100% tax penalty meant to deal with hardcore defaulters

PETALING JAYA: The 100% tax penalty effective next year for those who evade paying or under-declare their taxes is meant to deal with hardcore tax law defaulters, said the Inland Revenue Board (IRB).
"Under the Income Tax Act 1967, the director-general of Inland Revenue is given the power to impose a penalty for the offence of default in declaring income or in declaring incorrect income which is subject to tax.
"The proposal (100% penalty) ... is a step towards elevating the level of voluntary compliance among tax payers by dealing with tax payers who are hardcore tax law defaulters," its director-general Datuk Sabin Samitah said in a statement of clarification today.
Sabin, who is also IRB chief executive officer, said among the cases that would be subjected to the 100% penalty rate include:
- repeated offences of undeclared or incorrectly declared income received by way of a return form;
- refusal to give full co-operation during an audit or investigation process;
- failure to give information or documents requested to assist in an audit or investigation process;
- carrying out an organised tax evasion scheme; or
- failure to comply with the tax law even though the tax payer has been audited or investigated before.
"In preparation, tax payers are encouraged to come forward and declare their income and correct information within the required time," he said.
Sabin had, on April 12, said IRB plans to increase its penalty to 100% beginning Jan 1, 2018, from 45% presently.
Citing an example, he said, those who evade tax of RM1 million would have to pay the amount plus another RM1 million penalty.
The proposal, however, drew criticism from some quarters, including Sarawak DAP leader Chong Chieng Jen who claimed the punishment was too heavy, given the wide scope of tax evasion.