The move by the Inland Revenue Board (IRB) and the Malaysian Anti-Corruption Commission (MACC) to establish a network of strategic cooperation in investigations, information sharing and views on corruption, abuse of power, tax evasion and tax collection is an excellent precedent in cooperation to enhance the tax system and enforcement.
The move to set up the Aggressive Tax Planning Division under the Special Task Department is a good step towards consolidating tax collection governance and ethical compliance.
However, tax collectors must take diligent note that there is no equity about tax. Senior Professor Dr Leo Desmond Pointon, in his book Revenue Law in Singapore and Malaysia (3rd Edition by Lexis Nexis Malaysia), explains that the law on taxation is neutral. It neither supports nor demonises taxpayers and tax collectors. The rule — “there is no equity about a tax” — is given due recognition in the Commonwealth and civil jurisdictions.
I am reminded of a landmark case of Cape Brandy Syndicate v. IRC [1921] 1 KB 64, where Rowlat J. reminded taxpayers and tax collectors this rule in paying taxes or otherwise: “In a taxing statute, one has to look merely at what is clearly said. There is no room for any intendment. There is no equity about a tax. There is no presumption as to a tax. Nothing is to be read in, nothing to be implied. One can only look at the language used”.
Thus, when the language of a taxing statute is clear, if the assessed falls within the four corners of the statute, he is to be taxed. If not, no tax is to be levied. In summary, what it means is this: a taxpayer will only pay tax if it is due. And, if he avoids paying tax, then this is an offence.
In practical fact, how do you strike a deal in mediating conflicting rights by taxpayers, on one hand, and tax collectors on the other?
One golden rule is to strike a delicate balance in upholding the spirit of tax statute provisions.
In a business environment, and especially so under Company Law, the objective is to make profits and revenue. By focusing on business efficiency, business owners and board of directors are reminded of business wastage that may attract unnecessary tax liability. Hence, efficiency at business levels at different business structures (and business plans) can be used to minimise exposure to tax liability and improve Ease of Doing Business in global business ranking.
Those who earn more should pay more tax. However, those who earn less due to business inefficiency may end up paying more tax if he did not take steps to maintain business competitiveness.
In any move to stem out Aggressive Tax Planning in its investigation, the IRB is obliged to uphold rights of taxpayers as well, according to Income Tax Act provisions. The IRB, in upholding the spirit of tax provisions, is obligated to ensure fair enforcement in light of clear tax provisional rights provided to taxpayers or business establishment.
Adam Smith, in An Inquiry into the Nature and Causes of the Wealth of Nations (1776), explained the tax enforcement scenario: “Tax which each individual is bound to pay ought to be certain, and not arbitrary. The time of payment, the manner of payment, the quantity to be paid, ought all to be clear and plain to the contributor, and to every other person.”
Income inequality may be reduced not only with more tax collection but also by promoting good business sustainability practices that reduce unnecessary tax liability for the benefit and wellbeing of every citizen in the taxation collection and enforcement ecosystem.
JEONG CHUN PHUOC
Shah Alam, Selangor