SynergyBeyond

Boundaries

ANNUAL

2016REPORT

www.hasil.gov.my

2017 First Publication © Inland Revenue Board of Malaysia (IRBM) 2017

All Rights Reserved. Articles, illustrations and contents ofthis book may not be re-published, in whole or in part, inany form and by any means whatsoever, either electronic,photocopying, mechanical, recording or any othermeans, without the express written consent by theInland Revenue Board of Malaysia.

Malaysian National Library Cataloging-in-Publishing DataIRBM 2017 Annual ReportFront cover design : Gigawise Network Sdn. BhdLetters organised by : Mohd Syakirin Othman/Nik Yuzila Nik YusofFont text : HelveticaText size : 9/11Printed by : Gigawisenetwork Sdn. Bhd No. 74, Jalan Kapar 27/89 HICOM Heavy Industrial Park, Seksyen 27 40400 Shah Alam Selangor Darul Ehsan T:03-5191 1115 F:03-5191 1004 www.gigaprint2u.com

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STATEMENT ON CORPORATE GOVERNANCE

IRBM’S ACHIEVEMENTS 2016

CORE STRATEGIES

Core Strategy 1 38 Core Strategy 2 50

Core Strategy 3 60 Core Strategy 4 70

AWARDS & RECOGNITIONS

1MALAYSIA PEOPLE’S AID(BR1M) PROGRAMME

IRBM DIRECTORY

FINANCIAL STATEMENT

FINANCIALPERFOMANCE REPORT

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32CHAIRMAN’SSTATEMENT

CHIEF EXECUTIVE OFFICER’S MESSAGE

IRBM’S PROFILE

FUNCTIONS OF IRBM

IRBM’S AUTHORITY

CORPORATE CULTURE

VisionMission

ObjectiveSlogan

Quality PolicyMotto Service

CLIENTCHARTER

CORE VALUES

BOARD MEMBERS

EXECUTIVEMANAGEMENT

ORGANISATIONALCHART

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Contents

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Tan Sri Dr. Mohd Irwan Serigar Abdullah

As one of the most important government agencies, IRBM has made all the necessary efforts to ensure that to ensure the total of direct tax collection is in line with the country’s economic growth.

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CHAIRMAN‘S STATEMENT BismillahirrahmanirrahimAssalamualaikum w.b.t., Warm Greetings, Salam 1Malaysia and Salam 1Hasil.

Alhamdulillah, praise be to Allah the Almighty because with His will and permission, IRBM’s Annual Report for the year 2016 is published Successfully.

First of all, I would like to congratulateDatuk Sabin Samitah for his appointment as the new Chief Executive Officer / Director General of Inland Revenue effective on 12 December 2016. Congratulations and all the best in fulfilling your duties as the new CEO.

As one of the most important government agencies, IRBM has made all the necessary efforts to ensure that to ensure the total of direct tax collection is in line with the country’s economic growth. Rising from the economic turmoil that plagued the country in 1997, IRBM has successfully achieved a three-digit gross revenue beginning 2011 amounting to RM109.609 billion and this amount countinues to rise all the way to RM133.7 billion in 2014, the highest ever total revenue collected in IRBM’s history.

Due to the uncertainty and unpredictability of the forces that affect world’s economics, these past two years have been especially hard on IRBM and the total revenue collected. In 2015, the amount of tax collected is RM 121.236 billion while in 2016 RM113.945 billion. Despite this, the collection this

year still contributed 53.60% of the total federal revenue. Although the collection in 2016 did not reach the target of RM115 billion set by the Ministry of Finance, IRBM still managed to achieve all its KPI successfully. IRBM overall achievements in 2016 is based on the following four (4) Strategic Thrusts:

- The main contributor to the country’s prosperity and the well-being of the people with Key Results Area (KRA) focus on voluntary compliance:

i. Tax collection: RM113.945 billion @ 99.09% ii. Company audit: Cases resolved 161,760 @ 142.51% iii. Business audit: Cases resolved 399,242 @ 116.71% iv. Personal tax audit: Cases resolved 1,343,559 @ 135.83% v. Employer audit: Cases resolved 59,748 @ 138.31% vi. Investigation: Cases resolved 1,454 @ 139.81% vii. Previous year debit arrears: Cumulative reductions RM 5.702 billion @ 134.77% viii. Current debit arrears: Balance of arrears of 3.07%, which did not exceed the target percentage of 10.00% A

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- The tax administrator that people can trust and believe in with KRA focus on customer-centric: i. Refunds: Cases resolved 2,051,433 @ 99.63% of applications received ii. Customer satisfaction index: A total of 97.97% of respondents are satisfied with the services provided by IRBM.

- Efficient and effective working and operating systems and procedures, with KRA focus on operational excellence: i. Competency of collection costs: Achievement of collection costs efficiency at RM1.59 that is not exceeding RM 2.00 for every RM100 tax collected

- IRBM as an employer of choice and a great organisation to work with: i. Work satisfaction index: Achieve 94.66% job satisfaction

In addition to fulfilling the essential functions of a direct tax administrator, IRBM also helps to realise the government’s aspirations in easing the burden of the Malaysian citizens through the management of 1Malaysia People’s Aid (BR1M) Programme. Overall, BR1M 2016 has been provided to some 4.7 million households and 2.7 million single individuals with an allocation of RM5.9 billion.

Moving into 2017, IRBM needs to be more proactive in attaining targeted revenue. This is because IRBM can be considered as a pillar of support to the government to transform Malaysian into a high income nation by 2020 and further support the National Transformation Initiative 2050. This long journey towards achieving these goals is only possible when IRBM maintains its focus on it’s core functions which is to collect and manage direct taxes. At the same time, IRBM is required to remain relevant, contemporary and customer-friendly.

Ensuring IRBM is on the right track towards achieving the target of RM127.7 billion set for 2017, an effective strategy of enabling should be to encompass the enhancement of organisational management with a focus on leadership, work culture and organisational structure. Attention should also be given in strengthening of tax bases with emphasis on reviewing the existing work processes and utilizing big data analytics and up to date audit tools to enhance the effectiveness of enforcement actions through investigations and audits, as well as enhancing levy actions. IRBM also needs to strengthen the ties and engagement with various stakeholders, governmental, private agencies and Non-Governmental Organisations to attain benefits from the relationship built. Based on a 10-year trend for the total Direct Tax Collection percentage in comparison to GDP, IRBM has demonstrated the ability to reach the percentage collection within the range of 9.25% - 12.85%.

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The implementation of various taxation strategies for 2017 and the estimated GDP growth of4% - 5%, this year, IRBM should be able to perform better than the previous year. The achievements exhibited by Hasilians throughout the years, show that IRBM is indeed very committed in supporting the government’s desire and plan towards making Malaysia competative nation by 2050. I must mention here that the success of IRBM to this day is due to the close support and cooperation among all parties involved including all the Board Members, the top management of IRBM and Hasilians who always want the best for this beloved

organisation. Not to forget to taxpayers as well, who are always willing to contribute towards national development. Than you very much for your contributions and well done.

Thank you.

TAN SRI DR. MOHD IRWAN SERIGAR ABDULLAHChairman of The BoardInland Revenue Board of Malaysia

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Datuk SabinSamitah

Despite the challenges of the uncertain global economic environment in 2016, IRBM managed to collect a total of RM113.945 billion worth in revenue and contributed 53.60% of the total federal revenue.

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CHIEF EXECUTIVE OFFICER’SMESSAGEBismillahirrahmanirrahimAssalamualaikum w.b.t., Warm Greetings, Salam 1Malaysia and Salam 1Hasil.

Alhamdulillah, praise be to Allah the Almighty for His felicitation in granting the successful publication of IRBM Annual Report 2016.

IRBM AchievementsDespite the challenges of the uncertain global economic environment in 2016, IRBM managed to collect a total of RM113.945 billion worth in revenue and contributed 53.60% of the total federal revenue. For five consecutive years now, IRBM has managed to maintain a direct tax collection amount in the 3-digit zone.

However, the fall in oil prices and the introduction of the Goods and Services Tax (GST) has had a huge impact on the overall revenue collection in 2016. Petroleum direct taxes suffered the most decline among the taxes. Compared to year 2015, there are still several direct tax components showing significant increase and are not adversely affected as shown in table 1 below:

Direct Taxes Component 2016 (Million) 2015 (Million) Differences %

Companies 65, 974.74 71, 098.14 -7.21

Petroleum 8,425.76 11,636.88 -27.59

Individuals 29,603.47 28, 276.97 4.69

Cooperatives 89.71 81.49 10.09

Stamp Duty 5,674.04 6,016.25 -5.69

Withholding Tax 2,549.36 2,329.74 9.43

Real Property Gains Tax 1,491.67 1,725.54 -13.55

IOFC 80.92 36.88 119.41

Other Taxes* 55.59 33.95 63.74

TOTAL: 113,945.26 121,235.84 -6.40

* Other taxes cover payments pursuant to section 124 of Income Tax Act 1967, court charges, bank interest, legal proceeds, business registration and service fees pursuant to section 138B of the Income Tax Act 1967

Table 1: Comparison of Direct Taxes Collection by Component

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InitiativeIRBM is seen able to maintain revenue collection, a result of the implementation of proactive measures made in 2016 including paying attention pertaining to Aggressive Tax Planning (ATP) issues, strengthening the use of technology in enhancing compliance and tax collection such as Big Data and Advance Analytics, 360 Systems Degree, Remote Sensing and Google Map. Additionally, improvements in the aspects of auditing, collection and solidification of levy structures and legislative reforms were undertaken as well as strengthening strategic collaboration, as well as through experience and knowledge sharing initiatives among international tax administrations. It turns out that the measures taken have a positive impact on revenue collection despite facing current difficult situation.

The implementation of a fair, efficient and effective tax system is the core of a tax administrative so that its functions are recognised and respected by the people, for the well-being and prosperity of the nation. Therefore, IRBM is constantly working to improve its services to facilitate taxpayers to carry out their respective taxation responsibilities.

The Hasil4U programme is one of the initiatives held during the year 2016 aimed at raising public awareness of the responsibility of reporting income and voluntarily paying taxes.

BR1M ManagementIn addition to acting as one of the revenue collecting agencies, working for and with the government, IRBM has also been appointed and entrusted to manage the 1Malaysia People’s Aid (BR1M). Throughout 2016, IRBM has successfully processed 8,348,479 BR1M application forms.

