NATIONAL TAX CONFERENCE 2019
YANG BERHORMAT TUAN LIM GUAN ENG
MINISTER OF FINANCE
KUALA LUMPUR CONVENTION CENTRE
5 August 2019
Yang Berbahagia Datuk Ahmad Badri Mohd Zahir
Secretary General of Treasury
Chairman of Lembaga Hasil Dalam Negeri Malaysia
Yang Berbahagia Dato’ Sri Sabin Samitah
Chief Executive Officer, Lembaga Hasil Dalam Negeri Malaysia
Ms Farah Rosley
President, Chartered Tax Institute of Malaysia
- Tuan Syed Hisham Syed Mansor
Director of the Malaysian Tax Academy, LHDNM; and
- Mr. K Sandra Segaran
Council Member, Chartered Tax Institute of Malaysia
Ladies and Gentlemen
Salam Sejahtera and a very good afternoon to all.
1. It is a pleasure to be here addressing all of you and officiate the 19th National Tax Conference. Thank you Lembaga Hasil Dalam Negeri Malaysia (LHDNM) and Chartered Tax Institute of Malaysia (CTIM) for inviting me.
2. Taxation is an important policy tool to encourage sustainable and equitable economic growth. This Government is reforming its tax system to make it fairer and more efficient to achieve the goals of Shared Prosperity for all Malaysians. In this context, it is befitting that this year’s NTC is themed “Economic Prosperity and Taxation.”
MALAYSIA’S ECONOMIC RESILIENCE
3. The Malaysian economy is showing signs of resilience amid difficult external challenges arising from the China-US trade dispute. The World Bank expects the Malaysian GDP to grow 4.6% this year, while the IMF projects the global economy to expand only 3.2% in 2019.
4. Of course many are questioning whether Malaysia can enjoy sustainable economic growth following the short contraction suffered by Singapore in the second quarter. We feel that the situation is a little different, and whilst Singapore will definitely bounce back quickly, Malaysia is also confident that our economic growth for the second quarter would be sustainable in line with the projections of at least 4.6% this year.
5. The Malaysian economic resilience could be seen in its unemployment rate, which has fallen to 3.3% in May 2019 from 3.4% in April 2019. The stable unemployment of 3.3%-3.4% for the January-May 2019 period indicates a healthy labour market as well as strong economic prospects.
6. The healthy labour market is supported by an expanding economy. Our industrial production grew 4.0% year-on-year in May 2019. This is above market consensus of 3.5% as compiled by Bloomberg, and the third month in a row Malaysia’s factory output has exceeded market expectations.
7. Furthermore, approved FDI across all sectors for the first quarter of 2019 jumped 73.4% year-on-year to RM29.3 billion from RM16.9 billion, driven by a 127% year-on-year surge in approved manufacturing FDI to RM20.2 billion from RM8.9 billion previously.
8. Inflation for the first 5 months averaged 0.2% year-on-year, thanks to active government policy to alleviate living cost pressures faced by the rakyat. Two of the policies enabling the Government to keep inflation low and stable are the abolition of the GST, and the stabilisation of the petrol and diesel retail prices.
9. Our resilience, backed by our institutional reforms and strong economic fundamentals, have convinced top global rating agencies to keep Malaysia’s sovereign credit rating high at A- or A3 with a stable outlook. Recently on 18 July 2019, Fitch Ratings affirmed the Government’s credit rating at A-, and this came after S&P Global Ratings decided to do the same on 3 July 2019.
10. This is a clear sign of confidence in the Malaysian government and the Malaysian economy despite the difficult external environment as well difficult legacy issues bringing about fiscal problems that the Government is forced or compelled to resolve. I would like to emphasise here again that Malaysia has a stable political environment. We have a stable government, and we have a Prime Minister who is certain about the political future of the country. This Government will keep our promises.
FISCAL REFORMS IS COMBATING TRUST DEFICIT
11. We are focused on implementing institutional reforms that should be completed by 2021. At the Ministry of Finance, I am leading various initiatives on fiscal reforms, including the migration from cash-based accounting towards accrual basis accounting, as well as the wider implementation of open tender system to increase Competency, Accountability and Transparency (CAT) in the public sector.
12. These measures are also designed to restore public trust in the Government that for so long has suffered from severe trust deficit after years of abuse and misuse.
ENCOURAGING ECONOMIC GROWTH
13. As part of our fiscal reforms, the Tax Reform Committee (TRC) has a huge task to reshape Malaysia’s taxation system to make it fairer and more efficient. With further fiscal reforms and increased public trust, we are confident of reducing the deficit further to 3.4% of GDP this year as promised.
14. We all know that tax avoidance is legal, but tax evasion is not. But how do we draw the line between tax avoidance and tax evasion? And that’s why tax as a subject is fascinating; if we don’t get it right, we might end up in jail. And to solve this problem, and to overcome the fine line between tax avoidance and tax evasion, the Government, under the Ministry of Finance and the new Government has decided to make your jobs easier by introducing the Special Voluntary Disclosure programme.
15. Under the Special Voluntary Disclosure Programme (SVDP), taxpayers enjoyed a low penalty of 10% over any amount previously not declared to LHDNM up to 30 June 2019, compared to 300% penalty without the programme in place. From now until 30 September 2019, taxpayers are enjoying a still low penalty rate of 15%. Come 1 October 2019, a minimum penalty of 45% and up to a maximum of 300% will be imposed on any undeclared or underdeclared income for tax purposes. This will help tax payers to normalise and regularise tax payments. This also may cover any mistakes made.
