers have to decide which goods or services to buy. They pay GST only when the goods or services are consumed. So they may divert more of their expenses towards essential goods and services rather than on luxury goods.”

Khazali also points out that if the GST is implemented here at the proposed rate of 4%, it will be the lowest rate in the region.

Indonesia, Thailand, Cambodia, Vietnam and Laos charge a 10% GST rate, Philippines 12% and Singapore 7%.

But what is to stop the government from hiking the rate after it has been implemented?

Khazali cites past experiences, saying Malaysia increased its sales tax rate only once from 5% in 1972 (year of implementation) to 10% in 1983 and service tax rate too increased only once, from 5% in 1975 (year of implementation) to 6% in 2011.

There are still nuts and bolts to sort out with implementing the GST here, including tabling a new bill for it, putting an anti-profiteering mechanism in place, getting public understanding and acceptance on it. For now, it looks like it is still quite a long journey away.

Is GST the way to go?

No burden: The people can be assured of zero tax on basic essential items like rice, cooking oil, meat, chicken, vegetables, sugar, salt and water.
No burden: The people can be assured of zero tax on basic essential items like rice, cooking oil, meat, chicken, vegetables, sugar, salt and water. 
The Goods and Services Tax has been successfully implemented in 146 countries but many Malaysians are still unaware of its benefits.

JAYCEE Sim (not her real name) is a self-professed shopaholic who loves nothing more than spending her weekends at shopping malls. She is thus pleased with the one per cent cut in income tax rate announced in the Budget 2013 (for chargeable income up to RM50,000) because some extra money in the pocket is always welcome, especially when prices have been on the rise.

But she dreads the much-talked about Goods and Services Tax (GST) which has yet to be implemented in the country.

“I think it will cause a further hike in prices,” says Sim who teaches at a private college. But her friend, Debbie Lim, who owns her own business supplying component parts, is all for the GST.

“I think it is only fair. You pay for what you consume. You consume more, you pay more tax. If you don't spend, then you don't pay lah,” says Lim, who has family members in Singapore and has seen how the GST works there.

Lim too loves to shop and enjoys trying out new food places with friends.

She believes that post-GST, she can continue to do this without feeling the pinch, because there will be zero tax on essential food products like meat, chicken, fish, seafood be it locally produced or imported.

“Hey, without tax, maybe food prices can even come down. I can live with that!” she laughs.


So far, 146 countries have imposed the GST which is seen as a more efficient form of tax.
In Malaysia, which has a population of 28 million, there are approximately 12 million people in the workforce but only 1.7 million pay taxes.

PricewaterhouseCoopers Taxation Services Sdn Bhd senior executive director Wan Heng Choon refers to the GST as a fairer tax.

“I fall under the unfair' category of paying taxes. Out of our population of 28 million, I am one of the 1.7mil paying taxes. The rest of the population do not contribute but consume the same goods and services (like roads, schools, hospitals, public transport etc.) that the government provides for every single one of us. How can that be fair?” People here generally fear the GST, he says, because they do not understand how it works.

“Tell me which country will introduce a tax that drives prices up? It doesn't make sense. The GST has been successfully implemented in 146 countries. The difficulty here is that the simple mechanism is not understood,” he adds.

The people, he says, can be assured of zero tax on basic essential items like rice, cooking oil, beef, mutton, pork, chicken, fish, prawns, squid, vegetables, sugar, salt and water above.

They will also be exempted from paying GST on critical services such as public transport, toll, taxis, hospital and healthcare, schools, residential property, land for agriculture use, and financial services. Thus, the lower income group will not be burdened by the GST.

“If you conduct a poll, two out of 10 people will not know that essentials will be tax-exempted or zero-rated. That is a worrying statistic to me,” says Wan.

As for other consumer items like clothes, shoes, non-essential food items and furniture, Malaysians have in fact already been paying tax without realising it, because sales tax (sometimes as high as 10%) has been embedded in the price of the goods.

The GST system, on the other hand, will make the taxing system more transparent. The consumer will know what he is paying a tax on and how much.

Under the GST regime, the sales tax and services tax that people have been paying all this while, will be removed and replaced with a one-time consumption tax the GST.

So, it is not a case of consumers paying tax twice for what they buy.

