KUALA LUMPUR (Sept 2): Whether it is based on the modified cash accounting or the accruals accounting standard, RM16 billion worth of excess taxes paid that have yet to be returned are still missing from the Fund for Tax Refunds (TBBC), said Minister of Finance Lim Guan Eng.
Lim said this in a statement today issued in response to his predecessor Datuk Seri Najib Razak's claim that the RM16 billion taxes that have yet to be returned were actually not missing, based on the modified cash accounting standard that is supposed to be used, and not the acrruals accounting standard.
On Saturday (Sept 1), Najib said the new finance minister, who has placed the blame on the previous government for failure to return the RM16 billion to taxpayers, does not understand that the government uses a different accounting system from that of the private sector.
“Looks like our Finance Minister does not understand that the government uses the modified cash accounting standard and not the standard accruals accounting standard as used in the private sector,” said Najib, who was also the former prime minister in a Facebook post. He then tried to school Lim, a trained accountant, that under the modified cash accounting system, assets are not capitalised and liabilities are not reported in the financial report. This was the reason why, he said, Lim made an "incorrect conclusion" that the previous BN government had misreported unreturned taxes as revenue and accused it of falsifying the accounts.
"This statement by Datuk Seri Najib in blaming the accounting system used is his attempt in portraying that the RM 16 billion unreturned taxes is in fact not missing, is without basis and is absolutely untrue. The RM 16 billion that was unreturned since six years ago remained as missing from the TBBC regardless if the modified cash basis or the accrual accounting standard is used by the government," said Lim.
"According to the Inland Revenue Board (IRB), and as verified by the Accountant General’s Department, whereby the modified cash basis is used and as was mentioned by Datuk Seri Najib Tun Razak, it is found that the credit balance which has yet to be returned to the tax payers stand at RM16.046 billion as of 31st May 2018," he said.
The sum is owed to 1.65 million individuals and companies, he reitereated. "The seriousness of this situation was written in an official letter by the Director of IRB to the Treasury Secretary General, Tan Sri Dr Mohd Irwan Serigar, in 2016, whereby the IRB requested for the transfer of extra funds from the Consolidated Funds to the TBBC. However this was ignored by Mohd Irwan," he said.
The accrual amounting to RM16 billion for over six years was due to the failure of the Finance Ministry's Cash Management Committee to execute the transfer of extra funds to the TBBC, as was requested by the IRB during the monthly meeting that was chaired by Mohd Irwan.
The TBBC is a trust account formed under the Income Tax Act 1967 to channel funds from the Consolidated Fund for the purpose of returning taxes to taxpayers. "It should be emphasised that pursuant to Section 111B(2) of the Income Tax Act 1967, only the Minister of Finance has the power to make any decisions pertaining to the funds to be transferred from the Consolidated Funds to the TBBC," Lim said.
Hence, he said Najib has to answer why he allowed the RM16 billion not to be returned to tax payers in accordance to the timeframe set under the law.