Photo: ART CHEN/The Star
Experts: Instalment scheme will improve compliance
PETALING JAYA: Easing taxpayer instalment applications online may cause a temporary dip in government revenue but could lead to better tax compliance in the long run, say experts.
Although the option for making part payments had been there in the past, experts said the digital transformation with e-Ansuran – introduced on March 5 – is a greater convenience and will improve the ease of doing business.
However, they warned such a system could be abused by those who could afford to pay in full and if the Inland Revenue Board (LHDN) did not enforce penalties on those who delayed payments.
Tax expert Desmond Anil said a structured tax instalment plan for taxpayers was long overdue.
“Before this, taxpayers who needed instalment plans had to go through a manual application process, which often required justifications and supporting documents
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“With the rise of digital tax administration, including the implementation of e-Invoicing and ongoing digital transformation efforts by LHDN, an online automated instalment system aligns well with the government’s push for a modern, taxpayer-friendly approach,” he said.
LHDN reportedly said the initiative was to make it easier for taxpayers to apply to pay in instalments their tax balances or tax arrears, allowing them to obtain automatic approval without the need for supporting documents.
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The total application amount must exceed RM300 and the instalments can only range between two to six payments.
LHDN also said the application applies to income tax instalments only and does not include ongoing instalment plans.
Desmond, who is also council member with the SME Association of Malaysia, pointed out many other countries already had such mechanisms to assist taxpayers to manage their obligations without facing harsh penalties or financial strain.
“United Kingdom has the “Time to Pay Arrangement – HMRC” which offers a flexible arrangement for self-assessment tax bills, corporate taxes, and value-added-tax (VAT) arrears, subject to affordability assessments, while Australia allowed businesses and individuals to set up self-managed instalment plans online.
“Singapore allowed taxpayers to spread tax payments across and up to 12 interest-free monthly instalments.”
Desmond proposed that LHDN extend the instalment period beyond six months for higher tax amounts.
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“Businesses should also benefit from instalment payments for corporate taxes, which could help SMEs manage cash flow better.
“The effectiveness of the system will depend on LHDN’s ability to enforce timely collections and prevent abuse.
“Tax payers can intentionally delay full payments despite having the capacity to pay.
“Monitoring and clear penalties for defaults will be key to ensuring its success,” said Desmond.
He, however warned in the short term, such a mechanism might delay tax collections, as some taxpayers who would have otherwise paid in full may now opt for staggered payments.
Bank Muamalat Malaysia Bhd chief economist Dr Mohd Afzanizam Abdul Rashid said that e-Ansuran would definitely improve LHDN’s customer service.
“To a large degree it could avoid tax avoidance which can help improve tax collection and increase government revenue,” said Mohd Afzanizam.
However, he too cautioned there would be a dip in the government revenue before LHDN can see a rise in collections in the long run.
Federation of Malaysian Manufacturers (FMM) president Tan Sri Soh Thian Lai said the shift to an online, automated approval system provides greater efficiency.
“It will offer convenience, and transparency for businesses and individuals managing their tax obligations.
“FMM hopes this digital initiative will further improve the overall ease of doing business in Malaysia and that similar enhancements would be extended to other tax-related processes.
“We also take this opportunity to call on LHDN to ensure the tax refund process to businesses is expedited and further enhanced, similar to the efficiency in tax refunds to individuals,” said Soh.
Malay Businessmen and Industrialists Association of Malaysia president Mohd Azamanizam Baharon said the e-Ansuran initiative would be highly beneficial to entrepreneurs, especially micro, small and medium enterprises.
“We have been informed applications will be automatically approved without requiring any supporting documents.
“Given the challenging economic conditions and uncertain cash flow, many taxpayers struggle to pay their full tax amount in a single payment.
“With this facility, taxpayers can plan their payments more systematically according to their financial capability without compromising other urgent financial commitments.
“The e-Ansuran can also help reduce the risk of penalties due to late payments, thereby contributing to more effective financial planning,” said Mohd Azamanizam.
