Summary of the speech
by Dr Tan Seng Giaw, DAP National Vice-Chairman and MP for Kepong
during the debate on the Income Tax (Amendment) Bill 2002 on 4.4.2002
in Dewan Rakyat, Parliament, Kuala Lumpur
The national revenue is about RM70 billion a year, over RM20 billion being income tax. Last year, the Inland Revenue Board, IRB, collected RM22.6 billion from income tax. It is nearly one-third of the total revenue.
This Bill is technical. It is not easy to understand. The amendment is to simplify the determination of basis period under the Self Assessment System, SAS, effective from 2004 and subsequent years.
It seems that IRB personnel have been trained for six months on SAS. Some don't understand the definitions. Recently, it takes in 386 accountants. We don't know how long will IRB train them.
(According to the Deputy Finance Minister Datuk Chan Kwong Choy, personnel are under training for one year initially and then one and a half years later.)
MORE LANGUAGES
IRB prints its forms and statements in Bahasa Malaysia. It is important to use the national language. However, IRB wants people to understand the collection system including those who arrive in Malaysia during a year of assessment being required to submit a notice of chargeability to the Director General within two months of his arrival in Malaysia. IRB wants to collect more taxes from people. It would have to use more languages including English and Mandarin to achieve the objective. It needs a more liberal policy on languages.
Apart from using more languages and clear definitions on the SAS and the basis year, IRB must give taxpayers sufficient grace period to switch over to the new system. Previously, it assesses taxes of the year before. Since 2000, it assesses the current year. Then, it introduces the schedular system in which an employer deducts from his employees' salaries according to the schedule fixed by IRB. The Board gives a grace period of six or eight months.
We propose that the Government give a longer grace period, helping taxpayers to get used to SAS.
CP204 FORM
Companies use this form to assess chargeable income in the coming year. But then, it is not easy for a company to forecast its turnover in the coming year. A transnational such as Sime Darby can employ hundreds of accountants. It may have less difficulty in doing so. Petty traders and hawkers have. We hope that they register with IRB and that the latter is fair to them.
If a person forecasts the chargeable income at RM20,000 for the coming year and it turns out to be more than RM24,000, IRB may penalize him or her. IRB should be reasonable on this. ( The Deputy Finance Minister says that IRB gives the flexibility of 30%.)
UPDATED STATEMENT
In SAS, taxpayers find out for himself or herself whether there is debit or credit in his chargeable income. IRB does not issue updated statement. If there is debit, taxpayers may be penalized. If there is surplus or credit, IRB takes a long time to pay back the taxpayers.
For example, IRB overtaxed a company RM50,000. This company sends an agent to protest and to have interviews with IRB personnel many times, each time waiting from half to over one hour. Two years later, IRB admits that it has overtaxed. It cannot pay back immediately. It contras against next year's tax.
IRB's collection is put in the consolidated fund which is used especially to pay the interest on the national debt. Parliament has to approve before money can be taken out from the fund.
If an individual is late in paying taxes by one day, he faces a penalty. But, if IRB owes him or her money, IRB takes time to pay back without interest.
(The Deputy Finance Minister says that the Government is considering letting IRB asks for some money for paying back more quickly to those whom it has overtaxed.)
INSURANCE PREMIUM
Now, the Government gives tax exemption on RM5,000 a year to an individual who pays life insurance premium and contribution to the Employees' Provident Fund, EPF.
The Malaysian Life Insurance Association proposes that the Government provides tax exemption on RM5,000 to an individual who pays life insurance premium and contribution to EPF separately.
This is a good proposal. We hope that the Finance Ministry considers it.
STREET SURVEY
The Executive Director of IRB Datuk Zainal Abidin Abd. Rashid says that IRB will conduct a street survey on self-employed workers such as hawkers and petty traders who have not registered with IRB. We don't know
how he is going to conduct the survey. We hope that he will treat them fairly and justly.