Malaysia is looking at a GST rate of about 4% which actually works out to be cheaper than the present 5% to 10% sales tax and 6% service tax.

Refunds

A significant difference too under the GST regime is that the manufacturer, supplier and wholesaler get a refund from the Government on the GST (which in their case is an “input tax”) they have paid to buy raw materials, parts and utilities used, to produce their goods. So, it is the end user or customer who pays the 4% GST.

When manufacturers, wholesalers, suppliers get a refund on their input tax, it is good for business because it brings their production costs down. And when their costs are reduced, they can sell their products at a cheaper price to their customers.

At the customer level, since one has already been paying an embedded tax (of 5% to 10%) on many items prior to the GST, prices should not vary much.

As the GST covers a wider range of products (including those previously without a sales and service tax), some prices will go up but others will come down. But the important thing to bear in mind is that essential food items and key services will not be affected.

Wan says the Finance Ministry and Customs department have done years of extensive work on the GST.

They have come up with a Shopper's Guide, a list of 350 items in the CPI basket showing the estimated prices after the GST is implemented and the percentage of increase and decrease for each of these items, and shared this list with a number of trade associations including the Federation of Malaysian Manufacturers and the Chartered Tax Institute of Malaysia (CTMB).

“It astounds me that the list is not made available to the public. People want to know if their cup of coffee or roti canai will go up,” he says, adding that people need time to become aware of, accept and prepare for the GST.

Australia, he notes, took a year to prepare the public, explaining how the GST works and addressing concerns.

“If you release the list and information to the public only about three months before the implementation date, that's madness.”

Because the price of some non-essential goods might be higher, Wan suggests that the Government consider identifying the lower income group and offering them a one-off BRIM-like direct financial assistance to help them cope with the GST.

“Thus, the Government gives them support to deal with the GST but leaves it to them to decide how to spend that money.”

Dr Veerinderjeet Singh, chairman of Tax and Malaysia Sdn Bhd and former president of CTMB, believes that because Malaysia already has a sales tax embedded in the price of goods, it should be easier for people here to accept the GST than a country that never had similar taxes.

“People never really understood the objective and as a result, some sections are not for it. The GST is good for a country and this has been proven worldwide. We already have a sales and service tax; what we are doing is to merge and tweak it into the GST which is a more effective tax system,” he says, adding that the Government has done five years of solid work on the GST and spoken to every association. Now, they only need to go down to the ground to speak to the man-in-the-street.

Should manufacturers, suppliers or traders try to profiteer from the GST by not passing on their cost savings to the customers, action can be taken under the Price Control and Anti-profiteering Act that has been in place since April last year. Enforcement comes under the Domestic Trade and Consumer Ministry which is looking into establishing a price monitoring council to combat profiteering.

Dr Veerinderjeet points out that with the GST regime, there are more checks and balances in place as manufacturers, suppliers and wholesalers have to get their documents in order to claim their refunds on their GST (input tax).

He says it would also help uncover the underground economy because these businesses would now have to be registered to recover their input tax. And when they register their businesses, they will have to pay income tax, thus the government gains by collecting more taxes.

Wan notes that in the past, when the country's economy was growing at 7% to 9% annually and Foreign Direct Investment (FDIs) were coming in at a healthy rate, the Government did not worry too much about revenue because “the growth in the economy generated income that took care of things.”

“But remember 1997 and 1998 when corporate profits plummeted and PNLs (profits and losses) turned red? Where does the Government get its money from then?

“That's why the GST as a tax is a much better source for the Government. Regardless of whether there is an economic boom or recession, the GST can ensure a steady revenue to the Government .”

Wan suggests that people take a macro view of the economy, given the fact that the country has had a budget deficit for 16 consecutive years.

“People should not underestimate the impact of a budget deficit. If the government is spending more than it earns in revenue, a direct impact is that the value of the Malaysian ringgit will fall. What happens if that happens? We import inflation. A falling ringgit has greater far reaching implications on the overall economy and recession than the GST will ever have.

“The GST, on its own, is not going to be the silver bullet that cures deficit but it is definitely one of the strategies to help balance the books,” he says, adding that Malaysia should also tighten its subsidies and do something about its bloated civil service because a country as wealthy as it is should not slide down the slippery slope of the likes of Greece and Spain.

