GEORGE TOWN: The government needs to achieve an equilibrium to increase revenue through tax collections while at the same time not burden taxpayers, Finance Minister Lim Guan Eng said today.
Pointing to the absence of co-relation between the country's annual economy and increase in tax collections, Lim said the government was caught in a bind.
"Sometimes, when we want to collect more taxes, the taxpayers are unhappy. But when we don't collect more taxes, we are asked why. So we are caught in the middle.
"We are trying to address this in the most considerate way possible. Although we want to increase our collections, we don't want to be seen as being too harsh and cruel to the extent of squeezing the taxpayers to their very last drop.
"We have to do so in tandem with our economic growth, and we are confident it will grow sustainably," he told newsmen after the launch of the Inland Revenue Board (IRB) directors' conference here this morning.
Present was IRB chief executive officer Datuk Seri Dr Sabin Samitah.
Lim was asked on the government's plan as the tax collections compared to the gross domestic product (GDP) were still relatively low compared to other countries in the region, and whether the country was on track to achieving developed status by 2030.
Earlier in his speech, Lim said that based on the World Bank’s 2017 data, the country’s tax collections were only at 13.1 per cent compared to the GDP, lower than Vietnam’s 19 per cent, Chile (17.4 per cent, Poland (16.8 per cent) and South Korea (15.4 per cent).
He said the country’s low tax collections were due to “aggressive” tax incentives, generally low tax compliance, and tax evasion.
He said to overcome the issue the government needed to come out with fiscal policies which protect all quarters.
Elaborating on the issue at a press conference later, Lim said taxpayers also need to abide by the law, hence the government conducted the field audit.
"We don't intend to be like the previous administration, which charged at the taxpayers using M16s and balaclavas. We want to abide by the provisions of the law.
"We need to look for a balance between wanting to collect more taxes, and at the same time, not supress the taxpayers. And this is not something simple," he added.
Earlier, Lim announced that the IRB chalked up a direct tax collection of RM145.078 billion last year, the largest amount yet in its history.
Despite falling short of the Finance Ministry's RM147 billion target, he said the collection was RM8.044 billion or 5.87 per cent higher compared to the collection in 2018 at RM137.034 billion.
He said that the increase in collection was backed by the Special Voluntary Disclosure Programme (SVDP), where it managed to collect RM7.877 billion involving 286,428 taxpayers and 663,296 cases.
"We are setting a target of RM154.676 billion for this year, an increase of RM8 billion from last year.
"This amount represents 48 per cent of the country's overall revenue, which will be used to fund administrative and development spending to ensure the country's economy continues to be progressive and fulfil its potential.
"The record collection for 2019 will serve as a yard stick and a new challenge for the IRB which it needs to confront in the coming years," he said.
Lim also expressed confidence in the prospects of the country’s economy for 2020, saying that Malaysia’s economy was forecast to grow by 4.8 per cent, up marginally from last year’s 4.7 per cent.
“We also target a fiscal deficit of 3.2 per cent this year instead of the forecast of 3.0 per cent in the past.
"Also, the country's economy is expected to grow to RM1.607 trillion while the expected revenue is RM244.5 billion, which is 15 per cent of the GDP," he said.
On the shadow economy and the need to manage and curtail it, Lim said the shadow economy was 21 per cent of the GDP or RM300 billion, which consists of illegal activities and corruption.
"All government agencies must work together to reduce illegal activities that contribute to the shadow economy such as smuggling activities.
"This is one of the reasons why we introduced cashless payments gradually to cut down the shadow economy. Even if it is a 25 per cent reduction, it is a significant sum,” he added.