THE Inland Revenue Board (IRB) increased its tax collection for 2024 to RM184.8 billion, a rise of RM1.5 billion compared to RM183.3 billion in 2023.
The prime minister commended the IRB for its good efforts on March 10. He said: “I am optimistic. First, I was very impressed with the performance of the IRB over the last few years, particularly last year. I think this is more organised and structured, and new instruments have been introduced like the e-invoice, which has helped.”
The IRB has adopted the “carrot and stick” method, with the “carrot” being given greater importance through an informal encouragement of voluntary compliance to bring errant taxpayers into the net, and gently coaxing taxpayers who have underdeclared or non-filers into the system by leveraging information submitted by taxpayers for different purposes.
A simple example would be where an agreement is sent for stamping, and the information contained therein triggers the IRB to nudge the taxpayer to come clean on either the income or real property gains which may not have been declared in the past. With the gradual introduction of e-invoicing, more information will be available which will force taxpayers to become more tax compliant.
The non-confrontational approach adopted by the IRB using emails and letters to ask taxpayers to check their position and to revert if there are unpaid taxes is commendable as it is only using tax audits or investigations on a selective basis. This is a good way of building a relationship with taxpayers.
The IRB has also been carrying out various operations – such as Ops Metro, Ops Kosmo and Ops Dagang – which involve visiting taxpayers to build relationships and to remind them of their tax compliance responsibilities. However, for taxpayers who have been suspected of carrying out fraudulent activities or intentionally underreporting their taxes, the “big stick” is being used through surprise tax investigations with raids on business premises and personal premises of business owners. The latter is only used on hardcore non-compliant taxpayers.
Areas for improvement
Operationally, improvements can be made in responding to customer enquiries, especially in taking calls from taxpayers. Calls to the IRB go unanswered, and this is a simple area that can be improved quickly by monitoring and ensuring that the calls are attended to.
Another area that causes some concern to taxpayers is the IRB’s strict enforcement of the deadline to provide information. The IRB should reciprocate on the same basis in replying to taxpayers within this time frame. It is timely for the IRB to have an internal protocol to have a self-imposed deadline to reply. It cannot be one-sided.
Quicker refunds by the IRB will be welcomed by taxpayers and will greatly enhance the board’s relationship with taxpayers. The IRB should eradicate the perception that if you ask for refunds, you are likely to be audited. If possible, the IRB should come and openly state that this is not the case.
If there are technical issues where the IRB and the taxpayer have good reasons to hold their positions, there must increased time and effort spent within the IRB system to find amicable solutions and avoid the matters being taken to court as it will be time consuming to both taxpayer and the authority. Although there is an appeal system and a dispute resolution panel to resolve such issues internally, more time and discussion should be spent at the assessment level and at the policy level to exhaust all avenues of discussion before the matter escalates upwards. Settling through negotiations and understanding one another’s positions will be beneficial to both parties.
The current trend appears to be using technology and other soft approaches to increase compliance without abandoning the selective use of stricter enforcement methods. With the increase of artificial intelligence, the opportunity for the IRB to widen the tax net is forthcoming.
This article is contributed by Thannees Tax Consulting Services Sdn Bhd managing director SM Thanneermalai (www.thannees.com).