RecognitionOverall, Hasilians should be proud of the hard work done in upholding this organisation, both in terms of management and direct tax administration as well as in organisational management. The organisation received many awards and recognitions. For example: A 5-Star Rating in the Prime Minister Office’s Public Sector Star Rating Index (SSR) for the years 2015 - 2016. At the international level, IRBM was appointed as CATA President during the 13th CATA General Meeting for the 2016-2018 period, the second country in Asia to hold this position after Singapore’s appointment in 1979 - 1982. Every recognition received proves that IRBM is a leading tax administrative agency.

Stepping Into 2017The involvement of all parties in performing exceptionally well in all things related to tax collection and administration should be continued and enhanced from time to time. These efforts are important to ensure that the target revenue collection in 2017 amounting to RM 127.7 billion can be achieved.

The implementation of a fair, efficient and effective tax system is the core of a tax administrative so that its functions are recognised and respected by the people, for the well-being and prosperity of the nation.

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In this regard, IRBM needs to double the surge as in other government administrative mechanism, especially an agency that is the backbone of the country’s major source of income to enable various development plans and transformational programs in the developed route map. IRBM must produce remarkable results in terms of the amount of direct tax collection on behalf of the government that not meets but exceeds the targets set.

IRBM should always increase all efforts to ensure that direct tax collection that has to be collected is realized in line with the country’s economic growth. Among the efforts to be implemented is to focus on the effectiveness of enforcement on taxpayers who fail to comply with tax laws. This move is necessary because the failure of IRBM to take action on tax evaders will cause the public not to respect IRBM which is seen as unfair in carrying out its duties. As a result, obedient taxpayer will no longer obey and the country will be affected by lack of revenue that will directly increase country’s deficit spending and widen the gap between the rich and the poor in the country.

In addition to effective enforcement, IRBM is also responsible for providing only the best service to taxpayers who continue to perform their duties and obligations obediently. In this case, IRBM will ensure that the tax system implemented will provide ease and convenience to those who uphold tax laws.

AppreciationFinally, I would like to take this opportunity to convey my gratitude and appreciation to the Prime Minister of Malaysia, YAB Dato’ Seri Mohd Najib Tun Abdul Razak for appointing me as the Chief Executive Officer / Director General of Inland Revenue effective 12 December 2016.

Thank you to all IRBM Board Members for their support and not forgetting all the Hasilians that are always so full of hope and joy in working together in this organisations. InsyaAllah, I will continue to work and implement this mandate by giving my best. The passion shown by the Hasilians daily represent a statement of IRBM’s commitment in supporting the government’s desire and planning towards making Malaysia a competitive nation in 2050.

I believe that through a collaborative approach by embracing the National Blue Ocean Strategy (NBOS), our tax administration system will improve for the better and bring results that are truly beneficial to the organisation and our country-Malaysia.

Thank you.

DATUK SABIN SAMITAHChief Executive Officer/Director General of Inland RevenueInland Revenue Board of Malaysia

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IRBM was established in accordance with the Inland Revenue Board of Malaysia Act 1995 to give it more autonomy especially in financial and personnel management as well as to improve the quality and effectiveness of tax administration

The Department of Inland Revenue Malaysia became a board on March 1, 1996, and is now formally known as IRBM.

The Inland Revenue Board of Malaysia (IRBM) is one of the main revenue collecting agencies of the

Ministry of Finance

IRBM’S Responsibilities

IRBM’S PROFILE

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Complying with IRBM Administration-Related Legislation• Federal Constitution 1957• Interpretation Act 1948 and 1967• Limitation Act 1953• Courts of Judicature Act 1964• Companies Act 1965• Bankruptcy Act 1967• National Land Code 1965• Criminal Procedure Code (Act 593)• Penal Code (Act 574)• Company Winding Up Rules (1972)• Rules of Court of 2012

IRBM’S Responsibilities

Administering theDirect Tax Act• Income Tax Act 1967• Petroleum (Income Tax) Act 1967• Real Property Gains Tax Act 1976• Promotion of Investments Act 1986• Stamp Act 1949• Labuan Business Activity Act 1990

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To advise the Government on matters relating to taxation and to liaise with the appropriate Ministries and statutory bodies on such matters

To perform such other functions as are conferred on the Board by any other written law

To act as agent of the government and to provide services in administering, assessing, collecting and enforcing payment of income tax, petroleum income tax, real property gains tax, estate duty, stamp duties and such other taxes as may be agreed between the Government and the Board

May act as a collection agent for and on behalf of any body for the recovery of loans due for repayment to that body under any written law.

To participate in or outside Malaysia in respect of matters relating to taxation

FUNCTIONS OF THE BOARD

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To participate in or outside Malaysia in respect of matters relating to taxation

To enter into contracts

To utilise all property of the Board, movable and immovable, in such manner as the Board may think expedient including the raising of loans

by mortgaging such property

To engage in any activity, either alone or in conjunction with other organisations or international agencies, to promote better

understanding of taxation

To provide technical advice or assistance, including training facilities, to tax authorities of other countries

To impose fees or charges for services rendered by the Board

To grant loans to employees of the Board for any purpose specifically approved by the Board

To provide recreational facilities and promote recreational activities for, and activities conducive to, the welfare of employees of the Board

To provide training for employees of the Board and to award scholarships or otherwise pay for such training

To do anything incidental to any of its powers.

POWER OF THE BOARD

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MISSION

VISION

The Best Service For You

A Leading Tax Administrator that Contributes to Nation Building

To implement effective, fair and equitable tax management system

To provide excellent tax services by :

Improving voluntary complianceImplementing an integrated and transparent taxation system

Increasing operational effectiveness through innovative processes and information technology

Enhancing a competent workforce

CORPERATE CULTURE

OBJECTIVE

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SERVICE MOTTO

SLOGAN

QUALITY POLICY

The Best Service For You

With integrity as foundation, we are committed to giving the best service to our customers

Together We Develop The Nation

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WE ARE COMMITTED TO CONTINUOUSLY IMPROVE THE SERVICE DELIVERY SYSTEM AND PROVIDE A FAIR AND JUST SERVICE FOR ALL TRANSACTIONS BASED ON THE FOLLOWING STANDARDS

CLIENT CHARTER

To provide the current year Income Tax Return Form for :

i. individual taxpayer - by the end of Februaryii. non-individual taxpayer - by the end of April

To refund excess payment/to issue repayment of income tax from the date a complete and accurate Income Tax Return Form is received via:

i. e-Filing - 30 working daysii. post or submitted by hand - 90 working days

To initiate action on the property and land transfer instruments for the assessment of stamp duties as follows:i. to send the PDS 15 Form for valuation - 8 working daysii. to issue the notice of assessment from the date the valuation report is received - 8 working daysiii. to endorse the KTN 14A Form from the date the payment is received - 3 working days

To provide e-Filing facility for the submission of the Income Tax Return Form

To issue the tax clearance letter within 10 working days from the date the relevant completed document is received

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To assess instruments other than property and land transfer instruments for:

i. formal assessment - 5 working daysii. informal assessment - 1 working day limited to 30 instruments

To resolve appeals/objections other than Form Q within 60 days provided complete information is received

To process Form Q for submission to the Special Commissioners of Income Tax within 5 months from the date of receipt

To answer telephone calls within 3 rings

To provide service at the counter within 15 minutes after obtaining the queue number

To take action on letters, faxes and e-mails by issuing:i. acknowledgement letter within 3 working days from the date of receiptii. letter notifying progress status within 7 working days from the issuance of acknowledgement letter if matters raised need further action

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Happy At Work culture can raise the spirit of Hasilian in increasing the productivity of the organisation.

Applying and practicing the culture of friendliness and mutual respect towards creating a compassionate and harmonious organisation.

Managing People with good ethics and manners accordingly.

Creating a voluntary commitment together to achieve the goals / corporate KPIs.

Hasilians are required to adhere to the moral principles set by the organisation on the basis of values in accordance with the laws of the state, the local community system and certain rules are set to achieve the aspirations of the organisation.

A solid collaboration is applied in each Hasilian to ensure every decision making is carried out more regularly, time saving and efficiently resulting in

high productivity. Hasilian will be eminent in doing something in teams.

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WORK IN A TEAM BEING PROFESSIONAL FO

UNDED ON INTEGRITY

TO ACHIEVE EXCELLENCE

CORE VALUES

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Integrity is cultivated in every rank of IRBM employees in line with the objective to deliver a competent,

integrated and committed human capital.

Hasilian has high spirits to produce the best in every matter of tax administration in the direction to generate state income. In addition, every affair is administered and managed professionally and efficiently.

Hasilians strive to carry out its responsibilities excellently, to produce a quality and prestigious work in moving towards the leading tax administrator that contributes to nation building.

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Tan Sri Dr. Mohd Irwan Serigar Abdullah Secretary General of Treasury

Treasury Malaysia

Tan Sri Datuk Wira Dr. Mohd Shukor MahfarDirector General of Inland Revenue

(1 January 2016 - 11 December 2016)

Datuk Sabin SamitahDirector General of Inland Revenue

(12 December 2016 - 31 December 2016)

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MEMBERS OF THE BOARD

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Tan Sri Mohamad Zabidi ZainalDirector General of Civil Service MalaysiaCivil Service Department

Datin Paduka Zauyah Be T. Loth KhanSolicitor General IIAttorney General Department

Dato’ Che Pee SamsudinAccountant General of MalaysiaAccountant General’s Department

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Dato’ Khodijah AbdullahSecretary of Tax DivisionMinistry of Finance

Fadzli Abdul WahitPrivate Consultant

Tan Sri Datuk Rashpal Singh a/l Jeswant SinghPrivate Consultant

Datuk Hj. Md Afendi Datuk Hj. HamdanPrivate Consultant

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EXECUTIVES MANAGEMENT

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Tan Sri Datuk Wira Dr. Mohd Shukor MahfarDirector General of Inland Revenue

(1 January 2016 - 11 December 2016)

Datuk Sabin SamitahDirector General of Inland Revenue

(12 December 2016 - 31 December 2016)1 2

Deputy Director General (Tax Operation)

(1 January 2016 - 11 December 2016)

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Dato’ Abd Aziz HashimDeputy Director General of Inland Revenue (Compliance)

Datuk Noor Azian Abdul Hamid Deputy Director General of Inland Revenue (Policy)

Datuk Mohd Nizom Sairi Deputy Director General of Inland Revenue (Management)

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Organisational CHART

BOARD MEMBERS

Chief Executive Officer / Director General of Inland Revenue

Deputy Chief Executive Officer /

Deputy Director General of Inland Revenue (Compliance)

Deputy Chief Executive Officer /

Deputy Director General of Inland Revenue

(Tax Operation)