16. This programme will among others allow taxpayers with Malaysiabased income who have foreign bank accounts to declare their unreported income without incurring large burdensome penalties. The SVDP also allows others who have not reported their income and without any foreign bank accounts to participate in the programme, and contribute to nation-building.
17. I urge all taxpayers to make full use of this one-time initiative introduced by the Government, whereby the declaration made will be accepted in good faith by LHDNM, without any further probe. As of 23 June 2019, 486,360 taxpayers have come forward to LHDNM to participate in the SVDP and declared their unreported income. A clearance letter will also be issued. LHDN will also give you a clearance letter. With this letter, LHDN will no longer asked for receipts of up to six or seven years to be produced.
LHDNM’S ROLES AS A TAX ADMINISTRATOR AND A PARTNER
18. LHDNM as a tax administrator needs to cooperate with the taxpayers in achieving higher tax compliance. More recent approaches by other tax administrations include delivering high-quality customer services, operating with greater transparency and accountability, and raising higher awareness about tax benefits.
19. Taxpayers must be treated as a partner in national development by LHDNM, and not as someone suspicious and to be “dealt” with. Furthermore, the relationship between tax collectors and taxpayers is governed by the rule of law. A friendlier and more professional rulesbased approach can result in higher tax revenue through voluntary compliance. No more raids of offices by officers of your homes at midnight by officials with firearms wearing balaclava masks. That is a promise.
20. LHDNM must be focused on becoming service-oriented and acting professionally towards taxpayers. Initiatives like pre-filled simple tax returns and digital tax platform known as EzHasil have reduced the need for physical interactions between LHDNM and taxpayers, hence allowing taxpayers to go about their business with less interference by LHDN .
21. But LHDNM must do more and keep abreast with digitalisation trends. The nature of the domestic economy is changing and this requires a re-look at the application of tax laws. LHDNM will have to revisit its work processes to adapt to the new world.
22. Taxpayers will willingly pay their taxes if it is not burdensome and if they could see and feel the taxes paid are being used prudently and effectively for their benefits, and not for private benefitsand not for private or individual gains . Our reforms are increasing transparency in the public sector by adding various checks and balances to prevent past abuses of public coffers from recurring. The establishment of the National Centre for Governance, Integrity and Anti-Corruption (GIACC) in 2018 and the implementation of the National Anti-Corruption Plan as well as the public declaration of assets demonstrate the Government’s commitment in fighting corruption everywhere. And as our Prime Minister says, what happened in the past, must never be allowed to happen again. Never again.
MALAYSIA’S GREATER ROLES IN INTERNATIONAL TAX BODIES
23. Malaysia does not exist in isolation and taxation issues are global in nature. LHDNM must continue to work closely with international tax bodies on issues of common concern, especially if it involves safeguarding the tax base of the country.
24. As a member of the Inclusive Framework on Base Erosion Profit Shifting (BEPS), an initiative under the Organisation for Economic Cooperation and Development (OECD), LHDNM must continue to be vocal at international meetings and to ensure Malaysia is not disadvantaged at any time due to opposing views with that at the international level.
25. I am happy to note LHDNM has been invited by OECD to be part of their new Advisory Group on BEPS Implementation and Impacts, together with 3 other countries. This is an acknowledgement of Malaysia’s role in international taxation.
26. With respect to the Automatic Exchange of Information (AEOI), this year, Malaysia has been privy to information received from 92 countries as compared to only 52 countries last year. This will greatly help us in matching data against the one which has been reported and take the necessary compliance action.
27. On another issue that has taken centre stage at international meetings is on the digital economy. LHDNM is a member of the Task Force on Digital Economy at the OECD level, and this will serve as a reassurance that any stand taken must reflect the suitability of implementation based on the social-economic scenario of Malaysia.
THE TAX FRATERNITY’S ROLES
28. LHDNM has continually placed great importance in tax education and awareness. Programmes such as the NTC in cooperation with CTIM have not only provided technical guidance but also develop a mechanism for greater public accountability.
29. We cannot overcome challenges without the strong support from all stakeholders, including you the tax fraternity. As intermediaries between LHDNM and the taxpayers, you play an important role in shaping the tax compliance model in this country. The level of compliance of your clients will reflect your commitment in adhering to the tax laws. And I hope that you can communicate accurate information about our tax rules to all stakeholders. And here I would like to request if there are any complaints about the performance of LHDN officers, please address them to LHDN or the Ministry of Finance. We will address any abuse or misuse of powers by our tax officers. We want closer cooperation, and honest Government. We want a transparent and accountable administration. It is only with your feedback that we can succeed.
30. And in addressing accurate information, let me state here once again for that inheritance tax will not be imposed forthcoming Budget that will be presented on October 11 in Parliament.
31. I implore you to always abide by the code of ethics listed in your profession and to provide constructive feedback to the Ministry of Finance and LHDNM, for us to reshape laws, policies and guidelines for easy implementation by your fraternity. Together, we can build a better society where Malaysia’s prosperity could be shared widely and fairly.
32. On that note, I now declare the National Tax Conference 2019 officially open. Thank you.