GEORGE TOWN, 11 NOV - Tax administrators worldwide should cooperate and share information to address the issue of tax compliance and prevent illegal activities, especially the shadow economy, says Finance Minister Lim Guan Eng.
Lim said the shadow economy is difficult to measure due to its underground nature and it is always linked to whether the country is clean or corrupt -- if the country is corrupt, the shadow economy expands.
He said various studies suggest that the size of the shadow economy ranges from 15 percent of gross domestic product (GDP) in rich countries to about six percent in less developed countries.
"The shadow economy is huge in Malaysia, the figure is suspected to be around 21 percent, which works out to nearly RM300 billion of the GDP or around US$73 billion.
"I think the answer is obvious, isn't it. The country (Malaysia) was corrupt previously, a kleptocracy. Now it is no longer a kleptocracy, it is a democracy, so we want the shadow economy level to go down," he told reporters after officiating the Commonwealth Association of Tax Administrators (CATA) Annual Technical Conference 2019 here today.
He added that the government is currently working with various agencies and sectors to reduce the size of the shadow economy in the country, which includes all economic activities hidden from official authorities for monetary, regulatory and institutional reasons.
"If we can reduce the shadow economy in the country just by one fifth, imagine the additional revenue of between RM5 billion and RM15 billion you can collect every year," he said.
He said that information and digitalisation are the keys to prevent tax evasion and money laundering attempts, even by countries leaders.
"With digitalisation, especially with the data bank you have, it is very difficult to evade or avoid taxes.
“So we must ensure that digitalisation works for the country, for the tax administrators. Then we are in control instead of being controlled by multinational corporations," he added.