Putrajaya seeks to tighten tax laws, ups fine for those failing to file returns

Proposed amendments to the Income Tax Act 1967, includes heavier fines and punishment. – The Malaysian Insider filepic, October 27, 2015.

The government is upping the ante on those who do not file their income tax returns – those found guilty of not doing so for two years or more can be jailed up to six months, or fined up to RM20,000, or both, according to its proposed amendments to the Income Tax Act 1967 (ITA).

The monetary penalty for those found guilty of doing so for one year is between RM200 and RM2,000, according to the Finance Act 2015 Bill tabled for the first reading to amend the ITA and five other existing tax laws today.

Currently, anyone who fails to furnish a return can only be fined up to RM2,000 – or jailed not more than six months – or both, regardless of the number of years the tax returns were not filed.

Under the proposed amendments to the principal tax law under the bill, a special penalty that is equivalent to three times the income tax charged, can be imposed if one is found guilty of failing to furnish the returns, for the years of assessment missed.

Deputy Finance Minister Chua Tee Yong, in tabling the bill at Dewan Rakyat today, said the bill was slated for its second reading in this current parliamentary sitting.

Among the amendments to the ITA is one that empowers the director-general to order anyone to provide any information that concerns a deduction claimed by that person in arriving at the adjusted income for the basis of a year of assessment – within a specified time.

If the person fails to do that, no deduction from the gross income shall be allowed.

The five other tax laws being amended, together with the ITA, are: the Petroleum (Income Tax) Act 1967, the Real Property Gains Tax Act 1976, the Labuan Business Activity Tax Act 1990, the Goods and Services Tax Act 2014 and the Promotion of Investment Act 1986.

The amendments came following the implementation of the goods and services tax (GST), and the slew of tax reliefs announced by Prime Minister Datuk Seri Najib Razak in Budget 2016.

Among the more notable proposed amendments is one to the GST Act, which states that a business or person who fails to pay the due GST, will be fined between 5% and 25% of the amount tax due/payable, based on the number of days the payment has been delayed.

The director-general will also be empowered to assess and recover the amount of tax due, including the penalty, though the penalty will be waived if approval given for the tax arrears to be paid by instalments.

However, if the instalment payments are defaulted on, the court can then order the defaulter to pay the imposed penalty.

The interpretation of “input tax” and “output tax” were also included into the five tax laws, in accordance with the GST Act, including the provision that no deductions is allowed under the GST Act, if a business which is liable to be registered for GST, fails to do so.

If the bill is passed, the amendments will take effect from the year of assessment 2015 onwards. – The Edge Markets