‘Cutting income tax rate not a necessity’
> Introduction of Goods and Services Tax does not mean there must be a reducation, says expert
KUALA LUMPUR: The corporate tax rate has been reduced from 28% in 2006 till 24% today, reflecting a four percentage point drop, said YYC KK Chow Tax Sdn Bhd executive director Zen Chow.
“A lot of us will think that once GST (Goods and Services Tax) is introduced, there should be some gradual reduction in income tax and that has been the practice in a lot of countries. So, is there any gradual reduction actually in Malaysia? GST was introduced in 2015 and indeed there was a gradual reduction, a slight reduction in the Malaysian corporate tax rate,” he said at the Malaysian Tax Conference 2018 yesterday.
The corporate tax rate was reduced from 25% in year of assessment 2015 to 24% in year of assessment 2016. However, Chow said the one percentage point cut is an additional reduction on top of the three percentage point reduction since 2007, when GST was supposed to be implemented.
“Way back in Budget 2007, then prime minister Tun Abdullah Ahmad Badawi announced that GST will be implemented from Jan 1, 2007. At that point of time, he mentioned that once GST is introduced, he will slowly reduce the corporate tax rate and individual tax rates. So, we should be fair by looking way back to 2007 and see if there was any reduction in income tax,” he said, adding that the reduction in corporate tax rate was not deferred although GST was deferred.
In comparing with other countries, Chow said Singapore and the Philippines saw their income tax rates gradually reduced while GST was gradually increased and in Vietnam, corporate tax was reduced while GST rate remained.
“That doesn’t mean every country does this. If you take Australia for example, there was no reduction in corporate tax rate when GST was introduced, until today it is still at the same rate. The GST rate also remained the same. This shows that it doesn’t mean that you always have to reduce your income tax rate when you introduce GST,” he added.
Meanwhile, on the joint audits carried out by the Royal Malaysian Customs Department and the Inland Revenue Board (IRB), Chow said there could be more synergy and interaction between the two authorities.
“There have been instances where both authorities went in to the premises of taxpayers to do a joint audit. However, when they went to the premises, IRB would audit on their income tax part and Customs would audit on their part. We don’t see a synergy between these two authorities.
“The fact is, since they went in together, they call it a joint audit. However when it comes to work, it seems like Customs are doing their own work and IRB their own work. I would say joint audit is good but we hope to see more interaction between these authorities when they go in, so that the audit would be more efficient,” he said.
Recall that the two authorities signed up to the Standard Operating Procedure Audit Programme in August last year.