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Don’t abuse special voluntary declaration scheme, expert tells taxpayers

PETALING JAYA: The revised Budget 2023 tabled last Friday proposes to revive the Special Voluntary Declaration Programme (SVDP) with full penalty waiver beginning June this year until end-2024.

The Inland Revenue Board (IRB) and the Royal Malaysian Customs Department have been tasked with implementing this programme.

However, the earlier SVDP that was rolled out in 2018 for income tax covering the periods up to tax year 2017 and for indirect taxes covering the periods up to October 2021 was abused by taxpayers to under-declare their past undeclared/underdeclared taxes, said Thannees Tax Consulting Services Sdn Bhd managing director SM Thanneermalai (pic).

He told SunBiz that taxpayers used the opportunity, especially the income tax SVDP, to declare much smaller sums of undeclared past taxes.

“They did not provide a basis on how they arrived at the underdeclared amounts. The IRB was forced to accept whatever amounts they paid since the finance minister at the time made it clear that the IRB should accept whatever amounts declared in good faith. Effectively, these taxpayers abused the system by declaring a much lower amount and all their tax affairs were brought up to date. They got away scot-free,” Thanneermalai said.

Similarly, for indirect taxes SVDP, although Customs required the taxpayers to provide more details such as the taxable periods in which the under-declarations occurred and the type of offence committed, it did not require basis of arriving at the under-declared amounts.

In both cases, the amounts were accepted in good faith.

Thanneermalai said the increased frequency of SVDP could encourage good taxpayers to defer paying their taxes or underdeclare their taxes.

In the past, he added, bad taxpayers benefited from the SVDP in the form of penalty reduction and, in the case of Customs, even a reduction in the actual tax payable.

“This is not fair to the good taxpayers who have been paying their taxes diligently,” he said.

In the current economic climate, Thanneermalai said, it is understandable that the current government wants to increase the tax collection and broaden the tax base (bringing new taxpayers into the system).

However, he said, this should not be done to the detriment of the good taxpayers.

“It is a good idea to waive the penalties, but taxpayers who enter the SVDP should be requested to pay the full amount of the taxes that they have underdeclared. The tax authorities should not accept whatever figures that the taxpayers submit under the SVDP. There should be a check and balance to ensure that the correct amount of underdeclared taxes are collected,” said Thanneermalai.