Chief Executive Officer Department

Deputy Chief Executive Officer /

Deputy Director General (Policy)

Deputy Chief Executive Officer /

Deputy Director General (Management)

InternalAudit Deparment

Large Tax Payer Branch

Tax Compliance Department

Multinational Tax Branch

Petroleum Branch

Investigation Department

Information Technology Department

Civil and Prosecution Department

Information Processing Centre

Tax Policy DepartmentTax Operation Department

Revenue Collection Department

International Tax Department

Malaysian Tax Academy

Human Management Department

Corporate Logistics Department

State Office Director Negeri Sembilan/Melaka

State Office Director of Kedah / Perlis

State Office Director of Penang

State Office Director of WP Kuala Lumpur

State Office Director of Pahang

State Office Director of Sabah

State Office Director of Perak

State Office Director of Terengganu/Kelantan

State Office Director of WP Putrajaya

State Office Director of Selangor

State Office Director of Sarawak

State Office Director of Johor

Strategic Planning Department

Dispute Resolution Department

Corporate Services

Department

Inspectorate & Integrity Department

Board SecreteriatLegal Advisory

Department

Risk Management Department

Special Task Department

Development andFacility Management

Department

Profilling & Intelligence Department

Finance Department

Legal Review andDrafting Department

Tax Research Department

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STATEMENT ON CORPORATE GOVERNANCE

The Board Members of the Inland Revenue Malaysia (IRBM) are committed to maintain and ensure the adoption of the highest standards of corporate governance in IRBM. The Board of Directors presents a statement on corporate governance for the year ending 31 December 2016. This statement explains the best compliance of practices and processes that have been implemented by the IRBM.

Board Membership Section 6 of the Inland Revenue Board of Malaysia Act 1995 (Act 533) states that the Board is consisted of the following members:a. Secretary General of the Treasury who shall be the Chairmanb. The Attorney General or his representativec. Director General of the Public Service or his representatived. Chief Executive Officer of IRBMe. Two government representatives appointed by the Minister of Finance

f. Three representatives of the private sector who are influential and experienced in matters of finance, commerce, taxation or law nominated by the Ministery of Finance

The membership composition is in line with good corporate governance practices and ensuring the balance of power in improving accountability and for the freedom of decision making. Members of the IRBM Board consist of individuals who possessgreat achievements, diverse skills, great competency, broads experience and reliability to ensure they can contribute to the growth of IRBM itself.

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MLHDNM Bil 1/2016 15 January 2016MLHDNM Bil 2/2016 30 Mac 2016MLHDNM Bil 3/2016 16 May 2016MLHDNM Bil 4/2016 29 July 2016MLHDNM Bil 5/2016 23 September 2016MLHDNM Bil 6/2016 30 November 2016

The Chairman of the Board has a role in managing and giving leadership to Board Members to decide the matters brought to the Board’s attention and to monitor every Board decision is followed right up to execution.

The main role of the Chief Executive Officer as the Director General of Inland Revenue under Section 134 (1A) of the Income Tax Act 1967 (Act 53) is collecting and managing tax. At the same time, under Section 6A (1) of Act 533, Chief Executive Officer is also responsible for daily administrations and operations. Both roles are assigned to the head of IRBM to ensure that taxation and non taxation issue are handled well and balanced.

Throughout 2016, six Board Meetings were held at the following dates:

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BOARD AUDIT COMMITTEE

FINANCE COMMITTEE

INVESTMENT COMMITTEE

HUMAN AND REMUNERATION COMMITTEE 1

PROCUREMENT A AND B COMMITTEES

DISCIPLINARY COMMITTEE 1

DISCIPLINARY APPEAL COMMITTEE

Board CommitteesFor the purpose of carrying out the functions of the Board, several key committees were set up based on the statutory provisions of section 12 of the Act 533 of which the membership of each committee is appointed by the Chairman of the Board from the Members ranks.

The Board of the Committee are as follows :

Each committee works for different yet on complex, specific and exclusive issues. Recommendation and proposal made by the Board Committee appointed will be taken directly to Board Meeting to decide. This collective responsibility is an effective practice in upholding corporate governance.

Risk Management And Internal ControlTo achieve the objectives and maintain success in tax administration, managing and collecting tax require effective governance, risk management and internal control to meet the objectives. For that, IRBM has a clear risk management and internal control strategies of IRBM apply them in the governance framework.

In order to ensure the quality and effectiveness of risk management at IRBM, a governance risk structure management was set up with members and committees as follows:

• IRBM Board of Directors - Monitor the implementation of risk management in IRBM

• IRBM Audit Committee - Ensure and monitor risk management and internal controls are complied to the framework and instructions that have been issued

• Top Management of IRBM - Monitoring and ensuring that risk management strategies and policies work effectively as well as giving focus on critical and strategy risks

• Risk Management Committee - Monitoring the implementation of risk management strategies and policies, as well as deciding on risk recovery action by process owners and risk owners

• Safety and Health Committee Jobs - Monitoring the risks associated with safety and health at IRBM premises as well as making decisions for risk recovery action by process and risk owners

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- Organisation Risk Management Division, Integrity and Risk Management Department - As a coordinator to risk management activities, this division analyse and compile registered risks by the risk owners, as well as conducting studies on the effectiveness of implementing risk management strategies and policies in IRBM.

The implementation of organisational risk management Enterprise Risk Management (ERM) at IRBM which adopts the international standard ISO 31000: 2009 [Risk Management - Principles and Guidelines] provide guidance on policy, principles, processes, methodology and framework in ERM practices at IRBM. In addition, the IRBM Risk Management Manual is also referred as a way to strengthen the ERM implementation at all levels in IRBM.

IRBM also emphasizes on the health and safety aspects among officials and visitors at all IRBM premises through occupational health and safety practices under the Occupational Safety and Health Act 1994.

In addition, risk management activities also identify potential incidents or events which may impact negatively on the service delivery system to customers. Continuous monitoring towards this issue is being handled under the Business Continuity Management Plan. Risk management and IRBM internal controls are steady and sufficient to protect the interests of officers and organisation. However, continuous effort is important to cultivate risk management in daily practice.

IRBM possess an effective internal control management framework as part of an excellent corporate governance practice. Policies, circulars, procedures and guidelines issued by IRBM are

the main internal controls to ensure risks in the organisation can be minimized and thus ensure the organisation achieves its objective.

The main internal control system which includes finance, human resource, information technology and communication, security management as well as other related management operations are evaluated and updated from time to time, in line with the shifts of corporate risks and the ever-changing environment. Continuous monitoring and evaluation is implemented in daily operations by the Internal Audit team to ensure all audit observations and solution are done shiftly and effectively.

The Internal Audit function is important in providing assurance to the Members of the Board that a dependable internal control management is implemented at IRBM. Overall, audits report from the year of implementation finds IRBM internal management control is effective and adequate enough to protect the interests of IRBM corporate governance.

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IRBM’SACHIEVEMENTS 2016ACHIEVEMENTS 2016

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Job Satisfaction

Index

94.66%

Company Audit

142.51%161,760resolved cases @

Personal Tax Audit

135.83%1,343,559 resolved cases

Employer Audit

138.31%

59,748 @

Investigation

139.81%

1,454 resolved cases @

Business Audit

116.71%399,242resolved cases @

Prior Year Debit

Arrears Accumulated Reduction

Balance Arrears

134.77%RM5.702

Collection Cost Efficiency RM1.59

Refunds

99.63%

2,051,433@

Current Debit Arrears

10.00%3.07%

@

@

Customer Satisfaction

Index 97.97% satisfaction level

reached

RM2.00from every RM100

tax collected

Government’s Revised Forecast

Collection

resolved cases

Billion

resolved cases

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Collection 2016(RM Billion)

2015(RM Billion)

Federal Government Revenue *212.595 219.089Gross Direct Taxes Collection 113.945 121.236

Tax Reimbursement Fund 4.500 7.000Nett Direct Tax Collection 109.445 114.236

Government’s Revised Forecast *110.500 116.760Gross Collection Contribution of the Revised Forecast 53.60% 55.34%Nett Collection Contribution of the Revised Forecast 99.05% 97.84%

* Based on Revenue Budget Book

Total Revenue Collected

REGISTERED TAX PAYERS

Tax Agents

Individuals & Partnerships

Companies/Cooperatives/Trust

Bodies/Associations

Employers

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* Other taxes cover payments pursuant to section 124 of Income Tax Act 1967, court charges, bank interest, legal proceeds, business registration and service fees pursuant to section 138B of the Income Tax Act 1967

DIRECT TAX COMPONENT 2016

(RM MILLION)2015

(RM MILLION)

Stamp Duty

Individual

RPGT

Petroleum

Withholding Tax

Cooperative

IOFC

Other Taxes*

By ComponentComparison of Direct Taxes Collection

Company

Total

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CORE STRATEGIES

CORE STRATEGIES

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CORE STRATEGY

IRBM Is The Main Contributor To Nation’s Prosperity And People’s Well-being

• Improving Voluntary Tax Compliance

• Reducing Tax Leakages

• Improving Tax Arrears Management

• Expanding The Tax Base

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IRBM is the major contributor to the government’s revenue to fund national development for the well-being of the people. Since 2011, IRBM collection is over 55% of the country’s total revenue. The strong financial position of the Nation guarantees the ability of the government to manage the needs of the people well.

The socio-economic status of the people that covers the cost of living, employment, education facilities, security and health services can be improved. In addition, better quality infrastructures can also be provided. Hence, wealth and prosperity of the nation can be enjoyed by all the people.

IRBM is committed to realizing the government’s desire to improve the standard of living of the people. The continuation of the commendable revenue collection should be maintained through the implementation of planned strategic objectives which include improving voluntary tax compliance on a voluntary basis, reducing tax leakages, improving tax arrear management and enlarging the tax base.

Voluntary tax compliance is maximized with a balanced compliance programme and risk-based

focus, transparency and taxpayer compliance attitude. IRBM is diversifying the efforts to facilitate tax affairs and reduces the cost of compliance for taxpayers who are always ready to comply with their tax obligations.

In the effort to ensure fair tax execution to all, a strict enforcement action has to be applied to taxpayers who refuse to comply with tax laws. IRBM plans and targets compliance activities using risk management approaches that take into account the causes and consequences of non-tax compliance.

Tax arrear management is streamlined by focusing on debt prevention, identifying causes that can lead to indebtedness and performing efficient and effective collection of debt collection methods.

