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ENHANCING EFFICIENCY IN TAX ADMINISTRATION
Experiences and Learnings from Introducing GST in Malaysia
FAIZULNUDIN BIN HASHIM
SENIOR ASSISTANT DIRECTOR OF CUSTOMS
faizulnudin.hashim@customs.gov.my
+60388822845
ROYAL MALAYSIAN CUSTOMS DEPARTMENT
1
ENHANCING EFFICIENCY IN TAX ADMINISTRATION13TH ATAIC ANNUAL TECHNICAL CONFERENCE 2
32 years toward GST - How we got there
2014
GST BILL PASSED –
127 TO 78
ENHANCING EFFICIENCY IN TAX ADMINISTRATION13TH ATAIC ANNUAL TECHNICAL CONFERENCE
EXEMPTION AND ZERO RATING OF BASIC NECESSITIES AND CRITICAL
SECTORS
ADVANTAGES
•easier to convince the critics
•potential progressivity
DISADVANTAGES
•zero rating and exemptions enjoyed by everyone
•complexity
•compliance cost
•low productivity
Designing the GST model
ENHANCING EFFICIENCY IN TAX ADMINISTRATION13TH ATAIC ANNUAL TECHNICAL CONFERENCE
38.8
22.2
9.4
27.5
22.7
18.7
4.2
13.7
27.8
5.0
20.0
40.0
%
Food and non-
alcoholic beverages
Housing & Utilities
Transport
Low income Medium incomeHigh income
Source:
Household Expenditure Survey
Department of Statistics
4
CONSUMPTION PATTERN OF MALAYSIA
ENHANCING EFFICIENCY IN TAX ADMINISTRATION13TH ATAIC ANNUAL TECHNICAL CONFERENCE 5
MALAYSIAN GST MODEL
• Rate = 6% (one single rate)
• Threshold = RM500,000 (for all types of businesses)
• Zero-rated supplies
• Exempt supplies
• Foodstuff
• Agriculture products
• Livestock
• Poultry & eggs
• Seafood
• Supply of the first 300 units of
electricity for domestic use
• Supply of treated water for
domestic use
• Exported goods and services
• Land for general use
• Agriculture land
• Residential property
• Highway toll
• Funeral, burial or
cremation
• Private health & education
services / child care
• Rights to use Land
• Financial services
• Public transport (land & water
mode)
ENHANCING EFFICIENCY IN TAX ADMINISTRATION13TH ATAIC ANNUAL TECHNICAL CONFERENCE
It was a great success despite many challenges.
Pleasant surprise - no major issues
IMPLEMENTATION OF GST
CRITICAL FACTORS FOR SUCCESSFUL IMPLEMENTATION
OF GST
ENHANCING EFFICIENCY IN TAX ADMINISTRATION13TH ATAIC ANNUAL TECHNICAL CONFERENCE
On the day of GST introduction and throughout the
months, questions from businesses and public were expected
to be so much that everyone has to
attend to the queries
HELP DESK / CALL CENTRE
Effective communication and close cooperation with stakeholders
AWARENESS PROGRAMME
General public are basically given awareness through outreach program and also through electronic and print media. The awareness program also includes appointing GST advocates and ambassadors, public acceptance and persuasion program which is carried out to train NGOs both public and private.
TECHNICAL PANEL UNIT
EFFORTS TAKEN IN IMPLEMENTING GST
ENHANCING EFFICIENCY IN TAX ADMINISTRATION13TH ATAIC ANNUAL TECHNICAL CONFERENCE 9
EFFORTS TAKEN IN IMPLEMENTING GST
Target group
CONSUMER BUSINESS GOVERNMENT
4,227program
161,384participants
443program
62,148participants
210program
27,381participants
*Nota: 2010 - 2013
GST COMMUNICATION PROGRAM
ENHANCING EFFICIENCY IN TAX ADMINISTRATION13TH ATAIC ANNUAL TECHNICAL CONFERENCE 10
EFFORTS TAKEN IN IMPLEMENTING GST
GST Communication Program
3methods
Main stream newspaper
Traditional – brochure, TV advertisement, radio,
newspaper & magazines, talk show, billboard,
bus & taxi wrap, bunting etc.
