Tax assessment in malaysia Essay Example

system by addressing its inconsistencies, deficiencies, inaccuracies, or insufficiencies. Additionally, it involves modifying how the tax burden is allocated.

The scope of tax reforms covers adjustments in tax rates, brackets, thresholds, and the tax base. It also includes the imposition of new taxes, removal of existing taxes and changes in the tax mix. In Malaysia, taxation is frequently employed as a means of implementing socio-economic policies to achieve the universal objectives of taxation. These objectives are to shift resources from the private sector to the public sector, distribute government costs equitably among income classes (vertical equity) and amongst individuals with similar economic circumstances (horizontal equity), as well as promote growth, stability and efficiency.

The tax system has undergone several changes throughout the years with the aim of promoting investment, reducing the tax burden of lower income groups, fostering a caring society, enhancing research and development as well as skill training, improving the investment climate, and promoting domestic consumption. Some of the underlying themes in the reforms have included introducing various incentives to promote investment and providing tax relief for lower income groups.

The incremental method involves implementing a series of small tax modifications that are aimed at achieving a predetermined objective. This strategy allows for gradual tax reform, which is simple for tax authorities to manage and can be easily reversed if it is not well-received. On the other hand, the package approach offers an opportunity to make significant tax modifications in the reform process.

Generally, Malaysia introduces tax reforms incrementally rather than through comprehensive packages, frequently doing so via annual Budget announcements.

The government's recognition of the significance of women in advancing the

country is evident through several measures.

The carrying forward of losses and capital allowances by a company will be prohibited in the event of a substantial modification to its shareholding.

SELF ASSESSMENT

HOW IT STARTED

The GRID's formal system of reviewing all returns before making assessments had become less efficient and cumbersome. Additionally, their focus had been primarily on revenue collection instead of debt management.

THE DECISION TO IMPLEMENT SELF ASSESSMENT

The reason for the delay in implementing self assessment was the need to transform the Inland Revenue into a statutory board, which took place on 1 March 1996. To begin this process, the current year basis of assessment was introduced. This new basis of assessment replaced the old system, which was based on income from the previous year, starting in the year 2000. The goal of this change was to improve efficiency and responsiveness in collecting income tax and ensure that the Government's cash flow better reflects the current state of the economy.

The objective of this action is to improve tax adherence by connecting the system directly to economic performance and capacity to pay. Despite the adverse effect of the Asian financial crisis on the nation's economy, the government opted to exempt its income tax for 1999 with a view to facilitating a smooth transition to an assessment based on current year. Looking back, this choice proved prudent as it led to reduced tax losses during a time of economic decline.

Without a waiver, taxpayers are required to pay two years' worth of income tax in one year. This absence of a waiver hinders additional spending and limits the potential for

increased economic activity and multiplier effects. This measure is considered to be unparalleled in terms of its boldness, generosity, and forward-thinking. However, dividend income, final tax income, and income assessed under the Income Tax (Petroleum) Act of 1967 are not included in this income tax waiver.

This concerns non-resident individuals, regardless of their citizenship, who begin or terminate their employment in the year 1999 and their salary or wages.

The tax administration's proposals were considered radical, although they were deemed unexpected by some. Nonetheless, taxpayers and industries were happy with the changes, which were viewed as a joint effort to enhance tax administration and eventually benefit taxpayers. 3.

MALAYSIAN APPROACH TO SKIFF ASSESSMENT

The taxpayer bears the responsibility of declaring the accurate amount of tax under this system, as return forms submitted will be presumed correct.

Self-assessment implementation

The major tax reform for the RIB necessitates several measures including the introduction of legislation for the current year's basis of assessment, transitional provisions, provisions for waiver of tax on the 1999 income as well as self-assessment legislation.

To improve compliance with the new tax law, it is crucial to educate and inform both taxpayers and tax agents through publicity and educational initiatives. It is also essential for officers across all RIB branches to receive coordinated training on the new regulations, processes, and procedures.

The swift implementation of the self assessment system posed various challenges for taxpayers and tax agents, as there was a pressing need to take prompt action. The voluntary nature of tax payment and return filing under this new regime meant that compliance with specified deadlines became imperative. Consequently, taxpayers are required to

stay abreast of legislative changes and be more responsible for their own tax matters.

Familiarization with the new forms and procedures.

The tax agents experienced a change in their work pattern with the introduction of a new system where the filing of returns is based on the closing date of company accounts. Our strategy for implementing self assessment involved identifying areas that require changes and prioritizing them. An implementation plan was then developed to ensure all relevant parties reap maximum benefits from the new system.

The responsibility of creating rulings for issues where there is ambiguity in the law, realigning work procedures and processes to align with a new system and designing new forms, and developing a computer system that conforms with new laws and work procedures lies with the public rulings, work procedure and process, and computer system departments respectively.

New measures were implemented to enhance self-assessment management, including the introduction of provisions regarding the obligation to furnish appropriate resources and aid to the Director General or authorized personnel, as well as the implementation of the "tax preparer penalty."

The previous provisions on tax payment and return submission are practically the same as the current ones, except for the addition of a due date concept.

The Act requires taxpayers to furnish a return to the G within specific due dates, depending on their category. Companies, cooperative societies and trust bodies must file their returns seven months after the end of their accounting period. Other categories of taxpayers must submit their returns by either 30th April or 30th June, depending on whether they have business income or not. No extension of time is given,

and failure to meet the due date will result in a penalty for late return lodgment.

The GRID assesses returns on the day they are filed, with the return serving as the notice of assessment. For timely and complete returns, no further notice of assessment is needed. Late returns will result in an assessment from the Director General, along with a penalty for late lodgment. Taxpayers are generally expected to pay estimated tax as income is earned.

Previously, the G had to estimate tax, determine installment amounts and payment dates. Now, companies, cooperative societies and trust bodies must provide their tax estimate to the GRID. The estimate must be at least 85% of the revised or previous year's estimate. Installments are due on the 20th of each month starting from the second basis period month.

It is possible to revise the estimate during the 6th and/or 9th month of the basis period.

The remainder of the tax owed should be paid when the return form ii is filed. The deadline for filing the return is also the deadline for paying the remaining balance of tax.