Change in the tax system...

Change in the tax system for religious bodies is self defeating

With the proposed change in the tax treatment of religious bodies, and if implemented can be a source of much discontent to the believers.

The changed regime would mean that all religious bodies would have do up their books properly and engage accountants, and tax professional  and more costs to comply with the annual tax return and pay the questioned tax to the national coffer.

These religious bodies irrespective of size had enjoyed “tax-free” status for decades because their sources of income would be largely donations, tithes and contributions from their members of taxed disposable income.   So if religious bodies are taxed again for such incomes, it is a double tax.

So there is an argument that religious bodies do make profits from business undertakings and rental of properties owned by such establishments.  So such sources of income or profit need to be taxed like other business enterprises.

One thing we must not be misplaced is that such income from some sort of business-like enterprises are derived from the utilisation of donations received from members and the supporters.  With the donations so received, certain investment projects like building and businesses like kindergarten and book stores are likely to be carried out.  There are chances that such enterprising activities are not really profitable if not for the donations or generous giving come from the believers and followers.  So is it fair to impose tax on such activities and development not really business orientated?  Without donation or funds specially raised for specific projects to benefit the society at large, such “enterprises” would never emerge.

Just to give some illustration of those activities pursued by religious bodies, say a kindergarten or pre-schoolers, such enterprises must charge fees etc to all attendees to keep them afloat.  Such enterprises are kept afloat by some subsidies from the religious bodies because once started it is difficult to close them down for community purposes.  Normally, such enterprises would utilise the premises of the religious bodies and so to justify usage, the religious bodies would charge a rental and should such rental so received by the religious bodies be subject to tax?  It is just shifting the revenue or expense within the same religious bodies in various divisions.  If the ‘enterprising’ activities do make money, such surplus would be retained within the religious bodies.  It is indeed disturbing that tax would be applied in such scenario.

Take another case like the religious bodies have over the decades accumulated much donation or fund raised for some building projects and such houses and office building have spare capacity and then rented out within the religious bodies to finance the operations thereof, and such rent if tax would present disillusion.  Some flats owned by religious bodies could be rented out for nominal rent to own employees like priests or pastors, and it is indeed a disservice to the religious bodies to be taxed.  When religious bodies cannot pay the tax for such internal arrangement of facilities as cash flows is always an issue, the donations would be sought to make those payment if tax is introduced now.

The relevant authorities should consider dropping the proposed tax regime and let status quo reign and peace prevails.   

Joshua Y C Kong   30/12/2016.

where in the Constitution...?

Where in the Constitution stipulates that all states are equal in status?

There has been a lot of arguments over MA63, 20/18 Points, Cobbold Commission and IGC Report recently and seem to be endless when solution is not insight even with some official committees being formed to look into this matter on the formation of Malaysia.

Lets look at the Federal Constitution as per 16.09.1963 on Article 1- Names, States and territories of the Federation:- 1(1) The Federation shall be known, in Malay and in English, by the name Malaysia.

1 (2) The States of the Federation shall be –(a) The States of Malaya, namely, Johore, Kedah, Kelantan, Malacca, Negri Sembilan, Pahang, Penang, Perak, Perlis, Selangor and Trengganu; and (b) the Borneo States, namely Sabah and Sarawak; and (c) the State of Singapore.

(3)  The territories of each of the States mentioned in Clause (2) are the territories comprised therein immediately before Malaysia Day.

Then we had the amendment to the Federal Constitution on 27 August, 1976 as Article 1 -   - Names, States and territories of the Federation 1(1) The Federation shall be known, in Malay and in English, by the name Malaysia.  1 (2) The States of the Federation shall be Johore, Kedah, Kelantan, Malacca, Negri Sembilan, Pahang, Penang, Perak, Perlis, Sabah, Sarawak, Selangor and Trengganu.

We can see that in 1963, the states in 1(2) were listed in alphabetic order and similarly in 1976, the states without Singapore were listed also in alphabetic order, meaning such adjustment had really immaterial impact on equal status of all states in 1976 even with the said amendment on the formation of Malaysia where Malaya with the three partners Sabah Sarawak and Singapore were supposedly equal in status as per Malaysia Agreement 1963.

We are now in after-thought scenario argument on partners or states in equal status with states of Malaya when some people say Parliament is all powerful to decide on that.

I would like to quote the letter by Awang Jambul on “Blame latter day leaders, not documents” DE 11 December, 2016- “The 20 points, Cobbold Commission, Malaysia Agreement and inter-Governmental Committee Report have been incorporated into the Federation Constitution and State Constitutions.  The Federal Constitution and Sabah Constitution are the final products of all prolonged negotiations, documentations, commissions, enquiry and agreements by our founding fathers.”  He went to say that “Parliament is supreme”.  

