Make Budget 2019 a real game changer

Make Budget 2019 a real game changer..

We just had the first ever PH budget 2019 by the new Finance Minister Mr. Lim Guan Eng and lots of changes believed to be for New Malaysia in the process especially in the taxes and the collection of more taxes to resolve the sort of financial shortcomings after BN’s rule of more than 60 years especially now we have a national debts of RM1 trillion and more which is likely to be accumulated more than decrease it ever. There are fundamental reasons why the national debts are insurmountable as the fiscal budget would continue to be in deficit for obvious reasons.

The PH Government has form a Tax reform Committee which has come out with Special Voluntary Disclosure Program 2019 or Tax Amnesty in the immediate terms and long term solutions would come later.

It is one of the good measures of IRB Tax Review Committee, such move would close the leakages and thus increase the taxpayers base namely individuals, partnerships and corporate sector namely SMEs.  The intention is obvious to collect more tax.

Operational Guidelines No. 1/2018 by the Inland Revenue Board of Malaysia with a special program for voluntary disclosure is a new tax frontier that IRBM really mean business to collect more taxes. Whether it will succeed or fail is yet to be seen in the land of Malaysia Boleh.

With 1MDB or without, the tax base in line with OECD would need to be increased to secure much better revenue.

The burden of the very much increased national debts is too much for the same group of taxpayers and those responsible for that should be made to resolve that  national debts.

Going by the trend of corruption not 4% of the GDP annually but more likely 30% , are the BN’s political proxies/ cronies for 60 years prepared to voluntary disclosure and surely incapable to pay the relevant and related taxes and be bankrupt in such process or already migrated elsewhere?

Given the imperfect operations and lopsidedness of any system and no exception for tax, would the same group of known taxpayers be further exploited for more tax revenue to patch the revenue leakages in 1MDB (repayment of dubious debts), missing GST refund RM19.4 billion, missing IRB refund RM16 billions making up many hundreds of billions?  Such approach would inevitably impact adversely to the economic and social condition in society in term of employment as many firms and companies could fold up.

We have seen how GST at 6% had adversely impacted the consumers and the business communities/ taxpayers.  Even SST at 6% for the restaurant sector with a threshold of RM1.5m can cause irreversible setback when most restaurants are earning less than RM1.5m especially in Sabah. Such smaller restaurants can attract more customers to them and so those bigger restaurants can face a big decline of patronage.  Taxes is good for the nation but the unexpected impact can arise and how to over come such reality of customers choices?.So I hope the government would address such unexpected but normal anomaly in the business world to mitigate such damages .

I hope the Tax Review Committee whilst attempting closing of leakages would consider the following (both short and long terms):-

1.       Usage/classification of the revenue of tax penalties separating it from the mainstream of collected taxes or revenue for the benefit of educating taxpayers and tax agents/ tax personnel.

2.       Review the polygamy practice of tax relief and other relevant treatments of the extended families in many other aspects as burdensome for society at large.  It is part and parcel of the International Convention for the elimination of racial discrimination (ICERD) which is likely to be ratified soon .

3.       Treatment of Zakat in the Income Tax return form in the context of ICERD.  For both items 2 and 3, many billions annually could be avoided as a departure from national commitment as religion is still private and personal despite some claim it as a national context.  If item 2 and 3 are excluded, the taxpayers’ base can be enlarged immediately hence collecting much more taxes soon.

4.       Petronas with global business network dealing with its tax implication for Malaysia.

5.       What would happen if Petronas cannot come up with the RM30b tax to off set the missing GST and IRB tax refund and the victims depending on such refunds for cash flows would be burdened for no refund promptly.

6.       Threshold for new SMEs for accrual accounting so that they can be in cash accounting especially for contractual businesses where payments/ collections is always delayed and even contra-ed for work done when taxes have to be paid first even for non collected turnover in the context of accrual accounting.  Some of these items can even be bad debts affecting the much needed cash flows.

7.       Cryptocurrency and tax treatment thereof for the volatility of price fluctuation as a reality where the determination of profit is concerned..

8.       The issue of climate change as financial commitment by the corporate and individual possibly with some tax reliefs before it is too late to save the degraded earth to save ourselves in the noble effort of #EcoGeneration as sponsored by the Government for the well-being of all.

9.       Would the Tax review Committee open to town hall sessions to enable more views to be incorporated in the new taxation schemes?

In the budget 2019, many other issues may need to be addressed in terms of clarity, revision, and refined for implementation so that the taxpayers would not lose any confidence in the new PH government.

Joshua Y C Kong 23/11/ 2018