Transparency needed in refunding overpaid tax

PETALING JAYA: While business groups and experts welcome the government’s announcement of unreturned tax amounts, they feel the taxmen should increase efficiency and transparency in refunding taxpayers.

The Associated Chinese Chambers of Commerce and Industry of Malaysia tax committee head Koong Lin Loong said that in the last two years, companies found it harder to get bigger tax refunds.

“They had to go through audits and document checks that could take over a year.

“It was easier for the smaller amount, which are usually refunded within six months,” he said when contacted.

“One of our members complained that his company had RM2mil unrefunded, while several members claimed they had not got back their tax refunds for more than a year,” Koong said.

The tax consultant was responding to Finance Minister Lim Guan Eng’s statement on Wednesday that the previous government had not refunded RM16.046bil in excess income tax and real property gains tax.

He also said taxpayers who were owed refunds could now apply to offset this against income tax payable for the current year.

Koong suggested that the Inland Revenue Board (IRB) provide standard guidelines to ease companies’ applications for tax refunds.

“It should also provide a checklist for self-assessment before the application.

“Companies can then prepare all required documents, speeding up the refunds,” he said.

The Federation of Malaysian Manufacturers president Datuk Soh Thian Lai said it was surprised to hear of the whopping RM16bil in unrefunded taxes.

“This must have caused hardship to businesses. Nevertheless, we appreciate the Finance Minister’s candour in the matter.

“It is a good idea to offset the outstanding tax refunds with the new taxes businesses ought to pay, but it will also depend on how substantial the amount is.

“We worry it could take one to five years to offset the amount owed,” he added.

He suggested the ministry and IRB conduct dialogue sessions with stakeholders quickly to work out an effective action plan.

Chartered Tax Institute of Malaysia president Seah Siew Yun, who hailed Lim’s announcement as a move towards greater transparency, suggested that the government spell out clearly the amount of tax collected and unreturned in its annual Budget.

“Transparency can enhance people’s confidence towards the tax department.

“Taxpayers are more likely to be tax-compliant if they trust that whatever they overpaid would be refunded fast,” she said, adding that foreign investors would also support this effort.

Under the Income Tax Act, the government is subject to pay an interest of 2% on delayed refunds, but Seah noted that there are a host of conditions for companies to meet to be entitled to it.

When a company asks for refunds, there will be an audit on it and this could be extended to the group level.

“Usually, companies do not want to be audited. If the amount is not too large, they will just accept the amount refunded to them.

“We understand that the government’s fiscal position is not at its best, but it would be good to have more clarity on the refund system,” Seah said.