There are two aspects to consider in improving the Malaysian tax system – tax compliance and tax incentives.
Tax compliance needs to be made a way of life. However, media advertisements can only do so much to educate. There should be a focus on the educational role so as to be able to disseminate tax information. The website could be used more effectively, for example, listing all tax case law decisions, etc. as the public needs to know it all in the self-assessment world. The need for information also extends to officers of tax authorities, where they should be trained via contributions from the private sector to develop staff with a broader mind-set and enhanced business knowledge.
Tax compliance is a multi-faceted issue, hence there are many facets to consider. Examples include improvement of the tax consultation process, utilisation of technology in holistic manner, improvement of the tax authorities’ technical capabilities.
The roll-back of certain tax incentives that commenced in 2012 has stalled. It is important to carry out a review and decide which tax incentives are important and cease pandering to vested interests. The tax incentives legislation needs to be revamped to remove certain incentives while simplifying others.
The development of tax incentives in Malaysia has not really gone through a focused review. Instead, an approach of “add-ons and tinkering” was adopted rather than taking a step back and reviewing the rationale for the need for tax incentives and having a clear measurement tool to evaluate the effectiveness of tax incentives.
The Tax Reform Committee set up in September 2018 aims to address some of the issues mentioned above. It is not undertaking a public review of the tax system which will require a significant amount of time and resources. Rather, it acts as an advisory committee to the MoF by engaging with various stakeholders for suggestions on improvements, and provide recommendations to the MoF.
Dr Veerinderjeet Singh, Chairman of Axcelasia Taxand Sdn Bhd discusses examples of tax reforms to better the Malaysian tax system.