The Malaysian Medical Association (MMA) said it is deeply disappointed by a news article, which seemed to imply that tax evasion by doctors was widespread.
MMA president Dr John Chew said the association believed that the situation was quite the opposite as doctors in general were extremely law-abiding, and had been meticulous about declaring income and paying all taxes owed.
"We feel that a gross injustice had been done with this misreporting. We trust the director-general (and chief executive officer Sabin Samitah) of the LHDN (Inland Revenue Board) will clarify his statement if he has been misquoted," he said in a statement today.
Dr Chew alluded to a report, quoting Sabin, which appeared to imply that specialist doctors in private practice had been systematically and maliciously defrauding the government of tax revenue by wrongly declaring their income under their private limited companies, rather than in their individual names.
The MMA president said that the formation of a private limited company by doctors was and is entirely legal.
"No law restricts or prevents doctors from forming such companies. The LHDN accepts this," Dr Chew said.
Doctors, he explained, were generally not very knowledgeable about tax, accounting and such matters, which prompted them to employ people like accountants and tax consultants.
"It is generally these professionals who approach their doctor clients and advise them to form companies to facilitate tax planning. To ignore the advice of a professional that I have hired to counsel me would be foolish," he said.
Dr Chew said that since independence, doctors in private practice had been forming private limited companies, and they had been submitting their taxes in the prescribed fashion since then.
"And the LHDN (and its predecessor, the Income Tax Department) has been accepting these returns. Many doctors have been thoroughly audited over the years. The LHDN has always been aware of the use, by some doctors, of the private limited company," he said.
Dr Chew noted that in the past, company taxes had been the same as personal taxes, thus, the tax savings would have been minuscule, if any.
"In fact for the last two years, company tax had been higher than personal tax. In the recalculation, the doctors had over paid their taxes and will be getting a refund. This suggests that tax avoidance was not the primary motivation for setting up companies," he said.
Recently, he said, the LHDN decided that some private specialists, having signed contracts to supply services to hospitals in their private capacities, should not pay that money into their company accounts, but instead declare it as personal income.
"Since this was a significant and systemic change, the MMA engaged with the LHDN for clarification. We came to what we believed was a satisfactory resolution," he added.
Health Minister urges IRB to review system
Meanwhile, Health Minister Dr S Subramaniam urged the LHDN to review and find solutions pertaining to the income tax payment system among medical practitioners, to avoid confusion.
He said the LHDN and the MMA should discuss the best way to find a solution to the matter.
He said it was common practice for doctors in the private sector to form private limited companies to offer their services and declare their income under the company.
"Sometimes they have directors of a company who receive remuneration and this has been practiced for a long time.
"However, now, I have been made aware there has been a change. So, this may be the cause of why the problem exists," he told reporters after launching the 'I Want to be Healthy Camp' at the Orang Asli settlement in Kampung Leryar, Pos Menson near Cameron Highland, today.
Yesterday, IRB's Sabin said 2,229 of the specialist doctors detected had come forward to make their declarations voluntarily with the net amount of tax and penalties imposed totaling about RM400 million.
He said the remaining individuals would be audited in the near future, and included under the Monitoring Deliberate Tax Defaulters (MDTD) list if the audits found that they did not comply with their tax payments.