Strategies for expanding the tax base are important in order to ensure sustainable revenue collection. Therefore, IRBM has taken steps to increase tax awareness through the enhancement of tax education activities and increasing information sharing activities through collaborative networks with other agencies.

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• Taxation Seminar: IRBM also organises taxation seminars yearly by appointing experienced speakers and panelists in various areas of expertise.

Title No. Participants

e-Filing 47 3,028

Individual 22 1,195

Employer 1 69

MTD 4 175

Bussiness Support Service 1 30

Non Resident 17 808

Doctor 3 370

Lawyer 0 0

Celebrities 0 0

Withholding Tax 1 50

RPGT / Stamp Duty 2 100

Cooperative 0 0

Retirement 1 100

Others 3 284

Total 102 6,209

Making Tax Compliance a Culture in our society: High compliance among taxpayers is an important element in determining the total national tax revenue. All levels of society need to be exposed concerning the joint responsibility in determining the well-being and harmony of the nation. As one of the most important agencies in the government, the IRBM has always empowered all efforts to ensure that the direct tax collection that was supposed to be collected is in line with the country’s economic growth.

IRBM has implemented several initiatives throughout 2016 as an effort to bolster voluntary tax compliance with existing taxpayers as well as potential taxpayers. Among the initiatives are as follows:

• Taxation Briefing : IRBM through the Corporate Services Department has been managing tax education briefing application to taxpayers and the public. There were 102 tax-related briefings held at several branches throughout Malaysia.

• Collaborative Programmes: Educational activities and tax awareness was also extended through the IRBM collaboration programme with the outside agencies and also other departments. Among the involved agencies included the Employees Provident Fund (EPF), Ministry of Home Affairs (MoHA), Federation of Malaysian Manufacturers (FMM) and Islamic Bank.

IMPROVING THE RATE OF COMPLIANCE ON A VOLUNTARY BASIS

Schedule 1: Briefing Statistics

Collaborative Programmes No. Participants

IRBM – EPF 46 1,380

IRBM – MoHA 3 300

IRBM – ISLAMIC BANK 7 592

IRBM – FMM 1 24

Total 57 2,296

Schedule 2: Statistics on Collaborative Programmes

Source: Corporate Services Department

Source: Corporate Services Department

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• Love Your Nation with Civil Servant Programme: This programme is a collaboration of IRBM with National Institute of Public Administration (INTAN) for implementing the Nation Caring Programme in the course slots at INTAN. There are eight slots for 2016 which covered the Economic Cluster Ethics with the involvement of 238 civil servants.

High compliance among taxpayers is an important element in determining the national total revenue.

Schedule 3: Tax Seminar Statistics

Collaborative Programmes

No. of ProgrammesConducted

Participants

MATA Conference 1 600

IRBM-CTIM Tax Forum 5 1,150

IRBM-MEF 11 1,850

MIA 2 300

MATA-MIA 1 150

SALIHIN Budget 1 300

FMM 2 64

MACS 1 150

KPMG 1 150

MATA Budget Seminar 1 380

MATA-MIA Budget Seminar

7 2,500

CTIM Budget Seminar 10 2,770

Total 37 10,364

Source: Corporate Services Department

• Business Support Services Training Programme: This programme is organised by giving a briefing relating on a special taxation to traders. There are 50 briefing sessions that were held in IRBM branch offices throughout Malaysia involving 1,723 entrepreneurs.

• Visits by University Students and External Agencies: IRBM has also collaborated with the Higher Education Ministry and external agencies to implement tax-related awareness and discussion to potential taxpayers in particular. Throughout 2016, IRBM received visits from 17 universities and external agencies involving 1,033 participants.

• EY YTPY Programme: This programme is an IRBM tax awareness collaborative programme with Ernst & Young (EY). Among the programme activities included are ‘EY YTPY Student Ambassador Workshop’ involving student representatives from several universities and colleges. In addition, EY Young Tax Professional of the Year (YTPY) competition was held. Overall, the programme has attracted a total of 405 participants.

Effective and strategic promotion and publicity activities are important to assist the IRBM in an effort to increase tax compliance among the general public. There are various methods used by the IRBM including planning the publicity campaigns of IRBM in some selected media channels. Among them are through advertising in mass media, printed media, digitals, banners on highways and through online advertising. Each selected publicity and promotion methods should take into account the allocation that has been approved annually according to current needs and conditions. A

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TV Ads

873

Radio Ads

1,726

CORPORATE ADVERTISING

Magazine Ads

13

Newspaper Ads

87

Digital Ads (Online/

LED Screen) & PLUS Toll Plaza

Banners

7,454

TOTAL: 10,491

Text Crawler

291

Advertorials

18

TV/Radio Interviews

26Newspaper/Magazine Interviews

3

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TV Ads

873

Radio Ads

1,726

CORPORATE ADVERTISING

Magazine Ads

13

Newspaper Ads

87

Digital Ads (Online/

LED Screen) & PLUS Toll Plaza

Banners

7,454

TOTAL: 10,491

Text Crawler

291

Advertorials

18

TV/Radio Interviews

26Newspaper/Magazine Interviews

3Thirteen IRBM Tax Clinic slots @ Bernama Radio24 have been carried out involving a variety of discussions on taxation and

IRBM. The tax clinic guests were comprised of bright and talented IRBM officers, who are expert in various field of taxation.

IRBM Tax Clinic @ BERNAMA Radio24

Taxpayer’s responsibilityForm B, Allowable and Non-Allowable Business Expenses (Series 2)

Form BE, Deduction, Tax Relief and Tax Rebate (Series 2)

Overseas travel restrictions under section 104, ITA 1967 / section 22 of RPGTA 1976

Income Tax Refund and Income Tax Voucher Refund (BBBC) Retirement / Compensation

Tax Settlement Letter (SPC)

Form BE, Deduction, Release and Tax Rebate (Series 1)

Application for Tax Exemption underSection 44 (6) of the ITA 1967)

Income Tax Payments Penalty Reduction and Waiver of Tax Increase

Tax Audit, E-Commerce and Monitoring Deliberate Tax Defaulters (MDTD) Stamp Duties

Form B, Allowable and Non-Allowable Business Expenses (Series 1)

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Empowering Investigation and Compliance Activities: IRBM investigation activities are conducted by the Investigation Department with the main objective of monitoring any cases involving tax evasion and bringing the responsible persons in corporate entities charge to court. The actions taken are important in order to increase voluntary compliance with the tax law and regulations while ensuring the right amount tax can be collected from the parties that should pay the tax.

Investigations are focused on case settlement in civil compare to crime as this action can help to speed up the case settlement process and at the same time increase the collected amount. This approach succeeds where there are increase in case settlement and amount collected in 2016 as compared to 2015.

2016

Number of Cases Solved 1,212

Amount RM844.68 million

2015

Number of Cases Solved 1,063

Amount RM755.44 million

Schedule 4: Civil Case Achievements

Source : Investigation Department

In addition to the focus on civil case settlement,potential cases generating high amount (RM) settlement is also targeted such as the service, trade and construction industries. The need to have an impact on tax compliance and draws general attention where in year 2016, IRBM successfully completed 1 case using the provision of AMLATFPUAA with a total settlement of

Chart 1: Potential Industries Generating High Amounts of Revenue

36.45%33.94%

29.61%

Service

Trade

Construction

Source : Investigation Department

RM2,880,800. While the prosecution for the hardcore taxpayers have been executed with the increase of last notice on cases failed to submit documents / information. Prosecution action also has been taken on non-compliant cases as a reminder to taxpayers to be more responsible especially in the submission of tax-related documents.

Section 78 Section 79 Section 81

345 348 78

Schedule 5: Last Reminder Released

Source : Investigation Department

Total Prosecution Cases: 6

For cases that have been convicted by court, IRBM takes an approach by making announcements using mass media as a publicity tool to attract public attention. There has been one case that was resolved in court in 2016, in favor of IRBM. The offender was ordered to pay tax to IRBM amounting to RM397, 967.55 (Taxation: RM132,655.85 together with penalty under sub.113 (1): RM265,311.70).

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Non-Compliance Solution Mechanism: Strengthen the methods for management of storage records for taxpayers are one solution mechanism for non-compliance implemented by IRBM through several planned action plans.

• Action plan 1 Issue of Notice under Subsections 82 (A) and 82 (3) to taxpayers who do not keep business records - Final Draft of Operational Circular Work Procedure For The Taxpayer’s Case Failure to Save Sufficient Records And Giving Receipts Under Section 82 of the Income Tax Act 1967 (ACP 1967) has been prepared by the Tax Compliance Department and is in review of Legal Department for approval.

• Action plan 2 Improve the audit actions to file Small and Medium Enterprises (SMEs) -There was an increase in the cases audited on 2016 than the year before, the increase of 12,788 cases or 2.4%. The audited SME file in 2016 is 541,798 cases compared to 529,010 cases for 2015.

• Action plan 3 Audit action on taxpayers that fail to keep enough records - There is a decline in audited case for the taxpayer that failed to keep records amount in 2016 that is 8,735 cases compared to 2015 by 9,629 cases. Total decrease was 894 cases or 9.3%.

• Action plan 4 Improve action on taxpayers involved with e-Commerce transactions. Based on the profiling work carried out, as many as 66 new taxpayers have been registered and 40 audit cases were channeled during the current year based on established KPIs by e-Commerce Division. Meanwhile, e-commerce auditing briefing has been submitted at 11 IRBM branches to explain and give exposure to employees involved with e-Commerce auditing.

• Action plan 5 Improve audit action to the case single business individuals and partnerships -The focus is on individuals who earning an aggregate <1 million. There are decline in audited case in 2016 that is 497 cases compared to 522 cases audited on year 2015.

• Action plan 6 Strengthening Employer’s Audit Compliance - Distributing quality cases to branches by industries such as oil & gas, banking, construction, manufacturing and shipping industry. E-auditing Payroll method was introduced to audit officers to identify tax leakages to employers which use a computerized payroll system completely.

Year No. of Filed

ResolvedAudits

No. of Case ResolvedAudited

Amount (RM)

CompoundAmount (RM)

Amount(RM)

2016 21,412 59,698 147,193,937.56 30,766,740.22 177,940,677.76

2015 36,785 78,576 134,188,977.00 24,228,292.00 158,417,268.00

Note: In 2016 the number of files and cases been audited decreased due to starting on month September to December 2016 employer’s audit officer is directed to empower SG desk audit action. However the total discovery and compound amount showing improvement. - Source: Tax Compliance Department.

