Customs DG vows to plug leakages, close tax gap by RM3b

Customs Department director-general T Subromaniam has promised to crack down on leakages within his department as a way to close the tax gap created by the government’s switch to the Sales and Services Tax (SST).

The shortfall from replacing the Goods and Services tax (GST) with the SST is estimated to be about RM22 billion.

Speaking today at a forum entitled “Eradicating Income Leakages Nationally”, Subromaniam said he aims to reduce this shortfall by RM3 billion, as per what he previously promised Finance Minister Lim Guan Eng in a meeting.

“He (Lim) asked how much money had been lost due to leakages. I (told him) but I can’t disclose the figure here.

“He then asked me to come up with a strategy to reduce leakages in order to decrease the loss in tax revenue (from SST implementation).

“I promised him that we would reduce the tax gap and collect RM3 billion from (plugging) leakages from import and export duties,” he said at the department’s headquarters in Putrajaya today.

Subromaniam added that Customs will also be cracking down on companies who previously failed to pay GST.

“We will launch closure audits and this will in some way help the government to reduce the shortfall between GST and SST,” he said.

Commercial fraud, the biggest source for leaks

Nevertheless, Subromaniam admitted that longstanding integrity issues within the department could not be eradicated overnight.

“Even with the SST, there might be corruption as with the GST previously,” he said.

The director-general had earlier listed that the biggest sources of leakages within his department were commercial fraud, smuggling and tax evasion.

Among the solutions he mooted to address integrity issues were frequent job rotations, heavy penalties and reducing the windows of opportunity for corruption.

The GST was zero rated after Pakatan Harapan formed the government following the outcome of the 14th general election.

Lim announced this week that the SST is expected come into force beginning Sept 1, following the tabling of the SST bill in August.

Services will be taxed at six percent while the sales of goods will incur a 10 percent tax.

The other forum panellists were MACC deputy chief commissioner (prevention) Shamshun Baharun Mohd Jamil and Transparency International Malaysia president Akhbar Satar.

Moderating the forum was National Integrity Institute deputy director Ahmad Fadzli Ahmad Tajuddin.

-Mkini