This article first appeared in The Edge Financial Daily on November 28, 2017

CYBERJAYA: The Inland Revenue Board (IRB) has included the audit of 15 banks in Malaysia that have offshore dealings as part of its “Operasi Mega 2017” (Ops Mega 2017) — the tax authority’s biggest tax awareness operation this year.

IRB deputy chief executive (compliance) Abdul Manap Dim said phase one of the audit will involve the audit of 15 banks, comprising both local and foreign ones.

“We will audit these banks that have offshore transactions, for example those with transactions in Labuan. We will also look out for potential transfer pricing issues due to different tax rates imposed on entities in Labuan, and those in Peninsular Malaysia.

“We have started our checking, and we are now going through the information provided by these banks that are involved,” he told reporters after launching Ops Mega 2017 here yesterday.

However, he declined to share the targeted collection amount from the banks as the audits are still ongoing, but said the amount “could be huge”, perhaps “somewhere in the hundred million ringgit range”.

The number of tax cases that will be audited under Ops Mega — including the banks — is 4,158. These audits, which will be conducted throughout the country, started yesterday and will be concluded on Dec 1. The audit will involve a comprehensive check on identified taxpayers to ensure their reported income is accurate. It is also aimed at raising the level of tax compliance in the country.

The overall Ops Mega 2017, which started on Nov 20 and will also end on Dec 1, involves 4,219 tax officers out of IRB’s 11,000-strong workforce nationwide. Besides tax audit, it also involves tax investigation, tax collection, civil lawsuit, and raising awareness of taxation and compliance.

Under Ops Mega, it is initiating some 1,393 lawsuits over total unpaid taxes of RM120.127 million. It will also be conducting surprise visits to business premises, homes or offices as part of its tax investigations. The investigations, involving some 204 cases — comprising both individuals and corporations — are to identify tax evaders, whom IRB will also charge in court.

As for its efforts to raise awareness of taxation and compliance, the IRB has lined up 104 programmes, like briefings and the distributions of brochures, besides sending out emails to 59,920 taxpayers — mostly first-time taxpayers — to educate them on their responsibilities and rights.

It has also sent out reminders and notices to 6,560 individual and corporate taxpayers who have accumulated unpaid taxes amounting to RM434.175 million.

Abdul Manap said operations like Ops Mega will aid IRB in achieving its 2018 tax target of RM134.7 billion, which is 6% higher than its 2017 target of RM127 billion.

The higher target was set despite a potential RM1.3 billion in taxes lost due to the two-percentage-point reduction in personal income tax involving 261,000 taxpayers announced in Budget 2018.

As for its 2017 tax target, Abdul Manap said: “[God willing,] we will achieve the [2017 target]. To date, we have collected close to RM109 billion in taxes.”