PETALING
JAYA: About 84% of companies registered with the Companies Commission of
Malaysia (CCM) and salaried employees do not pay taxes under the current
system. But this ends today.
With
the launch of the Goods and Services Tax (GST) system, the base of companies
and individuals paying taxes will be significantly enlarged and will capture
those who could have been under-declaring or evading taxes.
According
to a Finance Ministry official, of the 13.2 million employees in 2012, only
2.24 million, or about 17%, paid tax.
“In
previous years, it was about 15%. But the numbers have improved because of the
pay-as-you-earn system,” said the official.
The statistics are worse among registered companies. Of the 1.02
million companies registered with CCM as at end 2012, only 15.6% or 159,000
companies paid tax.
Under
GST, more companies will end up paying tax because the system forces companies
to be compliant and businesses to have in place a system that is
“self-disciplined”.
The
early result of the Government reforms in the tax system is already beginning
to show.
It
is learnt that of the 345,376 companies registered with the Customs Department
under the GST programme, almost 10% have not had a tax file.
This
means about 30,000 or more of these companies that have a turnover of more than
RM500,000 have not been paying taxes all these years.
Under
GST, which was first mooted in 2005 by former Prime Minister Tun Abdullah Ahmad
Badawi, companies that sell goods or provide services act as tax agents and
have to charge a 6% tax on items that are not exempted.
GST
replaces the Sales and Services Tax that can go up to 10%, depending on the
outlet and type of product. But under GST, the rate set is 6% and it is charged
at every layer of the production process.
According
to Customs GST director Datuk Subromaniam Tholasy, the new system introduces a
bottom-up approach compared to the present top-down system.
In
the top-down approach, companies hand over their invoices to auditors, who will
then file their tax returns. But there is no system in place to monitor whether
there are omissions in filing invoices.
Under
GST, there is an input and output tax component for every stage of the
production process.
The
company can claim from the Government for all the taxes that it has incurred in
making a certain product or providing a service and, when it sells the product
or service, there is an output tax of 6%.
For
instance, a restaurant operator can claim from the Government for GST charges
that he or she would have paid for purchasing raw materials to prepare food. It
even includes the electricity bill incurred.
The Customs Department
would be able to gauge the size of the business that the restaurant generates
from the input and output tax.
“The
system basically takes into account the various transactions that the business
had entered into to provide the goods or services. It monitors all levels,”
said Subromaniam.
He
said GST would allow Customs to gauge the size of the business and it was
possible to minimise cases of outlets under-declaring their taxes.
“For
instance, based on the electricity charges and tax claimed, the authorities
would be able to determine the number of hours that the business operates. It
is a more efficient and fair tax system compared to the current one.”
He
said GST would force businesses to be more tax-compliant and have better
self-discipline.
Subromaniam
was of the view that over the longer term, the system would be able to detect
the segments of the production process that made excessive profits.
He said this applied
even for the pharmaceutical industry, where prices were resistant to change.
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