KUALA LUMPUR, Oct 21 — Former finance minister Lim Guan Eng has urged the federal government to expedite the repayment of RM29.919 billion in tax refund arrears, warning that holding back businesses’ own money severely strains corporate liquidity, particularly among struggling small and medium enterprises (SMEs).

Lim, who is the member of parliament for Bagan, pointed to the 2025 Federal Government Financial Statements, which show that outstanding tax refund liabilities decreased by RM3.425 billion, dropping from RM33.342 billion in 2024 to RM29.919 billion in 2025.

While acknowledging the Inland Revenue Board (IRB) for whittling down the balance owed to firms that overpaid their taxes, Lim stressed that the outstanding sum remains colossal by any benchmark, especially since it belongs to the private sector.

“In 2026, RM9 billion was paid to 130,000 companies by Sept 30,” he noted, adding that the government must repay companies, especially the 1.2 million SMEs, more quickly.

To curb systemic delays, Lim proposed placing a strict RM10 billion cap on federal tax refund arrears. He argued that allowing the backlog to hover near RM30 billion inflicts undue financial hardship on cash-strapped businesses wrestling with deteriorating operating environments and a volatile global economic climate.

Historical data demonstrates a steady accumulation over recent years, Lim said. Outstanding tax refund commitments stood at RM21.836 billion in 2021, before climbing to RM25.721 billion in 2022 and RM25.511 billion in 2023.

The DAP lawmaker also took direct aim at public officials tasked with safeguarding small businesses, questioning why statutory agency leaders have failed to advocate forcefully for the immediate release of these funds.

“Failing to consistently and persistently press the government to return back to SMEs their own money, may give the unfortunate impression that those responsible and holding statutory positions are ‘sleeping on the job’.”

Lim also pointed out that statutory late-payment penalties have surged sharply as a consequence of refund delays. Under Section 111D of the Income Tax Act, the government is mandated to pay an annual 2 per cent compensation to taxpayers when IRB fails to disburse excess tax refunds within stipulated timeframes.

While IRB disbursed RM23.64 million under this mechanism in 2025, that penalty figure escalated by nearly fivefold in the first nine months of 2026 alone, hitting RM109 million as of Sept 30.