This article first appeared in The Edge Financial Daily on April 20, 2018

KUALA LUMPUR: The Inland Revenue Board (IRB) said its action in writing to international schools requesting for information about fee payers is a routine procedure.

The board said the exercise “aims at promoting voluntary tax compliance, reducing the risk of tax leakages and ensuring the tax system is safeguarded”.

In a statement yesterday, IRB confirmed that a letter had been issued to the management of several international schools “requesting relevant information”.

This came after a snapshot of an email from an international school to parents of children studying there had circulated on social media platforms such as the WhatsApp messaging service. In the email, the school notified parents that IRB had requested the school to furnish details such as the name of the fee payer, identification number, name of student and total fees paid in 2017.

“The request for such information is pursuant to the provision of Section 80 and Section 81 of the Income Tax Act 1967,” IRB said in its statement.

The two provisions grant IRB access to any building in the country and the power to ask for any document and information, which must be provided. Some parents were reported to have come out to voice their dissatisfaction over IRB’s action.

But tax expert S M Thanneermalai said the board’s action is justified to meet its needs in the tax auditing process. “Technically speaking, IRB definitely has a right within the law to request information from businesses,” said the managing director of Thannees Tax Consulting Services.

“IRB is looking for people or areas where there are under-declaration of taxes. They are trying to identify and select taxpayers whom they want to audit. What they are doing is to collect data and to then do data matching,” Thanneermalai told The Edge Financial Daily over the phone.

Deloitte Malaysia’s business tax audit and investigation leader Chow Kuo Seng concurred, adding that tax authorities have increasingly been going beyond their prescribed list to seek more information.

“It’s nothing unusual. Tax authorities have been reaching out to different types of business entities. This includes banks, schools and property developers,” Chow said when contacted.

It is understood, however, that for some international schools, it is the first time they had been approached by IRB for information.

Chow stressed that IRB is seeking business information for tax purposes only. In the context of schools, such business information would include the name of the customer (parents or guardians) and the amount (fees) paid. “So schools are also responsible for making sure they do not give out information beyond these business requirements,” he said.

Both Chow and Thanneermalai concluded that IRB’s efforts are not surprising and that taxpayers are obliged to agree to have the relevant details passed on to the board.

“In my opinion, there should be no fear unless you haven’t paid or declared your taxes,” said Thanneermalai, who is also a trustee of the Malaysian Tax Research Foundation.

International schools as well as the Association of International Malaysian Schools could not be reached at press time.