Schedule 6: Employer’s Audit StatisticsA

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Strengthening the platform to curb tax leakages: Some amendments have been done in 2016 to strengthen IRBM as the main contributor for the country through collection of direct taxes. Hence, IRBM as the tax collector agency to the country certainly has great responsibility in ensuring the KPI targets can be achieved.

REDUCING TAX LEAKAGE

Industries

Field Audit & Desk Audit 2016 Field Audit & Desk Audit 2015

% incrementNo. of Solved Cases

Total Additional Tax and

Penalties (RM)

No. of Solved Cases

Total Additional Tax and

Penalties (RM)

Factories 11,919 200,801,297.26 10,159 153,933,502.86 30%

water supply, sewerage and sewage management and treatment activities

635 11,726,070.72 592 7,046,367.80 66%

Repair of motor vehicles and motorcycle, wholesaler and retailer

30,270 274,451,494.06 25,834 231,604,527.04 19%

Communication and information

4,133 55,021,158.39 3,392 4,403,073.26 1,150%

Professional, technical and scientific activities

10, 473 72,790,674.63 9,677 51,786,895.85 41%

Enhancing the Tax Audit Programmes and some other alternatives are among the efforts implemented by IRBM to curb tax leakages.

• Tax Audit: Tax Audit is an action whereby the payee’s business accounts and finance are investigated.

Source: Tax Compliance Department

Schedule 7: Audit performance according to selected industries

• Withholding Tax Audit: Withholding Tax Audit is an investigation of taxpayer’s financial affairs and business records to ensure that the amount of withholding tax charged for each expenditure is paid accordingly to the tax laws and regulations. Monitoring withholding taxes is another way to curb tax leakage. Overall, there was an increase in withholding tax collection in 2016 compared to 2015.

• Aggressive Tax Planning (ATP): IRBM always tries to take proactive steps in addressing taxation challenges, according to the needs and current developments. One of the initiatives taken to address the issues is Aggressive Tax Planning (ATP). ATP is carried out due to the manipulation of tax exemption under Subsection 127 (3A), Income Tax Act 1967; the abuse of Labuan Business Activity Tax Act 1990 (LBATA);

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Source: Tax Compliance Department

Source: Tax Compliance Department

Schedule 8: Withholding tax collection statistics

Schedule 9: Online Sellers Data Sources

Claims on operating expenses by the petroleum industry which did not follow the proper tax regulations (CITA and PITA) and tax evasion by multinational companies has led to a global issue which is known as Base Erosion Profit Shifting (BEPS). In the year 2016, 31 ATP cases by large companies have been solved successfully with a settlement of RM564,044,105.67. Fraud and Tax Evasion Prevention and Eradication: Strengthening the cooperative network with the concerned agencies is among the preventative measures implemented by IRBM to reduce fraud and tax evasion rates.

Year Section 107A (RM Million)

Section 109 / 109B

(RM Million)

Section 109C (RM Million)

Section 109D (RM Million)

Section 109E (RM Million)

Section 109F (RM Million)

Penalties(RM Million)

2016 249.58 2,262.57 0.03 35.57 0.34 1.01 0.25

2015 208.12 2,083.80 0.10 32.89 - 2.43 2.40

This also includes coordinating the tax administration issues. In addition to that, a strategic two-way cooperation with other agencies such as the Communications and Multimedia Commission Malaysia, Mynic, Exabytes and a few others is enhanced in handling the issue. The result of this collaboration, the e-Commerce unit of IRBM has obtained the online sellers’ data to be used as reference before further actions are taken on taxpayers who tried to avoid and evade paying taxes.

Agencies No. of Data Received Actions Notes

Exabytes 25,725 Identify e-commerce websites 24.14% are e-commerce websites

Mynic 100,575 Identify e-commerce websites 6.67% are e-commerce websites

Nuffnang 3,480 Check ITRF submission 88 cases are suggested for desk audit

Lelong 375 Check tax reference number and ITRF submission

28% of taxpayers fail to submit ITRF

Groupon 4,038 Check tax reference number and ITRF submission

In review process

Ipay88 3,850 Check tax reference number and ITRF submission

In review process

Total 138,043

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REINFORCE TAX DEBT MANAGEMENT

Tax Debt Management Strategy Through Prevention, Enforcement and Observation: The collection process is empowered by establishing a cooperative network with IRBM internal departments and other suitable parties. The Revenue Collection Department cooperates with various internal departments to enforce payment of tax arrears by filing a failed arrears case which has been contacted by The Hasil Recovery Call Center (HRCC) to the Profiling and Intelligence Department in tracking the taxpayer’s latest phone number.

Revenue Collection Department also works with the Tax Operations Department in producing Annual Taxation Programme 2016 which relates to the collection activities and at the same time collaborates with the Civil Division of the Legal Department to prosecute any taxpayers who fail to pay tax arrears even after all actions have been taken.

The Implementation of Bilateral Cooperation with Foreign Agencies: The programme was implemented by having a talk on the collaboration of classified information between the IRBM and the Malaysian Department of Insolvency (MDI) on 7th March 2016. Meanwhile, a discussion between the RCD and the Malaysian Companies Commission (SSM [Product and Business Development Section]) was held on 30th May 2016. The discussion has made space for the supply of company profiles to IRBM for free led by TOD; and IRBM also operates and reviews the tax settlement case referred to by Amanah Raya Berhad (ARB) and channels information to the branch. ARB is an agency that implements the administrative functions of the estate, the writing, storage and execution of wills, main trustees and inheritance services in Malaysia.

In 2016, about 12,176 case notifications were received from ARB.

Collection and Stabilization of Collection Structure: To ensure the management of debt is administered effectively and efficiently, IRBM has implemented a few initiatives such as the use of Tax Debt Management System and Debt Management Analytics System (DMAS), Corporate case and high profile individual (HNMI) structure is restructured by setting up a Task Force of Highest Arrears Case Monitoring Committee, Headquarters and Debt Management Unit of Revenue Collection Department are established. Revenue arrears reduction amount statistics using the DMAS-NBA strategy in 2016 5s 37.73% to compare with 33.34% in 2015.

WIDENING TAX BASE

Executing a Comprehensive Research on Widening the Tax Base: Information which is complete and in quality is a very important source for IRBM in executing the responsibilities as a direct tax administrator. A complete information will enable IRBM in making the right decisions in providing the best services to compliant taxpayers or in implementing the appropriate enforcement methods to impose on tax evaders and avoiders.

• Hasil Friendly Visits: Hasil friendly visit Is one of the programmes under compliance and enforcement activity which is implemented at the taxpayer’s business premise. This activity is carried out periodically at national level and at IRBM State Director’s Offices nationwide. Hasil friendly visit is a specialized profiling activity and its an initiative to enhance the effectiveness and the ability of IRBM to boost up the revenue collection. Starting from 2016, for the first time Hasil friendly visit has made improvements whereby it has become a focused visit.In

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Targets and objectives of Focused Hasil-friendly visits are to increase awareness and voluntary compliance among taxpayers, to speed up the tax collection process in reducing the number and amount of tax yet to be paid and also to increase national revenue collection. The number of premises visited in 2016 is lower to 2015 due to the visits were focused on the quality but not the quantity of premises visited.

year No. of visits No. of premises visited

2016 795 15,080

As a result, the focused visits had a great impact because of its clearer and more accurate goal. Among the benefits of the focused visits are as follows:

• Targeting taxpayers and identifying tax issues directly• Facilitate and accelerate follow-up actions taken• Facilitate planning and collection estimation• Combination of audit and profiling expertise gives a good result in getting input of visit cases

Source: Profiling and Intelligence Department

Schedule 10:

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The Tax Administrator That People Trust

• Ensuring Fairness And Equality In Tax System

• Improving Service Delivery To Customer

• Ensuring Assets And Tax Information Are Secured

• Managing Reputations And Improving The Corporate Image

CORE STRATEGY

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IRBM wants the people to be confident with the national taxation system. The taxation system that the people is confident with should be made easy to understand. This system needs to be supported by transparency and fair implementation integrity.

IRBM’s core strategies are to ensure the fairness and justice of the tax system, improve delivery in customer service, ensure asset security and tax information and maintaining reputation and corporate images.

IRBM’s conducts continuous research on proactive ways in ensuring Malaysian tax laws are always current and comprehensive. Tax-related Acts are constantly improved in line with the current taxation development issues and taking into account the policies set by the Government.

Tax guides are issued to facilitate taxpayers for better understanding of their rights thus reducing the rate of disobedient and increase compliance. This can help taxpayers plan and manage their taxes in more organised way while improving the people’s confidence in the seriousness of the IRBM in facilitating their tax administration.

Other tax administrators best practices are always referred to, to ensure Malaysia’s tax systems are comparable to international level tax administrator. This strategy is necessary for ensuring consistent taxation practices in the IRBM’s efforts to be fair

to taxpayers. For this purpose, IRBM participates in collaborative efforts making smart partnership and cooperating with tax administrators of other countries for addressing challenges related to obstacles in transparency of information.

IRBM is committed to providing quality services, meeting the current needs and is transparent. Information technology are utilized widely and innovatively as a catalyst in service delivery. IRBM’s is targeting on increasing online service by 2020 in line with the use of the Internet as a main channel for service delivery.

Increasing a comprehensive and automated self-service network can save taxpayer time in dealing with IRBM thereby reducing the compliance cost.

Information system and facilities security are critical in ensuring the confidentiality of taxpayers information. IRBM’s takes appropriate security measures to protect the information system and facilities from any threats, intrusions and leakage of information.

IRBM also emphasizes high integrity in all Hasilians. IRBM Integrity Plan is based on wise, true, trustworthy, transparent, fair values and gratitude meant to safeguarding reputation and corporate image as well as increase confidence taxpayers towards IRBM. A

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FAIRNESS IN TAXATION SYSTEM

Strengthening International Taxation Laws: To protect the national tax revenue and curb tax evasion activities, IRBM constantly update the Taxation Law and existing Guidelines besides participating enacting new laws based on development and current needs such as the following:

• MAP Internal Guidelines: The original MAP Guidelines (MAP Guidelines) has been uploaded to IRBM’s official website on January 28, 2015. This MAP Guidelines describes the procedure or arrangements for assistance from Competent Malaysian Competition in an effort to resolve related issues taxation with the Country of Contracting Partner. Action is being taken to update The Guideline and expected to be completed at the end of year 2017.