There are comments that the Federal Constitution has been amended countless of times when BN Government has 2/3 majority in Parliament and could be accused of abuses in that context in Parliament with hidden agenda.

Laws and amendments could be done by the Parliament on the Federal Constitution but what if the implementation of the Constitution was departure from the intention of any Agreement like the Malaysia Agreement 1963 as it was depicted in 1963 when the amendment in 1976 could be really be meaningless in several context.

I hope the legal fraternity and the constitutional experts would enlighten the public where in the Federal Constitution stipulate that all the 13 states in 1963 and 1976 were equal in Status? Can I safely say that Sabah and Sarawak were never treated as equal partners with Malaya since 16 September, 1963?  If the two Borneon states were not treated as equal partners ab intio, it would  be meaningless for the amendment in 1976 to give the impression legally or otherwise that all the states were equal in status.   So it is misconception by such amendment of sort of confirming what is in the mind of the current leaders post the formation of Malaysia?

Article 1 in 1963 does give some unwritten understanding that they were partners and the states in Malaya were just “shareholders” or “minority” in Malaysia.  Is there any implication of “pari passu” of all the states in Malaysia? So in 1976, was there any specific stipulation that all the states are equal as demonstrated by the dubious treatment of national leaders in the implementation of national policies?  Can we impart imagination or assumption in Federal Constitution if “Parliament is supreme” to do what it likes?  Parliament also must be seen to do justice to all states irrespective whatever assumptions when lop-sidedness prevails when there are so much disparities (demography, economy, resources, wealth/poverty) amongst all states especially Sarawak  and Sabah are the two bigger states as compared with some tiny states in Malaya.  Sarawak and Sabah had been least developed comparatively with West Malaysia (Malaya) even after 53 years despite so much contribution of resources to the national coffer.

Can we now query Parliamentary Monarchy democracy where much injustice had prevailed over 53 years in Malaysia?

As we talk about Parliament and the Federal Constitution, can we find the solutions albeit 53 years late so that we may resolve all the disputes splashed up in various avenues such as compliance with various deals as partners like the 40% revenue return to the two states, the pittance in allocations of annual fiscal budget and the Malaysia Plans allocations for decades and other non-monetary aspects?

Also we are past the state of evaluating or assessing the questioned mal-treatments, and assumptions and that the nation should have revert to the intention of MA63 and implement that deal long overdue immediately without any red-tape and unnecessary bureaucracy meant to delay settlements.

Our national income tax system is flawed if only RM4b is from Sabah out of RM128b as taxes of multi-national companies operating in Sabah are accounted for by the headquarters of these companies without showing separate figures for the Sabah sector.  This is obvious a setback for Sabah in the context of nation building as a double whammy when Sabah is treated “equal” with all other states.

Joshua Y C Kong 21/12/2016

Clear the air on the low tax in Sabah

Clear the air on the low tax in Sabah

Why Sabah is only targeted to contribute RM4b in 2017 out of the total expected in national collection of RM127b?

At this level of low taxes collected for decades in Sabah, it would give policies deciders that Sabah would be accounted low in getting a return of that revenue for the development of the State.

Have the policies makers consider how only RM4b is from collection in Sabah when so many multi-national and national companies accounted their tax cases to the central IRB in Putrajaya /KL or other relevant states in West Malaysia/ Sarawak. Such companies – number unknown – have massive operations in Sabah in the oil/gas and the oil palm plantation/timber trade for decades and never show separate amount of tax payable for the Sabah sector.  Even Government link companies (GLC) like MAS have substantial operations in Sabah as KKIA is ranked the second busy airport in the nation.  AirAsia also have much revenue from Sabah operation.  Do these companies operating in Sabah pay separate taxes for the Sabah sector, and if not there should be a separating accounting preparation for Sabah sector at least for the statistical identification/classification.  

Also in the news report it was stated that the Newly-appointed IRB Chief Executive Officer Datuk Sabin Samitah, a Sabahan also mentioned of tougher approach to go after those taxpayers with the intention to collect more taxes and penalties in tax settlements in Sabah.

Sabin also said that “there are still a lot of Sabahans who are not familiar with the provisions of the law on income tax,"

Can the IRB tell us how much of the RM127b collected is for penalties or compounds for tax offences and delays in payment of tax due?

Isn’t it appropriate that penalties and compounds collected from taxpayers (some innocent) should be utilised to educate the taxpayers –some already in “distorted” mentality – to greater awareness of the tax system always changing in regulations, laws, guidance, and compliance challenge?

Instead private or independent tax professionals and taxpayers are paying for expensive seminar/conference fees to attend updating forums annually and this simply defeat the rate of more participation in such avenues.  Only those who can afford such fees and cost of attending such forums can make it. So we look forward to the enhancement of awareness by the IRB in free seminars for the taxpayers for win-win scenarios.

Joshua Y C Kong 22/12/2016