GEORGE TOWN, Nov 11 — The size of Malaysia’s shadow economy is at around RM300 billion and integrating a fifth of it into the formal sector could bring the country between RM5 billion and RM15 billion in additional revenue, Finance Minister Lim Guan Eng said today.

He said the country’s shadow economy is higher than the ranges of six to 15 per cent of gross domestic product (GDP) in less developed countries to rich countries.

“In Malaysia, the figure is suspected to be around 21 per cent of GDP so with the 2018 economy at RM1.45 trillion, it puts the estimated size of the shadow economy at about RM300 billion,” he told a conference here.

The shadow economy includes all economic activities such as corruption and tax avoidance that were hidden from official authorities for monetary, regulatory and institutional reasons.


The minister was talking at the 40th CATA Annual Technical Conference 2019 themed “Addressing the shadow economy and digitalisation in securing revenue for sustainable development”.

Lim said the focus on shadow economy and digitalisation is important for tax administrators from different countries to cooperate and share information to prevent illegal activities especially the shadow economy.

“One of the factors of the shadow economy is corruption and it is only when we share information can we adopt similar measures to reduce corruption,” he said.


He also blamed Malaysia’s large shadow economy on kleptocracy by the previous Barisan Nasional federal administration.

“Now we are a democracy and we have to look at how we can bring the shadow economy level down,” he said.

Lim said conferences like today will ensure financial scandals such as 1Malaysia Development Bhd (1MDB) in Malaysia will never occur again.

He said with effective compliance and better sharing of information with other countries that tax administrators can better enhance their systems against tax evasion and corruption.

“Another important aspect we should look into is digitalisation especially with companies that have access to data banks and data flows,” he said.

He said these companies are very powerful so it is now up to all countries to frame a uniform, multilateral platform to ensure economic sovereignty is protected.

“We have to make sure we are in control of the data and not these multinational companies, we have to be in control to make sure compliance is more effective,” he said.

He said this is an issue that should be discussed in the conference today and for countries to share and cooperate.