• Transfer Pricing (TP) Rules and Guidelines: The transfer pricing guidelines are issued in parallel with the introduction of transfer pricing legislation under Section 140A of the Income Tax Act (ACP) 1967 and Income Taxation Methods (Determination of Transfer Price) 2012. Revision is being made to update the Transfer Pricing Guidelines 2012 to be in line with changes in tax legislation on international level as well as recommendations at under BEPS Action 8-10 issued by the Organisation for Economic Co- operation and Development (OECD) and Practical Manual on Transfer Pricing by United Nation.

• Petroleum TP Rules and Guidelines: Petroleum Industry is a specialized industry that has various business structures and company groups.

It is divided into two main industry type that is Upstream Industry (Upstream) and Downstream Industry (Downstream). To provide guidance on the aspects of the transaction price transfer involving related companies for this industry, one Transfer Guidelines Petroleum Price and Petroleum (Tax Income - Determination of Transfer Price) is being framed. Review and provision of this document is being taken action by the Legal Review and Drafting Department.

• Foreign Accounts Tax Compliance Act (FATCA) Rules and Guidelines: IRBM are currently preparing laws and Guidelines related to FATCA. It is a new global standard for information exchange automatically(Automatic Exchange of Information (AEOI)) for reducing the possibility of tax evasion.It provides a platform for exchanging non-resident financial account information with resident tax authorities account holder automatically. Tax administrator involved in the implementation of AEOI can send and receive the necessary information every year without having to send a specific request.

• Country-by-Country Reporting (CbCR) Rules and Guidelines: It was developed by the Organisation Economic Cooperation and Development (OECD). CbCR provides a template for multinational enterprises (MNE) with reporting information every year for each tax jurisdiction in which they run business. It involves cross- transaction boundary with other constituent entities with total revenue of the group consolidated in financial year before the financial year reporting at least RM3 billion.

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• Common Reporting Standards (CRS): CRS was developed by the OECD to place a standard automated exchange model financial account information for tax compliance purposes. To ensure all financial industries can perform procedures according to the standards set out in the CRS, one law and guidelines of its implementation should be made. Starting 23 December 2016, Income Tax Rules (Auto Exchange of Financial Account Information)2016 has been gazette as a law which enforces CRS implementation by financial industries in Malaysia.

• Digital Economy Review: Taxation Study of Special Digital Economy Activities Working Committee is created in February 2016 to submit recommendations and amendments to the Budget Committee 2017. IRBM also joined the Technical Taxation Committee under National E-Commerce Council (NeCC) and have submitted research paper titled Current Issues And Limitations With Regard To Taxation In The Context Of Digital Economy /E-Commerce to the Ministry of Finance for the purpose of the presentation in the event.

IMPROVING SERVICE DELIVERY TO CUSTOMERS

Improving Service Quality: Implementation of fair, efficient and effective taxation system is the core for tax administrator, for its function to be recognised and appreciated by people, for the wellbeing and prosperity the country. Therefore, IRBM always strives to improving its delivery service to facilitate taxpayers to fulfill their respective tax responsibilities.

• Organisational Committal Statement: Through the introduction of Organisational Committal Statement, proven to provide various positive impact to the organisation of which can be seen through an increase in total Income Tax Return Form (ITRF) delivery through e-Filing this year, 3,677,539 or 6.8%, the highest ever amount received in e-Filing history compared to 3,442,933 in the previous year. Here is an Organisational Committal Statement applicable to IRBM:

- YOUR TAX SERVICE PROVIDER Provide positive impact and customer-friendly to taxpayers by the Frontliners now known as the Hasil Care Group

- YOUR TAX EDUCATION PARTNER Give a more friendly image and informative during Hasil-Friendly Visits

- YOUR TAX INDUSTRY SPECIALIST Displays the expertise of Multinational Tax and Petroleum Branch Officer

- YOUR TAX COMPLIANCE PARTNER As a commitment to realizing and increase tax compliance by the Investigation Branch Officers (CSi)

• Customer Satisfaction Index Study: Implemented on March 2016 and ends in Nov 2016. The study was conducted by a third party consultant, HB Academy. 100% implementation of customer satisfaction index with the achievement of 88.5% overall. While IRBM counter customer service satisfaction index achievement is 87.2%. In 2016, Corporate IRBM KPIs are introduced under Customer Focus 2 KRA. The KPI has been set at 75% with a weight of 3% of overall KPI achievement.

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• HASiL4U 2016 The HASiL4U 2016 programme was conducted on the first of March 01 with the theme “HASiL Your Feel Good Partner”. This programme is a year-round activity conducted by the State Director’s Office and IRBM branch offices all over Malaysia with the purpose of opening a service counter HASiL4U inside and outside of the same office location for exhibition, expo, MobileCTC, and Open Day.

The objectives of the HASiL4U Programme are as follow:- Encourage taxpayers to file ITRF electronically via e-Filing and m-Filing and ensure ITRF is filled correctly and accurately- Encourage taxpayers to use electronic service provided by IRBM via the platform-ezHASiL- Providing advice on taxation matters to taxpayers

Ensuring that Hasilians Comply with Professional Standards: The efficiency and effectiveness of Local Service Counters at IRBM branches are frequently assessed to ensure that the branches comply with the guidelines set. The services provided must have the elements uniformity, reliability and comfort to customers, in line with IRBM service motto“The Best Service For You”. In addition, the problems faced by branches that cannot comply with the guidelines are identified and improvements are made to improve quality of delivery system of local service counters. Among the improvements proposed are, any counter employees with 10 year services are required to be transferred to another / unit / branch to avoid burdensome working pressure which causes health problems. Rotation of the employees are made at least once every 3 years so they can master working in different units. Job rotations should be implemented fairly and balanced to increase job satisfaction among IRBM employee.

Effective Action Survey:This study has been conducted to determine whether the collection branch / unit take the appropriate actions on current debit cases and arrears of revenue. Revisions are also conducted by checking and reviewing the effectiveness of actions taken toward collection efforts to increase revenue collection by identifying problems faced by the branches.Among the proposed improvements are:• Every installment Payment Scheme issued should be monitored to ensure payment is met. Further action should be taken on taxpayers who fail to comply with the Installment Payment Scheme issued. The branch should monitor all CP91 cases issued and release the XC18 form if the taxpayer fails to make payments.

HASiL4U Counters opened in 2016:

Visitors

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• The Collection Unit needs to ensure that the taxpayers address used is the correct and the most up-to-date address so that every registered summons can be submitted and the judgment can be passed quickly.

• Travel restrictions are an act imposed on taxpayers to fully pay their remaining tax arrears. Therefore, before taking action on travel restrictions, the Collection Unit must ensure the taxpayer’s address is correct and the most up- to-date so that certificate / letter of enforcement of travel restrictions is received by the taxpayer.

• The dispersal of the company’s collection file to the branches should be accompanied by a sufficient and experienced officer to handle the company’s collection and civil suit case so that the case can be properly managed to ensure that debits can be collected.

Ensuring that the Latest Information Disseminated are Transparent and the Most Up-to-Date:

• Social Media: Social media contents are uploaded from time to time, with the latest information to ensure tax-related information reachs the users. The IRBM Social Media Administrator is responsible for managing media content and ensures that tax-related information is current and relevant. Starting from November 2016, the social media monitoring system has been implemented to ensure the management of the IRBM media can be managed more systematically. As of December 2016, the numbers of likers on IRBM’s official facebook has reached 411,224.

• Portal: The IRBM official portal is an online medium that allows users to make quick access to any available general information regarding IRBM. Users can get various information by accessing links according to their needs. Tax- related references, downloading tax forms and other important up-to-date alerts are also available to users without the hassle. IRBM’s official portal facility helps a lot of users especially in the dissemination of the latest tax information. The official portal website of IRBM is available at www.hasil.gov.my. Throughout 2016, the official portal of IRBM managed to record a total of 30,962,414 visitors.

Ensuring Assets and Taxation Information Security

Today, online communication and transactions are an important component in IRBM delivery services. However, online transactions may also pose a risk of fraud such as individuals who cheat other taxpayers and citizens of Malaysia by claiming themselves as representatives appointed by the IRBM to obtain certain information or to claim tax payments via e-mail. IRBM like all other online service providers are always committed to ensuring the safety of taxpayer’s online activities. IRBM cares about this issue by constantly monitoring the system and controlling customer records from any fraudulent activity. As a reminder to taxpayers, information on any case and types of fraud will be announced and promptly identified from time to time. The channel aduan@hasil.gov.my is ready to assist anytime for the convenience of the taxpayer to make any inquiries and complaints.

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e-Filing is one example where taxpayers tax information is protected. e-Filing is a service that enables individuals, companies, employers and others to fill, digitally sign and send ITRF online via internet.

All tax information is covered by the following security features:- Secure Socket Layer (SSL) / Security Guarantee- Public Key Infrastructure (PKI) / Public Key Infrastructure- Secure Data Custody- Authenticable (authentic)- Integrity- No Doubt

In addition to a guaranteed data security and protection of other tax information, the use of e-Filing is also easier and more manageable, accessible at any time, accurate tax calculation, ITRF acceptance confirmation and expedite refund process.

Preserving Reputations And Corporate Images

Strengthening Good Governance: Strengthening the quality management system to improve the efficiency and effectiveness of IRBM’s operations implemented through the MS ISO 9001: 2008 internal audit programme. The results of this internal audit have been presented during the Management Review Pre-Meeting on 25 August 2016. The improvements have been made by the respective process owner’s department. The internal audit programme for MS ISO / IEC 27001: 2013 has been carried out on the scope of “Information Security Management System for Operation of e-Filing System at IRBM Data Center, Cyberjaya”.

In 2016 there were amendments made to the Internal Audit Procedure document where version 1.4 was issued and approved by the Deputy Chief Executive Officer (Management) on 13 June 2016. Internal Audit Visit for 2016 was conducted from 12-18 August 2016. The audit report was approved by the Deputy Chief Executive Officer (Management) on 14 September 2016 and was presented at the Joint Management Representative Meeting (MBWP) No. 2/2016 on October 4, 2016. Internal Audit Visit on Internal Audit Procedure was conducted on 22-23 October 2016 and the report was completed on October 23, 2016. A total of 2 OFIs were raised to the internal auditors. Reviews for OFI’s reply was completed on October 18, 2016 and all cases were closed before SIRIM’s audit visit was made on 26-28 October 2016.

