Friday 29 Mar 2024
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This article first appeared in The Edge Financial Daily on January 22, 2019

KUALA LUMPUR: The Inland Revenue Board of Malaysia achieved a new record in direct tax collection last year with RM137.035 billion collected, which is 11.13% or RM13.723 billion more than the RM123.312 billion collected in 2017, the ministry of finance (MoF) said.

The last record was set in 2014, when the direct tax collection came in at RM133 billion, according to a statement from the MoF on Sunday.

It attributed the rise to increased collection from components of taxpayers such as companies, individuals, petroleum, cooperatives, stamp duty and others.

“Besides reflecting the effectiveness of a clean leadership and an administration based on the principles of competency, accountability and transparency, this increase also shows that economic growth was encouraging in 2018,” said Finance Minister Lim Guan Eng.

Guan Eng further explained in a statement yesterday that the direct tax collection for 2018 relates to the imposition of tax on income received in 2018, in line with the implementation of the current year assessment system, which has been in force since the year 2000 for non-petroleum income, and since 2010 for petroleum income.

Hence, he said the increase in revenue in the previous year was the achievement of the collection in 2018 based on the assessment and economic developments occurring in the same year.

“It is not based on [the] economic estimates in 2017 as alleged by some parties. This is further supported by the sales and service tax (SST) collection that exceeded expectations by 34% in 2018, the first year the tax was reintroduced,” said Guan Eng.

SST collection for 2018 by the Customs Department came in at RM5.4 billion, compared with the targeted RM4 billion when the SST was implemented on Sept 1.

Meanwhile, the MoF said revenue collected from income tax other than petroleum contributed RM116.953 billion or 85.35% of the IRB’s total direct tax collection last year.

The corporate component was the biggest contributor at RM70.036 billion or 51.11%, followed by the individual component at RM36.065 billion or 26.32%, tax revenue from petroleum was RM20.082 billion or 14.66%, stamp duty collection stood at RM5.934 billion or 4.33%, withholding tax collection at RM3.117 billion or 2.27%, real property gains tax collection at RM1.467 billion or 1.07%, cooperatives tax collection was RM171 million or 0.12% and lastly Labuan International Offshore Financial Centre and other taxes stood at RM163 million or 0.12%.

Guan Eng said the encouraging tax collection was the outcome of “the effective tax-related strategies set by the Pakatan Harapan government that came into power after the 14th general election”, like more professionally conducted tax enforcement activities, focused tax education programmes, and improvements to the process of imposing travel restrictions on taxpayers with tax arrears

“The high level of integrity and transparency of the Pakatan Harapan government in spending every sen of tax collected from the rakyat also played a very important role in improving the level of compliance among taxpayers and led to this increase. These factors have directly increased the confidence and trust of the rakyat towards the government and has encouraged them to voluntarily declare and pay their taxes,” Guan Eng said.

On that note, he urged taxpayers who have compliance issues to participate in the special voluntary disclosure programme that was launched on Nov 3 last year, and which will end on June 30 this year, that offers low penalty rates of 10% and 15%, to avoid being penalised up to 300% when the programme ends.

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