Shadow economy syndicates generating RM18 billion annually, depriving govt of RM5 billion in revenue yearly

KUALA LUMPUR: A parliamentarian has called on the government to plug tax leakage resulting from the activities of illegal online numbers forecast operators (NFO).

Bukit Bintang MP Fong Kui Lun said while various parties are having critical discussions on Budget 2024, tax leakage has not been addressed.

“The pressing issue of tax leakage resulting from the shadow economy, with specific emphasis on the NFO gaming sector, needs to be seriously looked into.

“It is crucial to address the growing problem of tax leakage caused by illegal NFO operators. They surpass legal businesses and evade taxes.”

Fong said reports have indicated that illegal 4D betting syndicates, which primarily operate online, are generating revenue of at least RM18 billion annually, which is double the revenue of legal operators.

However, none of the illegal revenue goes to the government, depriving the country of approximately RM5 billion in taxes annually.

“These taxes are essential to fund public services and development projects.”

Fong said the same syndicates operate with impunity, engaging in activities such as money laundering, illegal money lending and online scams.

“These criminal activities pose a significant threat to our economy and the safety and well-being of our citizens,” he said.

Fong added that at the peak of the Covid-19 pandemic, 4D outlets were forced to close, causing a drastic shift to online betting.

“Illegal NFO leveraged this situation. They filled the void by offering online betting and gained considerable market share from it.

“This led to a loss of revenue for legal operators and resulted in significant tax resources being (affected),” Fong said.

He urged the government to proactively tackle the issue by allowing legal NFOs to operate online.

He said such a strategy would help combat the unregulated shadow economy and elevate legal operators as key players in the fight against the shadow economy.

“To adapt to the evolving digital landscape, we should enable legal NFO to operate online. This is essential as it will enhance tax collection and allow for effective market regulation.

“Such a move will substantially diminish the shadow economy’s influence and optimise tax revenue collection.”

Fong also underscored the need for legislative reforms to address illegal online operators and advocated stricter penalties and improved monitoring of their activities.

He said the aim was to foster a safer and more regulated environment for NFO gaming, which will promote fair and responsible practices.

“As we dive into Budget 2024, let’s not lose sight of the opportunity to reclaim lost revenue by confronting the shadow economy in the NFO gaming sector.

“The time has come to align our laws with today’s digital reality and take decisive action to protect our economy.”