KUALA LUMPUR: The government is looking into tapping income tax revenue from the shadow economy, said to account for 21% of the country's RM1.45 trillion Gross Domestic Product (GDP).
Finance Minister Lim Guan Eng said it was high time that the Inland Revenue Board (LHDN) went after players in the shadow economy sector.
"The shadow economy accounts for 21% of the GDP. This is a big number. LHDN must rope in this hidden sector into the taxation system," he said after opening a national taxation seminar at a hotel here on Tuesday (Oct 15).
The shadow economy includes the underground economy as well as retail businesses run by foreigners, among others, he said.
"This is different from the informal economy sector, involving Grab drivers and others," added Lim.
Noting that it was difficult to estimate the actual size of the shadow economy, Lim said proactive and innovative measures were needed to include this into the taxation system to further boost revenue.
He also said that the federal government's revenue was expected to increase from RM233.3bil this year to RM244.5bil next year.
"This excludes the one-off RM30bil Petronas dividend," he said.
The government, said Lim, would also be introducing a Tax Identification Number for individuals aged 18 and above in 2021 as well as for all businesses in a move to expand and enhance tax collection.
"We want to make sure that no one escapes paying tax," he said, calling on LHDN to apply Big Data technology to check tax evasion.
Lim said LHDN's Revenue Transformation Plan was aimed at enhancing compliance, plugging loopholes and checking losses.
On the Voluntary Disclosure Programme that ended on Sept 30, Lim said the penalty had now been increased to between 45% and 300%.
"We have given ample time (from Nov 3 last year to Sept 30 this year) for people to voluntarily disclose their undeclared sources of revenue, including deposits in banks abroad, and enjoy a much lower penalty of 10%.
"Now, the penalty is increased again to up to 300%," he said.
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