KUALA LUMPUR: The rollout of e-invoicing for the first category of taxpayers with a turnover of more than RM100mil by August remains in force despite calls for a delay, according to Datuk Dr Abu Tariq Jamaluddin, chief executive officer of the Inland Revenue Board (IRB).
He said the implementation of e-invoicing is a cornerstone of the board’s tax administration system that is driven by technology which allow for efficiency, transparency and taxpayer convenience.
“We have received a lot of requests to delay and we are looking at them a case-by-case basis to see why they can’t comply with the timeline. But as of today there is no extension of time and any penalties imposed will depend on the reason given.
“The e-invoice is a long journey and a big project for the IRB and eventually, you will need an e-invoice to claim for deduction of expenses incurred in the production of gross income.
“The e-invoice is so important to increase our tax to gross domestic product (GDP) ratio,” he said at the National Tax Conference here yesterday.
Last week, micro small and medium enterprises with turnover of less than RM150,000 a year were exempted from e-invoicing.
Malaysia’s tax to GDP ratio in 2022 was about 12.2% compared with the Asia-Pacific’s average of 19.3% and the Organisation for Economic Co-operation and Development of 34%. The ratio hit a high of 16% in 2012 and low of 11.45% in 2020 post withdrawal of the Goods and Services Tax and the Covid-19 pandemic.
The ratio is an indicator of the efficiency and effectiveness of the country’s tax system. In its country report, the International Monetary Fund had estimated the tax ratio potentially should be at 15% to GDP for Malaysia based on the characteristics of the local economy.
The World Bank estimated a minimum tax to GDP ratio of 15% was required for sufficient public revenue for essential services and development spending.
The low ratio for Malaysia is partly blamed on tax evasion and avoidance and the shadow economy which involves legal and illegal activities that are not being taxed or undertaxed, as well as money laundering activities.
To tackle this problem in the past, the IRB introduced a special voluntary disclosure programme (SVDP), the last of which (SVDP 2.0) ended in May.
The SVDP 2.0 resulted in some 66,000 declarations, which was above the IRB’s target of 50,000 declarations and tax revenue collected amounted to RM1.29bil, compared to its target of RM1bil.
New tax payers totalled some 20,000 but Abu Tariq said digging into declarations, the amount declared was very small and is a concern.
“More than 50,000 declared RM10,000 which is a concern for the IRB. Some 6,000 cases had tax declared below RM100. Nevertheless, we will honour our word that we will not audit and investigate the companies but we will engage with them so that in the coming years, the right amount of tax is paid and not what they declare,” he said.
From January 2025, the IRB will introduce a self-assessment system for real property gains tax and in Labuan, the taxation year will change from the preceding year to the current year.
The move, Abu Tariq said, should lead to an increase in tax collection judging from past records.
Meanwhile, the IRB has set up a new branch called the strategic compliance branch, to tackle the issue of tax avoidance and evasion, especially the many cases unresolved under the normal audit activities.
“The new team has a strategic focus to deal with new areas like cryptocurrency and evasive tax arrangements.
“Our new branch will deal with high profile individuals with significant bank balances and transactions and assets including VVIPs, the shadow economy and tax evaders who are out of the tax ecosystem like digital-asset traders, developers and contractors using multiple layering of transactions to claim fictitious costs and under declare income from property transactions as well as companies, illegal investment schemes and other methods of money laundering schemes,” he said.
A special-task department will work closely with other agencies or build up cases on information shared by agencies such as the Malaysian Anti-Corruption Commission and the police.
“They will explore any tax issue based on investigations under criminal offences,” he said.
In his speech at the conference, Abu Tariq said IRB’s tax administration 3.0 is characterised by the seamless integration of new technologies such as artificial intelligence, big data analytics, and blockchain.
“These innovations are designed to enhance our ability to collect taxes more effectively and equitably while reducing the administrative burden on taxpayers.
“By leveraging on data-driven insights and predictive analytics, it improves our ability to discover and prevent tax evasion,” he said.
