TAX NEWS - 2010

Malaysia Tax: Why citizens should pay their taxes

Tax evasion should not be tolerated by society. Those who avoid paying taxes are actually living off the generosity of those who do.

There are a number of ways for the government to raise funds for the running of public services for the community i.e. through sales of assets, taxes or borrowings.

Of the three options, taxes are the most reliable as there is a limit to what assets the state can sell to raise revenue and borrowing requires repayment.

In fact taxes have become an integral part of life as Benjamin Franklin (1706-1790) was quoted saying, "In this world nothing is certain but death and taxes".

The Malaysian tax system requires taxpayers to self-assess and pay the tax due to the Government.

The foundation for success of the self-assessment system is voluntary compliance whereby taxpayers voluntarily comply with the tax laws.

'Voluntary' does not mean one can choose to pay or not to pay the tax.

The law requires all those eligible to pay taxes to do so and there are sanctions for not complying, such as imposing penalties for late filing or late payment, for non declaration or under reporting of income and unsubstantiated claims for deductions and reliefs.

Under certain circumstances, a taxpayer who has not settled his tax due can be prevented from leaving the country. In less than three decades after its independence, Malaysia has successfully transformed from a primary-based economy to that of an industrialised state in the 1990s, and has the vision to be a fully developed nation by 2020.

The incidence of poverty was reduced from 49.3% in 1970 to 5.7% in 2005, literacy rate increased from 77% in 1965 to 95% in 2005, infant mortality rate reduced from 59 per 1,000 in 1965 to 3.5 per 1,000 in 2009, basic amenities of piped water and electricity extended to well over 90% of the population and a first-class infrastructure network saw the expansion of 9,200 kilometres of road in 1965 to 124,212 kilometres in 2009.

Through all these developments, direct taxes, which are administered by the Inland Revenue Board (LHDNM), are the major source of funding which consistently contribute around 40% to 50% of the Government's total revenue.

The Government now has great plans to transform the nation from a middle-income to a high-income nation.

This is to be achieved through the four pillars of national transformation namely the principle of 1Malaysia, 'People First, Performance Now', Government Transfor­mation Programme, Economic Transformation Programme under the New Economic Model and the 10th Malaysia Plan 2011-2015 to operationalise the above transformation programmes.

The Government will be investing substantial sums of money into reducing crime, fighting corruption, improving student outcomes, raising the living standards of low-income households, improving basic rural infrastructure and improving urban public transport.

Human capital development will be enhanced to generate a talented workforce to meet the needs of a high-value knowledge economy, capable of lifting the standard of living for all Malaysians.

Many of us do not realise that what we are enjoying now are the fruits of development contributed through taxes paid by our fathers and forefathers.

In the same way, we owe it to our future generations to ensure the transformation programme is a success so that our children and grandchildren can live in a better Malaysia.

We can do this through voluntarily contributing our fair share of taxes and encouraging our friends, colleagues and family members to pay their share, too, as they also enjoy the services provided by the Government.

Tax evasion should not be tolerated and should be frowned upon by society.

Those who avoid or do not pay their taxes are actually living off the generosity of those who pay their taxes diligently.

If everybody pays his share of taxes, Govern­ment revenue will increase and this can be translated into better services for the benefit of all.

Tax evasion is morally wrong, thus tax evaders should be reported to the IRB so that appropriate action can be taken to ensure they too, contribute to nation building. One should take note that tax evaders are also enjoying the same benefits of development and services made possible by the taxes we all pay. Paying taxes is the responsibility of all who reside in this country. It might not be apparent, but the benefits we and our families enjoy through services provided by the Government are numerous and cannot be measured in monetary terms.

To quote one taxpayer in a local daily on paying taxes, "We do not have the time and capability to build our own roads and bridges, so this is how we (taxpayers) can help the Government build these facilities for us."

In addition, paying taxes has been simplified and taxpayers need not feel burdened when filing their returns and paying tax. Filing can now be done 24/7 from one's home or office through the e-Filing system.

Similarly, payments has been made easier with the availability of various payment channels such as at IRB's collection branches, CIMB Bank, Public Bank, post offices and Internet banking through IRB's official website www.hasil.gov.my. Other transactions such as registration of taxpayers and tax enquiries can also be made through the IRB's website.

In conclusion, I would like to advise those who have yet to fulfill their responsibilities to contribute their fair share of taxes towards nation building. We owe this much to our future generations who will eventually inherit this beloved nation of ours.