Social Media – facebook, twitter, blogs & online media
gstmalaysiainfo.blogspot.com
https://twitter.com/gstmalaysiainfo
Telephone : 1 300 888 500 / 03 8882 2111
Website : www.gst.customs.gov.my
ENHANCING EFFICIENCY IN TAX ADMINISTRATION
ENHANCING EFFICIENCY IN TAX ADMINISTRATION13TH ATAIC ANNUAL TECHNICAL CONFERENCE 12
EFFORTS TAKEN IN IMPLEMENTING GST
HAND HOLDING PROGRAMME
ENHANCING EFFICIENCY IN TAX ADMINISTRATION13TH ATAIC ANNUAL TECHNICAL CONFERENCE 13
EFFORTS TAKEN IN IMPLEMENTING GST
CURBING PROFITEERING ACTIVITY
ENHANCING EFFICIENCY IN TAX ADMINISTRATION13TH ATAIC ANNUAL TECHNICAL CONFERENCE
INFORMED COMPLIANCE - ENGAGEMENT WITH STAKEHOLDERS
EFFORTS TAKEN IN IMPLEMENTING GST
ENHANCING EFFICIENCY IN TAX ADMINISTRATION13TH ATAIC ANNUAL TECHNICAL CONFERENCE 15
EFFORTS TAKEN IN IMPLEMENTING GST
Legislation
→ GST Act 2014• Has been gazette on 19 June 2014
→ 3 Regulations have been gazette on 1 July 2014• General Regulations;
• Advance Ruling; and
• Tribunal Regulation.
→ 8 Orders • 5 orders have been gazette on 1 July 2014
Threshold;
Rate of Tax;
Gov. Taxable Supplies;
Designated Area; and
Tax Agent Fee.
LEGISLATION READINESS
• 3 orders have been gazette on 13 October 2014 Zero rate;
Exempt; and
Relief.
ENHANCING EFFICIENCY IN TAX ADMINISTRATION13TH ATAIC ANNUAL TECHNICAL CONFERENCE 16
EFFORTS TAKEN IN IMPLEMENTING GST
LEGISLATION READINESS
→ 1 General guide • completed and
uploaded in GST
website
→ 16 Specific guides • completed and
uploaded in GST
website
→ 55 Industry guides • completed and
uploaded in GST
website
→ FAQ provided are
based on the
following groups:• General
• Consumer
• Tourist
• Business
• Taxpayer Access
Point (TAP)
→ To assist those
groups in obtaining
the required
information on GST
→ 5 FAI published and
uploaded in GST
website
→ Some of the issues
are:• Last date to issue
invoice under the
Service Tax or Sales
Tax
• Goods received free
and given away free
• Price display
Process &
Procedure
Frequently Asked
Questions (FAQ)
Frequently Asked
Issues (FAI)
ENHANCING EFFICIENCY IN TAX ADMINISTRATION13TH ATAIC ANNUAL TECHNICAL CONFERENCE 17
EFFORTS TAKEN IN IMPLEMENTING GST
LEGISLATION READINESS
→ published by RMCD on 2 January
2015
→ The list was printed in the booklet
form and uploaded in GST website• 13 categories of taxable and non-
taxable goods (e.g: grocery, food &
beverages and household)
→ To assist consumers in identifying
the GST treatment on the 1,800
commonly purchased goods
→ published by KPDNKK on 1 February 2015
→ 2 million copies were distributed through out
Malaysia and uploaded in KPDNKK website
→ The price changes were published based on
prices from 6 different zones as follows:• Central (Selangor, WP and Negeri Sembilan)
• South (Malacca and Johor)
• North (Kedah, Perlis, Penang and Perak)
• East (Terengganu, Kelantan and Pahang)
• Sabah
• Sarawak
→ 500 types of selected goods
Sundry Goods Shoppers’ Guide
CRITICAL FACTORS FOR SUCCESSFUL IMPLEMENTATION
OF GST
ENHANCING EFFICIENCY IN TAX ADMINISTRATION13TH ATAIC ANNUAL TECHNICAL CONFERENCE
ANTI-GST PROTEST23 March 2015
ANTI GST PROTEST