Dr Veerinderjeet admits that the one per cent cut in personal income tax rate took him by surprise and he feels it has been “overly-generous”.

“It benefits everybody in the taxable threshold, including the higher income group. People will save RM25 to RM475 in taxes. It is a good measure because it reduces liability and puts more money in your pocket. But I would have preferred for it to be held back for a rainy day,” he adds.

Currently, the maximum corporate tax in Malaysia is 25% but for personal income tax, the maximum is 26% which is something odd, given that individuals now pay a higher tax rate than companies.

Dr Veerinderjeet says it wasn't like that years ago.

“Personal taxes have always lagged behind corporate taxes. But countries have been lowering corporate tax rates over the years (to stay competitive) and we too have lowered ours.

“Many of us, including professional bodies, have been lobbying for the top margin tax rate for personal income tax to be aligned with corporate tax rate of 25%,” he shares, adding that the income tax bands too should be widened so that someone who works hard and earns an additional RM10,000 to RM15,000 a year will not find himself pushed up into a higher tax rate bracket.

Tax system

Dr Veerinderjeet favours a revamp of the entire tax system, including personal income tax, corporate tax, petroleum tax, real property gains tax, customs duties, sales tax, service tax, the GST and fixing the anomalies and income tax laws that may be burdening business and introducing incentives that encourage innovation and business while reviewing those that have not achieved their objectives.

“It is not as simple as introducing the GST, then think of lowering personal and corporate tax rates. Is this system sustainable for the future? We are looking at 2020 who are we benchmarking ourselves against in terms of our tax system? Are we benchmarking against a developed nation?”

On views that the GST should be deferred to give back to the rakyat, Dr Veerinderjeet says Malaysia needs far more development and it needs to fund this development.

“We are giving back to the rakyat in different forms like better roads, better schools and better hospitals,” he says.

With 146 countries already implementing the GST, it is perhaps only a matter of time before the Government here follows suit. But for this, they must really go down to the ground to allay the fears, address the concerns and explain to the people why GST is the way to go.

Consumers assured of a fairer tax system


“YOU know that shirt you are wearing? You've paid tax on it,” Customs Department director-general Datuk Khazali Ahmad points out during a recent interview on the proposed Goods and Services Tax (GST).

What people do not realise, he adds, is that the Customs Department has been collecting sales and service taxes over the years. This is because the taxes have already been included in the prices consumers pay at the check-out counters.

And the amount collected is significant. Just take this year alone, till Oct 4 even without the GST the Customs Department has already collected RM7.3bil in sales tax and another RM4.36 bil in services tax.

Last year, it took in RM8.57bil in sales tax and services tax came up to RM4.98bil. In 2010, its collection for sales tax was RM8.17bil and RM3.92bil for services tax.

“Some people are not happy with the GST because they think the Government is introducing a new tax to add to the tax that is already in place.

“But the GST is not a new tax. The GST is only a replacement tax (to replace the sales and services tax) to make our taxing system more efficient and transparent,” says Khazali.

He understands the people's fears that the GST will affect prices of goods, services and their consumption pattern. But these fears are unfounded, he says.

“There is a zero tax on a lot of basic necessities (see chart) and we are giving exemptions on critical services (schools, hospitals, public transport, tolls, banking),” he explains.

“Consumers should be better off as essential food like rice, vegetables, cooking oil and fish are not subject to GST at all.”

Currently, the people are already paying a sales tax of 5% to10% and services tax of 6% on goods and services. With a proposed 4% GST rate, prices of these goods and services would in fact, be down.

He says this is because suppliers and manufacturer get a refund on what they pay as GST to produce their goods; so with the GST regime, they would now have to remove these elements from their cost.

“We have gone around to meet the suppliers to make sure that whatever cost savings they get (from their refund), will be passed on to the clients and consumers. We will ensure the public do not pay more when the GST is introduced.”

However, for certain goods and services that are now not subject to any sales or service taxes, there might be an increase in price with the GST but the rate should not be more than the GST proposed rate.

Khazali says the Customs Department will work closely with the Finance Ministry, Domestic Trade, Co-operative and Consumer Ministry and consumer associations to monitor prices and release a shoppers' guide to the rakyat so that they know how much they should be paying.

They will also get hypermarkets to co-operate and be the price-setters.

By SHAHANAAZ HABIB, The Star/Asia News Network

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