Scope Branch

The individual payroll process refund for e-Filing cases and

m-filing Branch

IT DepartmentMiri branch

Seremban branch

External Audit Implementation Procedures Company Case

(Audit Focus)Melaka branch

Implementation Process of Acceptance,Writ Summons

Preparation And Filing And Claim Statements For OG Files For

Revenue Tax Cases

Kota Bharu branch

Payment process temporary release procedure and cancellation of travel

restrictions individuals other than company directors

Kuantan branch

Management and support procedures

All IRBM Departments / owner process

involved

MS ISO 9001:2008 Scope

Source: Tax Compliance Department

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Empowering the Roles of Integrity Care Officer (ICO): Module 1 The ICO Role Empowerment Course to IRBM’s ICO was held at the Malaysian Academy of Taxation Kuching on 28 March 2016 until 1 April 2016. 81 ICO took part in this course. The extension of the course, the ICO IRBM is responsible for conducting Integrity Training at their respective departments / states / branches using the Integrity Training Module provided by the Integrity Division, Inspectorate and Integrity Department.

Monitoring the Implementation of Integrity Initiative Under the Corporate Integrity Pledge (CIP): Monitoring two integrity initiatives under the Corporate Integrity Pledge (CIP) IRBM 2016 and No Gifts & Hospitality Policies have been conducted on an ongoing basis. The IRBM Information Empowerment Policy which has been uploaded at Hasilpedia allow informers to submit any complaints regarding malpractices, corruption and abuse of power involving IRBM officials.

A bunting template for “No Gift & Hospitality Policy” are displayed in appropriate spaces such as at local counters and locations easily seen and accessible to the public.

Implementation of programme and monitoring of the Action Plan under the IRBM Integrity Plan (PIL): Implementation Report of the IRBM Integrity Plan 2015 is based on an observation of the Scope of Programme / Activity Implementation Analysis under Strategy 1 to Strategy 6 and Analysis of Performance Implementation Agency Performance.

Analysis results are as follows:i. A total of 61 out of the 61 PIL programmes / activities have been successfully implemented in 2015 which is 100% achievementii. EXCELLENT achievement is at 76.60% comprising 64 Implementing Agencies. Executing Agency that reached a very good level of 16 agencies. While the analysis for the achievement level of GOOD recorded 5 agencies involved. The analysis found that an agency was categorized at WEAK level.

Strengthening Integrity Complaint Management IRBM’s Officers: IRBM has always been serious about IRBM’s misconduct in executing official duties. Therefore, the IRBM has taken the initiatives to illustrate the channel procedure complaints on the integrity of officers at the IRBM website under the Revenue Integrity Programme. Integrity Complaint of IRBM officer via email integriti@hasil.gov.my sent directly to IRBM’s Integrity Officer who is responsible in ensuring the integrity level of the IRBM officer is at a high level. Integrity complaints are conducted by the Integrity Division, the Department of Inspectorate and Integrity through the Special Committee Meeting of Integrity Complaints of IRBM Officers from time to time based on integrity complaints. The IRBM integrity complaints are recorded in the Integrity Data System (SPEDi) for monitoring purposes.

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Organising Integrity Day: 2016’s Integrity Day with the theme SYNERGIZING INTEGRITY which coincides with the annual theme of the IRBM SYNERGY BEYOND BOUNDARIES illustrates the importance of synergy within the organisation. In concept integrity is synergised as a whole in the success of IRBM’s role as THE BEST TAX ADMINISTRATOR that contributes to nation building.

Among the key points in organising the 2016 Integrity Day are:• Integrity needs to be nurtured and cultivated from home to produce excellent human capital in the world and hereafter.• The culture of Integrity in an organisation can increase productivity in a more established way.• Leaders play an important role in the development of a country.

Increasing IRBM’s Reputation:Throughout 2016, the International Taxation Department (ITD) manages the involvement of 171 officers comprising of top management and IRBM officials to participate in international conferences, seminars, workshops, courses and meetings abroad. A total of six foreign delegation groups involving 212 officials from various tax administrations and other international organisations are also managed by the ITD in 2016. ITD has also conducted four external study tours visits involving 54 IRBM officers.

International Courses, Workshops, Training and Tours:i. Asia Pacific AEOI Implementation workshop in Canberra, Australia; 16 - 18 February 2016ii. Tax Evasion and Compliance Strategies workshop in Tokyo, Japan; 09 - 11 March 2016iii. Conducting Financial Investigations (Foundation) Course in Rome, Italy; 11 - 22 April 2016

iv. Tax Administration Diagnostic Assessment Tool (TADAT) at Canberra, Australia; 26 - 28 April 2016v. International Taxation for Asian Countries Course in Tokyo, Japan; 10 - 28 May 2016vi. IBM Z Systems Technical University training in Munich, Germany; 11 - 19 June 2016vii. SGATAR-OECD Transfer Pricing Workshop & SMU-TA Center for Excellence in Taxation Annual Conference in Singapore; 05 - 09 September 2016viii. OECD International Academy For Tax Crime Investigation: Managing Financial Investigation (Intermediate) Programme in Rome, Italy; 12 - 30 September 2016ix. Century Financials Enrichment Training & Technology Update in Bangkok, Thailand; 21-24 September 2016x. Training and Transfer of Dense Wavelength Division Multiplexing Technology (DWDM) in Shenzen, China; 17 - 21 October 2016xi. BM Technical University Training (Virtual Library VE TS7740) in Baltimore, USA; 29 October - 6 November 2016xii. Study trip to Korea National Tax Service (NTS) and to CENSOF Site Office (CIAT) in Seoul, Korea; 20 - 22 December 2016

Organising International Conferences:The 13th ATAIC Annual Technical Conference 2016 was held on 26-29 September 2016. The conference was attended by 107 delegates from 21 ATAIC member countries and 2 ATAIC observer countries. In addition, the conference was also attended by special guests from the National Tax Agency (NTA), Japan and 3 international organisations namely the Commonwealth Association of Tax Administrators (CATA), International Bureau of Fiscal Documentation (IBFD) and International Tax Compact (ITC). Some local institutions and agencies have also participated

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in this conference. In order to achieve the mandate to encourage cooperation and dialogue among its members, the 13th ATAIC Annual Technical Conference was held to publicly discuss and share ideas and experiences on issues pertaining to the theme of the Conference that is “Enhancing Efficiency in Tax Administration”. The topics of discussion during the Conference were “Big Data Analysis in Tax Administration” and “Communication Strategies in Tax Reform”. These topics have been selected based on its relevance to current issues relevant.

International Network: IRBM continues to actively promote engagement while maintaining international and domestic collaboration and networks.

IRBM through ITD continues to maintain long-standing relationships with international organisations such as:i. Commonwealth Association of Tax Administrators (CATA)ii. Study Group on Asian Tax Administration and Research (SGATAR)iii. Association of Tax Authorities of Islamic Countries (ATAIC)iv. Inter-American Center of Tax Administrations v. Organisation for Economic Co-operation and Development (OECD) vi. International Bureau of Fiscal Documentation (IBFD)vii. United Nations (UN) viii. International Monetary Fund (IMF) ix. Asian Development Bank (ADB)

IRBM has also increased international relations with tax administrators and other establishments and continues to communicate and collaborate with the organisation by participating in international conferences and meetings as well as assisting in organising it.

IRBM also manages the active involvement of IRBM officials in OECD meetings as well as conferences that focus on Working Party, FTA Joint International Tax Shelter Information and Collaboration (JITSIC), Global Forum AEOI Working Group, Joint Meeting of the FTA MAP Forum; Task Force on Tax Crimes and Other Crimes (TFTC), WP 11 on Aggressive Tax Planning and Working Party No. 6 Meeting on the Taxation of Multinational Enterprises. Involvement of IRBM also continues to be active in the Meeting of the UN Tax Committee’s Subcommittee on Transfer Pricing and also the Committee of Experts on International Cooperation in Tax Matters.

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Effective and Efficient Working Systems And Procedures

• Developing and strengthening the Information and Communication Technology Systems

• Enhancing Efficiency and Effectiveness Costs

• Improving Work Procedures

• Cultivating the Culture of Risk Management

CORE STRATEGY

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IRBM will constantly will improve the standards of our service to ensure excellent service is provided to customers. IRBM’s strategy is to develop and strengthen the information and communications technology system, improve efficiency and effectiveness cost, improving work procedures and inculcating risk management in the work processes.

Compliance rates can be increased when information can be obtained swiftly, accurately and acquired anytime. Stabilization of the tax system application is made so that information can be accessed from various locations and from any mobile electronics devices. The use of data analysis tools and automated additions is made to improve existing work processes. This contributes to the effectiveness of internal costs with the allocation of strategic resources.

Work procedures are streamlined continuously to reduce bureaucratic red tape and speed up the decision-making process. Initiatives aimed at enhancing the effectiveness of the information technology system will be implemented under this core.

IRBM also embraces the risk management culture in all work processes to minimize threats that could affect the ability to achieve its goals. Risk profiles are developed and risk is monitored in strategic planning initiatives to enable them to be managed efficiently and effectively.

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LHDNM TOOLS

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2016RM Million

2015RM Million

IRBM Payment Counters

Total 15,321.82 16,022.63

Bank Counters

CIMB Bank Berhad 352.26 323.85

Public Bank Berhad 537.59 520.41

Pos Malaysia 3.71 2.068

Total 893.56 846.33

Internet Banking

CIMB Bank Berhad 1,048.42 656.62

Public Bank Berhad 314.63 214.58

RHB Bank Berhad 660.70 517.51

Alliance Bank Berhad 168.53 105.52

Maybank Berhad 1,179.03 848.01

EON Bank Berhad 189.96 136.79

OCBC Bank Berhad 282.08 186.38

Citibank 900.18 969.26

HSBC Bank 227.37 95.23

AmBank 57.70 37.26

Bank Islam 3.58 0.224

Pos Malaysia 0.20 0.153

AFFIN Bank 0.06 -

e-PCB & e-Data PCB 130.33 47.51

Total 5,162.77 3,815.04

OVERALL TOTAL 21,378.15 20,684.00

DEVELOPING AND STRENGTHENING THE INFORMATION AND COMMUNICATIONS TECHNOLOGY SYSTEMS

Modernizing Application Systems and ICT InfrastructuresThe use of information and communication technology (ICT) has always been enhanced in the development and implementation of various service improvement programmes introduced by the IRBM. Among the initiatives implemented by the IRBM in 2016 are improvements involving ReMS, DMAS and “Taxpayers Ledger” display application system.

The “Taxpayer Ledger” display application has been completed and is now being used for monitoring of tax arrears payment compliance purposes by Revenue Collection Department. Hence, it is also aimed at revising the current ledger position by taxpayers during the submission of BNCP via e-Filing.

