Need to plug loopholes in our national tax laws
Given the current uncertain outlook for the world economy, Malaysia may have to brace itself for some trying times ahead on the economic front.
To safeguard growth in such difficult circumstances, the nation will have to draw upon all the financial resources at its disposal and can ill afford any wastage or leakage.
In this regard, besides combating corruption, another phenomenon that has the potential to become a major drain on the country's coffers also needs to be addressed - namely, corporate tax dodging.
Late last year, there was a huge public outcry in the United Kingdom after it was revealed that giant multinational companies like Starbucks, Google and Amazon had paid little to no taxes in the country in recent years despite raking in billions of pounds in revenues.
Yet this is only the tip of the iceberg, for the problem of tax avoidance and evasion is one that has plagued countries in the developing world for decades.
It has been estimated that poor countries are deprived of a whopping US$160 billion a year in tax earnings as a result of corporate tax dodging.
These are resources which could otherwise have been channelled towards health, education and other essential public services in these countries.
Corporations are able to elude the taxman by resorting to a variety of creative accounting techniques.
For example, a multinational firm can adjust the prices at which goods and services are transferred between its subsidiaries in different countries.
These prices can be inflated or deflated such that most of the profits ends up in a country that imposes low tax rates or, better still for the firm, in a tax haven.
There is thus a need for the Malaysian government to plug any loopholes in our national tax laws that could facilitate such tax-dodging practices.
Beyond this, Malaysia could work with other countries to set international accounting standards which will require greater transparency in the reporting of multinationals' activities in each country where they do business.
Also important would be the establishment of a system that provides for automatic exchange of tax information between national tax authorities.
In a word, we should ensure that the corporate sector, including foreign multinationals investing in the country, pays its fair share of taxes.
This would not only raise the resources to fund public policies and programmes but may also obviate the need for alternative revenue sources such as the regressive Goods and Services Tax (GST) which will hurt consumers and the poor.
The people must not be made to clean up the mess left by unethical corporate tax dodgers.
SM Mohamed Idris is president of the Consumers Association of Penang.
For more news and views that matter, subscribe and support independent media for only RM0.36 sen a day:Subscribe now
Keep Malaysiakini independent!
Malaysiakini will be 18 this year. That we’ve survived this long is because of you.
Your support matters. A lot. Especially those who pay RM150 annually, RM288 biennially or RM388 triennially to keep Malaysiakini independent from government/opposition influence and corporate interests. Advertising alone will not keep Malaysiakini afloat.
Together, we’ve gone far. We’ve covered three prime ministers, four general elections, five Bersih rallies, and countless scandals. But the journey continues.
Help us deliver news and views that matter to Malaysians. Help us make a difference for Malaysia.