Sunday August 5, 2012

The taxman cometh, and giveth, all too frequently

The Star Says

WHEN the Inland Revenue Board (IRB) announced that it would compensate taxpayers 2% for late refunds on their overpaid taxes, provided that the delay had not been occasioned by taxpayer irregularities, there were reportedly mixed feelings among the public.

The matter is not simple or straightforward because it concerns several related issues, including the cause of the initial overpayment itself. But for a start, compensation can only be welcomed as it is better than nothing, and it is something of a pleasant novelty to receive cash back from the taxman.

People who are overtaxed unjustly lose part of their earnings through no fault of their own. There can be no moral basis or legal justification for taxing people more than they are required to pay.

Even when compensation is given later, there is the matter of lost interest on the sum overpaid. Will the 2% cover this lost interest, as well as lost opportunities to invest (opportunity cost) with it?

So although compensation from the IRB is very much in order, there is the question of whether 2% is sufficient in cases of considerable sums in refunds, or when delays in refunds have stretched to several years.

That means while the IRB’s compensation mode is not at issue, the adequacy of the sum compensated may well be. All of this suggests that unqualified approval may not quite be in order.

Many Malaysians are perplexed over why there had to be overpayment of tax to begin with, unless of course they had been overtaxed from the start.

Is the IRB’s formula for calculating the tax payable flawed? Where exactly does the problem lie for overpayment and refunds to occur so frequently?

Why is it not possible for taxpayers to be asked to pay the precise amount any more? What is to be done to address the matter of constant overpayments and continuous refunds?

Some have suggested that the IRB revise its formula for sums payable downwards, such that taxpayers need only top up any shortfall at the end of the year. That makes a lot of sense and helps everyone concerned.

Taxpayers will have more disposable income each month, and the IRB can save by not having to keep paying them compensation. Will this simple idea be too brilliant to be appreciated?

News

Sunday August 5, 2012

The taxman cometh, and giveth, all too frequently

The Star Says