Is govt's fiscal success inflated by late tax rebates, Rafizi asks

 

PARLIAMENT | Former economy minister Rafizi Ramli (Harapan-Pandan) questioned whether the delay in refunding those who overpaid their taxes since 2020 has contributed to the perception of the government's success in reducing the fiscal deficit.

Due to the government's practice of cash accounting, he said the tax revenue declared in the national budget every year does not deduct the overpayment that must be refunded to taxpayers.

"Actually, if we return (the overpayments) and pay as we should, our deficit has not decreased," he said during his debate on the royal address in the Dewan Rakyat today.

Taking the overpayments into account, he said the fiscal deficit should stand at around 5.8 to 6.0 percent in 2024, unlike the announcement that put it at 4.1 percent that year.

He also raised concerns over the sharp increase in the federal government's tax refund commitments each year.

Referring to the federal government's financial statement for the year 2024, Rafizi said the tax refund amounted to RM14.6 billion in 2020, increasing to RM21.8 billion (2021), then RM25.7 billion (2022), RM25.5 billion (2023), and finally RM33.3 billion (2024).

Based on this trend, he said the refund for 2025 is likely to be greater than RM33.3 billion.

"Why did the Finance Ministry - whether under the Perikatan Nasional administration from 2020, until now, under the Madani government up to 2025 - not return the overpaid taxes collected from our people and companies until it skyrocketed to RM33.3 billion, which is an increase of 128 percent, in just four years?" he asked.

He further questioned whether the delay in tax refunds stemmed from mere negligence or a deliberate decision to portray the government as achieving its targets in reducing the fiscal deficit.

Compensation for taxpayers

On Jan 7, former finance minister Lim Guan Eng said taxpayers who overpaid are due compensation of two percent per year on the amount, based on Section 111D of the Income Tax Act 1967.

"If the overdue tax refund is RM30 billion by the end of 2024, this means that the two percent compensation payment per year that must be paid is RM600 million.

"RM600 million is only for one year. Since the amount outstanding is for five years since 2020 and varies by year, it is likely that the accumulated compensation payment since 2020 is much larger than RM1 billion," the Bagan MP said in a statement.

Lim Guan Eng

The rate applies to both individual taxpayers and companies, he added.

Last month, Bernama reported Prime Minister Anwar Ibrahim as saying that the government has doubled its tax refund allocation to RM4 billion.

Anwar, who is also the finance minister, said the move is meant to expedite outstanding payments.

He said the government is reviewing the amount and will determine whether it needs to be increased. - Mkini