KUALA LUMPUR: A Bill will be tabled in Parliament next week to amend a section under the Inland Revenue Board (IRB) of Malaysia Act 1995, which will allow the Minister of Finance (MoF) — currently Prime Minister Datuk Seri Najib Razak — to set up an investment panel within the IRB.

The Bill if passed will allow the panel to make investments using taxpayers’ money to acquire stocks, bonds, debts and property assets that are deemed fit by the Minister of Finance, said Kelana Jaya MP Wong Chen at a press conference in Parliament yesterday.

“The government is going to debate this income tax amendment Bill which is set for debate next week, but we don’t know when is the exact time yet.

“It was presented to us on Monday. This Bill is significant because the Minister of Finance is also the Prime Minister at the moment, and if this is passed he can create an investment panel in IRB to invest taxpayers’ money in whatever he wants,” said Wong.

According to documents obtained, the amendments to the Act will include provisions that will allow the Minister of Finance to appoint six out of the seven board members for the investment panel, said Wong.

He added that the finance minister will have his say in the appointment of six board members that include a chairman, a representative from the MoF, a secretary (a position that will be held by IRB’s chief executive officer) and three other persons with experience in finance, business or other relevant experience. The last board seat will be allocated to the governor of Bank Negara Malaysia.

“If the Bill is passed, it will essentially transform the IRB into a quasi investment body like 1MDB (1Malaysia Development Bhd),” Wong said.

Najib is also currently the chairman of 1MDB.

The Kelana Jaya MP cautioned that this initiative is “highly unusual and lacks transparency and accountability”, noting that “there is nowhere in the world that this is being practised or done”.

One of the amendments to IRB’s Act include new provisions that will allow the panel to invest in shares offered pursuant to an initial public offering (IPO), which Wong said could mean that the IRB could become a cornerstone investor for 1MDB’s upcoming IPO.

Another glaring inclusion of provisions, Wong pointed out, is that it would also provide the panel with powers to invest monies from IRB in any form of investment with the approval of the Minister of Finance.

The current law on the chapter of investment only allows the IRB to invest monies collected on a short-term basis, with Bank Negara Malaysia or licensed banks, or in government bonds, mortgage papers or commercial notes before the monies get transferred to the Treasury to be disbursed to the respective ministries.

Wong said it is understood that the IRB’s expected level of collection is about RM130 billion every year.

PKR is opposing this bill because the Public Finance Management good practices demand that all taxes and revenue must be accounted for and be put into the Government Consolidated Fund, he said, noting that the creation of this investment panel within IRB is against good practices.

“All the money collected is supposed to go to the government but what the finance minister is trying to do is put a barrier in between,” he said.

The proposed provision consolidates all powers to the Finance Minister allowing him to remove all powers from IRB, where currently the IRB is in charge, Wong added.

Another reason why PKR is opposing the bill is because when “you divert government revenue into investment, you are not fully reporting on the fiscal data, so we won’t know how much will be collected and how much will be used for what purposes.

“And because it is being taken out to invest in other things, it’s off budget financing and therefore Parliament does not have direct access to question the minister,” he said.

He warned that taxes collected by IRB that is meant to finance for example health and education purposes will instead be used for investment purposes since the finance minister has unlimited powers to divert the flow of the taxes collected.

All the ministries will then suffer a drop in revenue or spending and would have to start begging for more money, he cautioned.

The party is also very concerned about accountability and transparency because there is no accountability provisions included in the bill, Wong said, adding that “we have seen how lacking in accountability 1MDB has been.”

Such a move by the government could also be damaging to the country’s debt ratings, he cautioned.

Wong urged all MPs from both Pakatan Rakyat and Barisan Nasional plus the ministries to unite and reject the bill.

This article first appeared in The Edge Financial Daily, on June 13, 2014.