Founder and director of Williams Business Consultancy Sdn Bhd and economist Dr Geoffrey Williams.
PETALING JAYA: The proposed Tax Tribunal, particularly for individuals and micro, small and medium enterprises (MSMEs), is seen as a means to simplify things.
However, some have argued that having two appeal platforms on tax matters for MSMEs and non-MSMEs may complicate things further, given the technical nature of tax matters.
Recently, former Finance Minister Lim Guan Eng reiterated his call for a tax tribunal, saying there were concerns over unfair bureaucratic treatment by the Inland Revenue Board (IRB).
Thenesh Kannaa, executive director of TRATAX Sdn Bhd, said rather than a newly formed tribunal, the focus should be on improving the existing Special Commissioners of Income Tax (SCIT) and the Customs Appeal Tribunal (CAT).
He said that right now, taxpayers aggrieved by an assessment issued by the IRB are allowed to file Form Q to appeal to SCIT, which could loosely be regarded as a tribunal.
Appeals against customs audit outcomes may be filed to the CAT, which is independent of the Royal Malaysian Customs Department. He said this showed that both act as tribunals for taxpayers who file appeals within the stipulated time frame.
“Making the existing SCIT and CAT more business-friendly could be the answer. For example, Regulation 4 of Customs (Appeal Tribunal) Regulations (P.U. (A) 210/2007) provides that an appeal shall be heard at the CAT if the appellant has not paid the disputed duty and any applicable penalty.
“Having the financial capability to pay disputed amounts should not be a prerequisite for the matter to be heard by the tax tribunals,” he told StarBiz.
Thenesh added if the concern was to avoid appeals without merit, then the legal framework could be amended to include interest from the date of the assessment, if the appeal is not decided in favour of the appellant.
According to him, another concern is the time taken to make decisions, which can be addressed by re-examining the adequacy of resources allocated to SCIT and CAT, and also digitalisation initiatives.
“Once the areas of improvements for SCIT and CAT are attended to, there would be no need for a separate tax tribunal for MSMEs,” Thenesh said.
Similarly, economist Professor Geoffrey Williams reckoned that while a new tax tribunal could be formed, the onus should and must remain on tax auditors, who incidentally need to be pressed to do their job well. He said tax disputes boiled down to two issues – the IRB saying people had not paid enough and needed to pay up, and the taxpayers saying they had paid too much and deserved a refund.
“These are technical issues and best handled in an independent tribunal. Actually, tax auditors should be held accountable in most cases, especially for SMEs, where there have been genuine concerns over delayed refunds, especially during the goods and services tax period,” he said.
Nevertheless, Williams reckoned in a modern-day economy where almost 80% of transactions are electronic, the most effective way of cutting disputes and raising revenue is to use an e-payments tax (EPT) on all electronic transactions.
“A 1% tax on buyers and sellers raises RM28.8bil and is collected at the point-of-sale. So this is all electronic, whereby collection and monitoring is via eCommerce technology and the blockchain. This cuts disputes more effectively than regulation and tribunals,” he said.
Meanwhile, the Small and Medium Enterprises Association of Malaysia (Samenta) has urged the government to establish the tax tribunal, while including industry representatives to ensure real situations on the ground are reflected.
According to a statement by the association, as the country moves into e-invoicing, members have reported a surge in tax audits – creating even more pressure on SME’s who are already struggling with tight liquidity and rising operational costs.
National president Datuk William Ng said the current dispute resolution mechanism is manifestly insufficient, costly and time-consuming for all parties.
“It forces poorly equipped SMEs to defend themselves against powerful, well-resourced agencies. It is not a fair fight and the presumption of guilt has no place in a modern democracy,” he said.
According to Ng, a single unified body that can handle both direct and indirect tax disputes would be a good idea, allowing SMEs to focus on lawyering up one time only. At the moment, disputes are being handled by the SCIT and CAT.
In addition to that, Ng said the collection of additional taxes and penalties would be suspended as soon as a notice of appeal is filed. “We must stop ‘tax-induced bankruptcies’ where SMEs are forced to close because their working capital is seized for assessments that are later proven incorrect,” he explained.
Ng reiterated that the association’s stand is that taxes must be paid, and there should be no room for tax evasion. However, he said, SMEs must be given a fair opportunity to dispute findings that were unjust.
“We are ready to work with the Finance Ministry to turn this proposal into a reality that protects our wealth-creators, encourages entrepreneurship and ensures Malaysia remains a destination of choice for businesses and investors.”