"Today is one week before GST takes off. We are going to stay put until we get satisfactory answers to all our queries," PSM secretary-general S. Arutchelvan
106 questions
ENHANCING EFFICIENCY IN TAX ADMINISTRATION13TH ATAIC ANNUAL TECHNICAL CONFERENCE
FIRST DAY BLUES
ENHANCING EFFICIENCY IN TAX ADMINISTRATION13TH ATAIC ANNUAL TECHNICAL CONFERENCE
APOLOGY LETTER
FIRST DAY BLUES
ENHANCING EFFICIENCY IN TAX ADMINISTRATION13TH ATAIC ANNUAL TECHNICAL CONFERENCE
The day before GST & first day
Angry…
Pay before
12am no
GST 6%
Pay after
12am
subject GST
6%
ENHANCING EFFICIENCY IN TAX ADMINISTRATION13TH ATAIC ANNUAL TECHNICAL CONFERENCE
First day and in the subsequent weeks
REGISTERED
RETAILERNON REGISTERED
RETAILER
Price with GST 6%
Price with no GST 6%
Confused…
GST 6%
WHAT?????.......I thought cooking oil
is zero rated!!!!But…….sunflower oil
is standard rated.
LEARNINGS
ENHANCING EFFICIENCY IN TAX ADMINISTRATION13TH ATAIC ANNUAL TECHNICAL CONFERENCE
Forbids any increment in the net profit margin of goods and
services between 1st Jan 2015 and 30th June 2016
Many traders took advantage
intentionally increase the prices before Jan 2015
Law is only enforced for 18 months, 3 months before GST
and 15 months after GST
BACKFIRED????
PRICE CONTROL AND ANTI PROFITEERING ACT (AMENDMENT) 2014
ENHANCING EFFICIENCY IN TAX ADMINISTRATION13TH ATAIC ANNUAL TECHNICAL CONFERENCE
Reasons for not claiming:
Incurring additional
cost/expenses
Cash flow - Refund is given in equal
instalments over a period of two years
Fear - application may not be
approved or do not want to take the risk
MEANT TO ELIMINATE EMBEDDED TAX BUT WAS THE OBJECTIVE ACHIEVED?????
PURPOSE:
RESULT:
SPECIAL REFUND
Only about 2,000 out of 70,000 businesses claim for Special Refund.
Others refused to claim resulting in price hike due to embedded tax.
ENHANCING EFFICIENCY IN TAX ADMINISTRATION13TH ATAIC ANNUAL TECHNICAL CONFERENCE
An expeditious refund procedure to deal with excess net credits
Prevalence of fraudulent refund claims often makes tax administration
verify all refund claims before approving refund
REASON :
Businesses are bound to make mistakes in their first few returns and it delays the process as officers need to do verification.
False claim / fraudulent claim often happens when a new tax is introduced.
RESEARCH BY
KPMG
WORLD AVERAGE
RATE FOR
REFUND: 56 days
Refund within 14 working days is not
possible at the initial stage of
implementation.
However, the refund percentage improved from 18% to 70% within 9 months
REFUND – 14 WORKING DAYS???
ENHANCING EFFICIENCY IN TAX ADMINISTRATION13TH ATAIC ANNUAL TECHNICAL CONFERENCE
Few, ideally no, exemptions
Zero-rating only for exports
Exemptions force tax rate higher, which makes VAT less efficient and causes more distortions
Exemption and zero-rating worsen C-efficiency
REPLACEMENT TAX WITH
MORE ZERO RATING &
EXEMPTIONINTRODUCE AT A HIGHER RATE
ZERO RATE & EXEMPT
ENHANCING EFFICIENCY IN TAX ADMINISTRATION
FAIZULNUDIN BIN HASHIM
SENIOR ASSISTANT DIRECTOR OF CUSTOMS
faizulnudin.hashim@customs.gov.my
+60388822845
ROYAL MALAYSIAN CUSTOMS DEPARTMENT
29
THANK YOU
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