Former Inland Revenue Board (IRB) Director-General Hasmah Abdullah has been appointed chairperson of the newly established Tax Reform Committee, which will look into reducing the existing tax gap, addressing tax leakage, as well as exploring new sources of revenue.
It will also study the taxation of the digital economy and review the effectiveness of various tax incentives as provided by the law, Finance Minister Lim Guan Eng said today.
The committee is joined by finance and tax experts, namely Verinderjeet Singh, Chua Tia Guan and Amardeep Singh, he said in a statement.
Meanwhile, Tax Department Secretary Khodijah Abdullah, Tax Department Deputy Secretary Mohd Sakeri Abdul Kadir, and Fiscal and Economic Department Deputy Secretary Mohd Hassan Ahmad represent the Ministry of Finance.
All the appointments came into effect on Sept 12, 2018. The committee convened its first meeting on the same day.
Lim said the government would ensure that it has sufficient and stable revenue sources to meet all of its future obligations and to safeguard its fiscal sustainability while fulfilling the aspirations of the rakyat.
“The gap in revenue collection must be addressed as it could prevent the federal government from carrying out its social and developmental mandate,” he said.
The Pakatan Harapan-led federal government recently abolished the goods and services tax (GST) and replaced it with sales and service tax (SST). These measures will reduce tax collection by RM23 billion in 2019.
So far, the federal government has discontinued and deferred several costly infrastructure projects due to revenue constraints, while implementing a wider open tender system to control its expenditure.
Since the federal government is not planning to increase the corporate and individual tax rate, it is taking a holistic approach in reforming its taxation system in order to address this matter, he said.
The Tax Reform Committee will be tasked with broadening and diversifying the federal government’s tax revenue without further burdening the rakyat, as well as minimising tax leakages.
“Any new tax under consideration must be efficient, neutral and progressive to promote long-term sustainability, productivity, and economic growth. If implemented properly, tax measures can be more targeted and more progressive.”
Most of these tax measures are already being pursued by developed and neighbouring countries.
More importantly, these tax measures should not further burden the lower income group.
Apart from that, the federal government will strengthen its enforcement and compliance measures against fraud, tax evasion and the smuggling of controlled items that contribute to the loss of revenue.
“Malaysia faces revenue loss due to direct smuggling of contraband goods and indirect smuggling where some exporters make false declarations or produce fake invoices,” he said.
These are usually facilitated by shipping, forwarding and transport agents.
“Streamlining and strengthening enforcement actions are key to combating smuggling activities at our land and sea borders,” he pointed out.
Greater focus will be accorded to material cases of tax evasion, particularly by companies that are abusing transfer pricing and tax-planning activities.
“Fighting all networks engaged in smuggling activities and tax evasion requires joint efforts between the authorities within and outside Malaysia. To do so, the federal government will deepen cooperation between the various domestic and foreign authorities,” he added.