IRB is seeking tax arrears amounting to RM42m from a listed firm

By P PREM KUMAR & ALIFAH ZAINUDDIN / Pic By AFIF ABD HALIM

The Inland Revenue Board (IRB) could wind up a listed company to recover backdated taxes and place another 91 publicly traded companies (PLCs) on surveillance as the agency goes on an offensive to plug leakages and nab tax dodgers.

The tax collection agency is seeking tax arrears amounting to RM42 million from a listed firm and will exhaust all avenues, including to wind up the company to recover the money.

“Actually the legal action is already towards the end and if the company fails to pay by this week, we will wind up the company,” IRB CEO Datuk Sabin Samitah told The Malaysian Reserve in an exclusive interview recently.

“The IRB will take action to wind up a company that fails to pay the income tax accordingly,” said Sabin.

Sabin, however, declined to name the company except that the listed firm is involved in the tourism, hospitality, resort and golf industry.

The IRB has intensified its auditing and surveillance of companies to ensure tax compliance. Corporate taxes contribute the largest portion to the IRB’s revenue.

The IRB collected RM126.7 billion in tax revenues in 2014, but collection dropped to RM111.8 billion in 2015. Direct taxes collected last year was estimated at RM114.02 billion. This year, the agency has a RM127.7 billion tax target to achieve.

In the first seven months of this year, 30 listed companies have been audited and were subjected to tax and penalties amounting to RM1.09 billion. The tax collection agency is also closely monitoring high- net worth individuals for possible tax-related offences.

“We have a specific unit in the IRB to look at big taxpayers. They continuously monitor these high-net worth individuals. Generally, they are cooperative, but there are non-compliance issues,” Sabin said.

Besides the traditional tax audits and compliance operation, Sabin said the IRB has started to target what he termed as “aggressive tax planning” and the underground economy.

He said as of Aug 29, about 15 companies, including four listed companies, have been detected for “aggressive” tax planning.

“The total amount of taxes and penalties imposed on these 15 companies are RM1.02 billion,” Sabin said.

Tax planning refers to specific corporate arrangements allowed under the law, including business restructuring or business relationship framing that would reduce tax liability. Companies and wealthy individuals would employ tax advisors to provide such guidance to escape from paying higher taxes.

But, the IRB said, such tax planning scheme is deemed aggressive or abusive when it ignores the spirit of the law and mainly performed to avoid high tax payments.

Sabin said the focus on aggressive tax planning forms a key part of the IRB’s efforts to curb tax leakages and evasion. The board has established the Aggressive Tax Planning Division under the Special Task Department.

He said most companies audited for aggressive tax planning are in the financial and banking, investment, insurance and asset management sectors.

In addition, there are companies that are involved in the gaming and numbers forecasting, development of information technology software, infrastructure, logistics, manufacturing and medicine.

Out of the 15 companies investigated for aggressive tax planning, three companies — one involved in the financial sector, an investment company and a gaming company — have been slapped with a RM823 million tax and penal- ties bill. Another 12 companies have been subjected to tax and penalties of RM193 million.

Sabin said the IRB is also actively involved with other enforcement agencies under the National Revenue Recovery Enforcement Team.

The board has also frozen the accounts of 428 individuals and companies amounting to RM143 million, in a recent operation on entertainment and karaoke outlets in the Klang Valley.

Sabin said the IRB’s 2017 strategies aim to weed out non-compliance.

He said the IRB’s compliance model is based on international best practices.

“As a matter of fact, the compliance rate in some foreign tax authorities is extremely high due to the severity of the tax crimes in that country, where taxpayers may be jailed for failing to return their tax form or for the non-payment of taxes,” he said.

Sabin said the IRB wants to ensure a level playing field for all taxpayers by creating a fair and transparent tax system.

“Should taxpayers face problems in making payment due to problems in their cashflow, they may come forward and the IRB will consider an instalxment plan which is suitable,” he said.