Tax Reform Committee established to reform tax system ahead of Budget 2019

Lim said the committee will need to find new ways to raise tax collection progressively without affecting the lower-income (B40) group. ― Picture by Razak Ghazali
Lim said the committee will need to find new ways to raise tax collection progressively without affecting the lower-income (B40) group. ― Picture by Razak Ghazali

PETALING JAYA, Sept 14 — Finance Minister Lim Guan Eng said the federal government was taking a holistic approach in reforming its taxation system through the establishment of a Tax Reforms Committee (TRC) as there were no plans to increase the corporate and individual tax rate.

Lim said the ministry has subsequently appointed former director-general of the Inland Revenue Board, Tan Sri Hasmah Abdullah as the chairperson of the TRC ahead of Budget 2019.

“A new comprehensive study on the Malaysian taxation system is needed to make it more efficient, neutral and progressive, as well as capable of generating high-quality growth in order to raise the well-being of the rakyat.

“The committee will be tasked with broadening and diversifying the federal government’s tax revenue without placing additional burden on the people,” he said in a statement today.

He further explained that the committee’s main objectives were to address tax leakages, reduce the existing tax gap, explore new sources of revenue, study the taxation of the digital economy and review the effectiveness of various tax incentives as provided by the law.

Lim said the committee and Hasmah’s 37 years of experience in tax administration will need to find new ways to raise tax collection progressively without affecting the lower-income (B40) group.

“With the abolishment of the Goods and Services Tax (GST) and the implementation of the Sales and Services Tax (SST), our tax collection would be reduced by RM29 billion in 2019 from a narrowed tax base.

“The government will ensure that it has sufficient and stable revenue sources to meet all of its future obligations and to safeguard its fiscal sustainability while fulfilling the aspirations of the people as noted through the deferral and discontinuing of several costly infrastructure projects,” he said.

During the committee’s first meeting on Wednesday, Hasmah was joined by finance and tax experts Verinderjeet Singh, Datuk Chua Tia Guan and Amardeep Singh.

Meanwhile, Tax Department Secretary Datuk Khodijah Abdullah, Tax Department Deputy Secretary Mohd Sakeri Abdul Kadir and Fiscal and Economic Department Deputy Secretary Mohd Hassan Ahmad represented the Finance Ministry.

Lim said the gap in revenue collection must be addressed as it could prevent the government from carrying out its social and developmental mandate.

“However, any new tax under consideration must be efficient, neutral and progressive to promote long-term sustainability, productivity and economic growth,” he added.

Pointing out that tax evasion also contributed to the loss in national revenue, Lim stressed that the government will strengthen its enforcement and compliance measures against fraud, tax evasion and the smuggling of controlled items in the country.

“The government will work with local and foreign authorities to curb contraband smuggling as certain exporters make false declarations or produce fake invoices.

“We will also accord greater focus on material cases of tax evasion, particularly on companies that are abusing transfer pricing and tax planning activities,” he said.

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