KUALA LUMPUR, April 27 — The Inland Revenue Board's plan to raise tax evasion penalties to 100 per cent could result in backlash from local taxpayers, said tax consultant Grant Thornton.
It said the decision to remove the previous leeway to charge first-time offenders a lower penalty of 45 per cent could also be counterproductive, with taxpayers more likely to contest such penalties in court.
Grant Thornton country managing partner Datuk NK Jasani also suggested that businesses would baulk at being treated the same as hardcore tax defaulters under the move that would remove such distinctions in the penalties applied.
“As the government is pushing to increase its revenue, it could perhaps emulate from the success of our neighbour, the Indonesian government, in implementing a Tax Amnesty initiative for taxpayers,” Jasani said in a statement.
He said Indonesia's move was a “whopping success”, noting that 800,000 tax evaders reportedly declared a cumulative US$350 million.
Jasani said a similar move by the IRB would result in both a short-term increase in collections as well as a wider tax base in the long run.
The IRB announced this month that it will no longer apply the 45-per cent penalty for undeclared or under-declared taxes starting 2018, but the full 100 per cent allowable by law.
It previously said the tax gap has remained consistently in the 20-per cent region, indicating that more measures were needed to realise the full collections due to the government.
In January, the IRB said it aims to collect RM127 billion in direct taxes, a target of around 10 per cent of the national gross domestic product, this year.
