by NUR HANANI AZMAN / Pic by TMR FILE PIX

LACK of proper clarifications on the introduction of the new Section 106A of the Income Tax Act 1967, which will allow the Inland Revenue Board of Malaysia (IRB) access to taxpayers’ bank account information, may deter people from keeping their money in banks.

“Without proper explanation on these amendments, some may overreact and choose to keep their money elsewhere,” Malaysian Association of Tax Accountants deputy secretary general Dr Mohd Fairuz A Razak told The Malaysian Reserve (TMR).

“The new proposed section 106A makes it easier for the IR to collect dues taxes,” henoted.

“Suppose there is a civil proceeding on an individual or company who has unexplained wealth, which means that the taxpayer maintains a lifestyle beyond the means of the income reported in his annual tax returns. In that case, it will be easier to collect whatever taxes are due.”

Last week, Dewan Rakyat passed the Finance Bill 2021, which includes the introduction of Section 106A in the Income Tax Act 1967.

According to the Income Tax (Exchange of Information) Rules 2021, which was gazetted on Dec 1, banks do not need to inform taxpayers when the authorities request their bank account information.

Deloitte Malaysia tax audit and investigation ED Mohd Fariz Mohd Faruk said it is important for Malaysian taxpayers to really understand this new power granted to the IRB under Section 106A, so that they are not misguided.

“The power to call for bank account information must be for the purpose of making garnishee order applications. One must be clear of the definition of garnishee proceedings,” he said in a statement.

A private sector worker who only wanted to be known as Jerry opined that these amendments may push more people to buy more cryptocurrency.

“While I don’t have anything to hide, I hate the fact that people will have access to my accounts,” he told TMR.

Another taxpayer, who did not want to disclose her name, said it is our duty as a citizen to pay our taxes, but being unhappy with policies or how the money is being managed by the government is a separate issue.

“Exercise your rights as a citizen then to vote. However, there’s no excuse to evade tax. If prior notice had already been provided, it should suffice for authorities to run an investigation and this includes getting bank accounts details.

“But the real question here is whether the authorities will be impartial and go after politicians, businessmen and influential figures?” she told TMR.

Mohd Fairuz said the request for information must be for a specific purpose and pertain only to certain individuals.

He said IRB can also use Section 81 of the Income Tax Act 1967 to enable the DG of IR (DGIR) to request from taxpayers any information or particulars that the DGIR deems necessary for income-tax purposes.

“But, again, this may contradict the Personal Data Protection Act (PDPA) if it is used to collect data without individuals’ consent. In doing so, there must be a balance between the DGIR’s powers to collect information for tax purposes and the forces of confidentiality of taxpayers’ information.

“The DGIR should not have absolute powers to gather information without reason, and the PDPA should not shield taxpayers who are committing tax evasion or fraud to hide their crimes,” he explained.

The IRB clarified on Saturday that the amendment which grants it access to taxpayers’ bank account information is limited to cases involving garnishee orders allowed by the court.

The board said garnishee proceedings are the process of enforcing a monetary judgement by seizing or withholding debts due to any party, such as IRB, amid the existence of unpaid tax arrears by the taxpayer.

“The introduction of this new provision will help IRB administer the country’s direct tax system more effectively by minimising tax leakages due to the taxpayers’ failure to settle existing tax debts, besides increasing voluntary tax compliance among taxpayers.

“It has to go through a prescribed judicial process and is limited to cases that have already gone through civil proceedings first,” it said.

“IRB once again emphasises that existing taxpayer bank account information that does not involve garrison action is not accessible to IRB through this new provision.”