KUALA LUMPUR: The government's special programme to encourage taxpayers to declare unreported income within a limited time period to enjoy low penalty rateswill encourage voluntary disclosures and improve tax collection in the short term, says Ernst & Young Tax Consultants Sdn Bhd.
Under Budget 2019, after the limited period, the penalty rates will significantly increase (to up to 300% of the undercharged tax) from June 30, 2019, Amarjeet Singh, partner and Malaysia tax leader at EY said.
“Other countries such as Indonesia and Thailand have introduced similar tax amnesty programmes to positive effect. It is expected that this measure will encourage voluntary disclosures and improve tax collection in the short term,” he said.
On the other hand, businesses face a proposal to limit carry-forward of losses and allowances to seven years.
Similar provisions exist in neighbouring countries such as Indonesia, Thailand and the Philippines. However, it is unclear how this will be applied to existing losses and allowances.
On the overall Budget 2019, he said the new government has had the unenviable task of managing a higher than expected Government debt against a continued budget deficit trend and rumoured risk of a credit rating downgrade.
“ Against this backdrop, we believe that the proposed measures in the Budget are commendable, particularly the focus on encouraging the private sector to spur growth,” he said.
Amarjeet said the government is embracing the digital economy with the following measures introduced to promote development. They are the RM3bil Industry Digitalisation Transformation Fund, RM2bil allocated by government-linked investment funds for co-investment with private equity and VC funds into strategic sectors and new growth areas.
Also included in the Budget 2019 are a regulatory framework for alternative financing platforms via equity crowd-funding and peer-to-peer financing and also a regulatory framework for digital coin and token exchanges.
The Government is also seeking to collect its fair share of taxes from the digital economy through the imposition of service tax on imported online services, effective Jan 1, 2020.
Other imported services will also be subjected to Service Tax effective 1 January 2019, to level the playing field between local and foreign service providers.
“We also note several measures by the government to address the property overhang including the bold idea of introducing a crowd-funding platform as an alternative source of financing for first-time home buyers, and the expansion of certain stamp duty exemptions for first-time homebuyers,” he said.
Amarjeet said for businesses, the good news is that the Government has addressed certain concerns with the Sales and Service Tax (SST) regime, by proposing service tax exemptions for specific business-to-business transactions and a sales tax credit system to prevent compounded taxation.
The government will also grant private sector access to facilities, scientific equipment and research data and introduce several incentives to promote SME investment in automation and modernisation.