IN MALAYSIA, taxpayers who disagree with positions taken by the Inland Revenue Board (IRB) or Royal Malaysian Customs Department (RMCD) have the right to appeal to the Special Commissioners of Income Tax (SCIT) or the Customs Tribunal, and thereafter can appeal further to the High Court and the Court of Appeal.
In theory, the taxpayer has the right to appeal but, in reality, the system is stacked against smaller taxpayers. The main impediment is the procedures that are legalistic in nature, which will be alien to the ordinary taxpayer, together with the costs involved.
What is the challenge faced by taxpayers?
In the Malaysian system, when an assessment or bill or demand is issued, the tax has to be paid within 30 days of the issuance despite an appeal being initiated by the taxpayer. The taxpayer has an opportunity to take the matter to the Dispute Resolution Panel (DRP) or the Customs Review Panel (CRP) which can be done by the taxpayer without the help of any professional, provided the taxpayer has the necessary evidence and understanding of the law.
It must be understood that although the DRP is independent of the officers who raised the assessments, the members of the DRP are entirely from the IRB. In the case of the CRP, it is entirely made up of officers from RMCD. The independence of both DRP/CRP is questionable since there are no outsiders in both panels. The mindset of the officers in these panels will naturally be influenced by their past training which would have been one-sided – to enforce the law from their perspective. This is the first hurdle the taxpayer must pass.
If the taxpayer is not successful in the DRP/CRP, the case will proceed to the SCIT or Customs Tribunal. At this stage, the ordinary taxpayer or small taxpayer in most cases will have difficulties in handling the cases themselves because the preparation for the proceedings and the actual proceedings are conducted in a manner that is similar to a court of law. The preparation of the papers such as witness statements, filing of necessary documents, etc, and attending hearings before and during the proceedings are very legalistic and tend to follow court procedures.
Unless one is familiar with court procedures and rules, there is a possibility that the case may not be entertained properly because the layman will not understand these procedures, and the chances of the taxpayer losing the case will be high.
In most cases, matters referred to SCIT or Customs Tribunals are handled by tax professionals or lawyers, and there is a cost to be incurred. If the matter involves a small tax liability, the cost of employing professionals will far exceed the benefit, and therefore in most cases taxpayers are forced to concede to the IRB or the RMCD.
If the taxpayer loses the matter at the above level, the taxpayer can then proceed to the High Court and thereafter the Court of Appeal, where he or she has no right to handle the matter by themselves. This is a domain entirely dominated by awyers and taking such matters to the High Court/Court of Appeal is expensive. Taxpayers who cannot afford the cost of paying for lawyers will be forced to concede to the tax authorities without having the opportunity to debate the issue in front of the judiciary.
Tax justice is not available to the ordinary person
In conclusion, it appears that the ordinary person will never get justice when the person has a dispute with the tax authorities unless he or she can afford to pay the professionals to fight the case up to the bitter end. It is timely for the system to be overhauled so that the process of appealing all the way to the highest court is available to the ordinary person, whether rich or poor. At the moment, the system is biased to those who can afford to buy justice and to the authorities whose costs are borne by taxpayers.
This article is contributed by Thannees Tax Consulting Services Sdn Bhd managing director SM Thanneermalai (www.thannees.com).
