PETALING JAYA: The Special Voluntary Declaration Programme (SVDP) is not a sustainable way to collect taxes, and can in fact be unfair to taxpayers who have complied, says a top tax analyst.
KPMG Head of Tax Dispute Resolution for Malaysia, Soh Lian Seng, also argued that it is not the job of the Inland Revenue Board (LHDN) to collect penalties.
“Every taxpayer should pay the right amount of tax. While SVDP can be viewed as one of the measures to collect back taxes, this move cannot be seen as sustainable, ” he said.
For Soh, focus should instead be on helping taxpayers manage their tax risk so that they may be guided to make the right decisions when it comes to tax planning for themselves or their organisations.
SVDP was introduced by LHDN on Nov 3 last year to coax taxpayers to voluntarily declare their misreported income and deductions by promising a low penalty rate of only 10 to 15%. It was to have ended in June this year, but was extended to Sept 30. Soh said the government, regulators and the public also need to be educated on the difference between legal tax avoidance and illegal tax evasion.
“It has become harder to strike the right balance between what is and is not industry-preferred practice.
“The distinction between legal tax avoidance and illegal tax evasion remains clear in law, but becomes blurred in the minds of governments, regulators and the public. Increasing requirements and challenges cause ongoing changes for businesses with regard to tax risk management and governance, ” he said.
Soh added that an effective tax governance system would continually minimise the effective tax rate while adding sustainable value to every organisation.
“From a long-term perspective, this is the best strategy for all stakeholders as only an organisation that remains competitive and successful in the market can pay taxes and contribute to society, ” he said.
“The government has also committed to the Common Reporting Standard of Automatic Exchange of Financial Account Information (AEOI) to address tax leakages and ensure compliance.
“Through the participation in AEOI, financial information, including transactions of an individual and companies in participating countries, can be easily obtained by LHDN.
“Another measure the government can take is to review the current tax system, which is the Self-Assessment System, where taxpayers are responsible in declaring their own chargeable income and tax payable, ” said Soh.
Tax consultant Christine Koh said taxpayers should make full use of SVDP.
“The 10% and 15% penalties are the lowest I’ve ever seen, and is a good opportunity for taxpayers.
“I told them that they may regret it later if they don’t come forward now.
“This is a very strong black and white promise by LHDN that they will not reopen the tax files on individuals and companies who had declared taxes under SVDP, ” she added.
For taxation lawyer, S. Saravana Kumar, it would have been better if the penalty was completely waived.
“LHDN aims to collect RM10bil from SVDP, and if this is achieved, then it should be able to increase its tax collection this year. LHDN’s target in 2019 is RM150bil, though it is unclear whether this is inclusive of SVDP’s target of RM10bil.
“SVDP could be more effective and attractive if a composite assessment was issued, and the penalty waived.
“This will give comfort to taxpayers that LHDN will not reopen their tax files in future.”