EzHasil services are also streamlined through the enhancement of payment methods such as ATM, Tele Banking, cash and cheque deposit machines (CDM). In addition, the appointment of tax collection agents has been upgraded to 14 banks and Pos Malaysia as well as e-payment for example ePCB, eData PCB, ByrHasil and online credit cards. The improvements that are being implemented have given a lot of facilities for taxpayers especially for PCB payments by employers.

Development of withholding tax receipt applications through a banking firm is still in the discussion stage following the focus on the development of income tax payment methods using credit card and debit card at IRBM payment counter and the use of ‘Virtual Account’ for the monthly payment of MTD by

Schedule 1: Tax Payment Methods and Total Collection

Source: Revenue Collection Department

employers. The ‘Virtual Account’ method may also be used as a method for online payment involving other taxes such as withholding tax and offshore business activities.

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• Analyse the lists of action taken on collection issues• Combine existing data in a data warehouse• Review data with collection process• Assess paying capability by using a 1-10 score known as “NBA points” whereby 10 points shows the highest tax paying capability• Recommend the effective collection action “Next Best Action (NBA)”

Statistical Package For Social Science SPSS TACOS Tax Collection Optimizer Solution

Statistical Package For Social Science Tax Collection Optimizer Solution

Debt Management Analytics System

Analyzing taxpayers behaviour -The probability of failing CP204 -The probability of failing CP500 -

The probability of failing to pay tax by companies -The probability of failure to pay taxes by individuals -

Section 107A & 109 involving ScreenWorth of Increase, Increase and Dishonoured Cheques.

List of underpayments of WHT cases exclusion of S107A and WHT quotation lists.

Phase 1

Phase 2

New ModuleReMs-WHTWithholding Tax

Schedule 2: e-DAFTAR Statistics for Year 2016

Schedule 3: e-Services Statistics

Category Individuals Companies Employers

No. of application 112,466 25,059 13,992

Successfully registered application 110,615 21,146 13,625

Source: Tax Operations Department

Source:Tax Operation Department

ServicesNo. of transactions

2016 2015

e-Bayaran 189,257 152,172

STAMPS 3,012,186 2,529,044

e-PCB 137,390 85,701

e-Data PCB 33,951 25,484

e-Kemaskini 75,070 61,834

e-SPC 1,899 1,377

e-LEJAR 352,583 73,151

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e-Filing Performance for 2016Compared to in Year 2015

e-FILING Method to

electronically fill and submit Income Tax

Return Form

TAeFTax agents is able to submit Income Tax

Return Form on behalf of their client online

e-LEJARCheck Personal

Information, Ledger Transaction and Latest

Tax Balance Information

e-DATA PCBFor employer to check CP39 file format and

upload the txt file to be submitted to IRBM via

online

e-BaSSubmit e-Form in

clusters for registered tax agents

e-KEMASKINIAn application that facilitates taxpayer to update Personal

Profile, Relief Information and Company Profile

e-DAFTARRegister as individual

taxpayer, company and employer

m-FILINGSubmit Income Tax

Teturn Form (e-BE) via mobile devices

e-DATA PRAISISystems that allows

employer to check and verify the submitted

prefill data

ByrHASiLAn electronic

application for payment of income tax through

appointed banks

PCB CALCULATORSupport system to calculating MTD

e-SPCSystem for applying

tax clearance letter by employer via online

e-RESIDENCECertificate of Residence

(COR) is issued to confirm the resident status in Malaysia

STAMPSAssessment and Stamp Duty Payment system

via online

e-PCBFor employer without computerised payroll

system to calculate and check MTD

MyTaxLatest tax information activities,

acknowledgement receipt of Form e-BE / e-B / e-M / e-MT,

e-Lodgement and refund notification

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INCREASING EFFICIENCY AND EFFECTIVENESS COST

Effective and Quality Service and Management: The Malaysian Tax Academy (MTA) is a training institution entrusted to train IRBM employees to carry out their duties more professionally and competently. MTA is responsible for implementing quality training programmes and in line with current requirements in order for continuous learning culture to be instilled among officers.

The MTA quality policy has outlined efforts to enhance IRBM’s human resource skills towards integrity-based excellence through effective training. MTA is committed to always give excellent training programmes so that it meets the needs of customers in line with the requirements of the Quality Management System MS ISO 9001: 2008. MTA is also responsible for training the staffs to be more knowledgeable, highly performed, multi-skilled, have integrity, creative & innovative and at the same time assist in saving the administrative and management costs.

The implementation of the courses through e-learning applications is widespread at the Malaysian Tax Academy. Application development is always monitored and updated to maintain the quality of service provided. Continuous support training to the officers by providing TOT courses from time to time as e-learning is constantly undergoing changes based on the latest developments in the technology system.

The MTA quality policy has outlined efforts to enhance IRBM’s human resource skills towards integrity-based excellence through effective training.

Schedule 4: e-Learning Application Course

Schedule 5: TOT for Training Officers

Training Center No. of Courses

Legal 43

Account & Audit 9

Management 4

Information Technology 2

Course Date of Implementation

LMS and i-Spring training for Finance Department 23 Feb 2016

LMS and i-Spring training for Civil and Prosecution Department 9 June 2016

LMS and i-Spring training for Revenue Collection Department 14 Nov 2016

Source: Malaysian Tax Academy

Source: Malaysian Tax Academy

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IMPROVING WORK PROCEDURE

Harmonising Work Procedures Corresponding with the Best Tax Administrator: IRBM strengthens existing work processes and procedures by issuing clear operational directions regarding services on tax credit balance for companies in the process of winding up. Throughout 2016 there were 6 Operational Circulars, 13 General Memos and 54 Special Memos regarding the process and work procedures have been issued by Revenue Collection Department for guidance on the implementation and action of the entire IRBM branch offices.

Updating and Strengthening Collection Procedures: This is implemented on an ongoing basis in line with the proposed amendments to the act and the law by submitting relevant amendments proposals for the Drafting Committee, IRBM’s Executive Management and Ministry of Finance’s consideration. Five proposals were submitted for consideration that is the proposed amendments of the act which requires taxpayers under Co-operative, Limited Liability Partnerships, Trustees, Unit Trusts / Real Estate / Real Estate Investment Trusts / Property Trust Funds categories to submit tax estimation (CP204) electronically (e-Budget). Suggestions are as follows:

• Integration of taxpayers data and e-Filing system to be more flexible: - Improving the functions of STSNC for the preparation of statement of account position so that it can be amended and updated. (Completed and used) - Odd payment cases need to be notified as a conspicuous status is in the STSNC system. (Completed and used) - Status of action for no remit MTD bankruptcy cases is required to be in STSNC. (Completed and used)

- Control of TBBC Vot through the ERAS / Vot system for the provision of the Tax Refund Fund (TBBC) is now controlled using the ERAS system. It allows the fund distribution and approval controls to be made more easily by the Revenue Collection Department.

• Improve the Knowledge of Collection Officers at Branches Among the steps taken are: - Clarify policies, collection policy and performance and finding the problem solving method. - Organise the Collection Convention Programme. - Collection action improvement workshop on company directors under section 75A of the ITA 1967. - Produce a “Resolution of Collection Actions Improvement on Company Directors” workshop. - KPI briefing and statistical monitoring of 2016 collection for each VAT.

• Monitor Implementation of Collection Activities in accordance with Collection Policies: Act as Policy Help Desk and Operation Collection for any technical and collection issues raised by users at the branch. The focus of the new collection policies implementation is the Annual Work Targets of Collection Officers Based on the Norms of Work citation of Ringgit Malaysia (RM) from 2016.

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Value Audit Management System (VAMS): Implementation of 2015 VAMS for Headquarters sector involves 22 Implementation Agencies inclusive of departments and branches of the IRBM Headquarters including the Malaysian Tax Academy Bangi. The VAMS aims to identify the effectiveness of the implementation of moral value programmes and other related programmes as well as develop strategies to enhance the practice and appreciation of moral values in the IRBM. In addition, VAMS is also used to measure and identify level of moral values in practice and improving the implementation of a programme.

RISK MANAGEMENT ENCULTURATION

Robust Enterprise Risk Management: This programme is implemented to identify emerging risks and strategies to mitigate these risks before they affect whole organisation performance.The review and submission of feedback from branches and process owners who become auditees to the relevant levels of the National Audit Department have been adjusted as needed. Two studies have been conducted for the purpose of Civil Procedure Management against the Company and Tax Arrears Management.

The results of VAMS 2015 Headquarters Sector indicates the level of practice in IRBM reaches 84.51 points at

GOOD level which is “Acceptable with Continued Effort to Improve”

0

10

20

30

40

50

60

70

80

90

100

99.4

4

83.6

3

Valu

e Pr

actic

e Re

cord

s

Idea

l Val

ue In

dex

Pers

onal

Val

ue In

dex

Org

aniza

tiona

l Val

ue In

dex Clie

nts

Feed

back

s

Inde

ks K

ompo

sit

78.3

3

73.6

5

94.2

3

84.5

1POIN

TS

POIN

TS

POIN

TS

POIN

TS

POIN

TS

POIN

TS

Chart 1: Value Audit 2015 Results

Points Value Level of Practice Interpretation

> 90 Excellent and should be maintained Excellent

80 – 89 Acceptable with continued effort to improve Good

60 – 79 Need improvements and monitoring Moderate

< 59Very necessary

improvements with monitoring

Weak

Source: Inspectorate & Integrity Department

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As a result, Overseas Travelling Restrictions under Section 104 of the Income Tax Act 1967 and Section 22 of the RPGTA 1976 for all categories of taxpayers at IRBM have been imposed.

Schedule 6: Ban from Leaving the Country

Section

Registered

Registered Cases until 31.12.2015

Amount(RM Million)

Registered Cases in 2016

Amount(RM Million) Total Cases Total Amount

(RM Million)

Section 104 156,631 3,853.25 44,967 585.55 201,598 4,438.79

Section 22 17,115 262.42 3,359 59.34 20,474 321.76

Section

Cancelled

Registered Cases until 31.12.2015

Amount(RM Million)

Registered Cases in 2016

Amount(RM Million) Total Cases Total Amount

(RM Million)

Section 104 55,319 1,298.03 23,527 515.91 78,846 1,813.93

Section 22 7,864 122.94 2,572 45.40 10,436 168.34

Still effective Until 31.12.2016Sec 104 122,752 2,624.86

Sec 22 10,038 153.42

Number of cases and amount effective until 31 December 2016 (Including registered cases before 2016) – Source: Revenue Collection Department

Meanwhile feedbacks from the branch offices and process owners involved was submitted to the Federal Sector of the National Audit Department, Auditor-General, Corporate Strategy Division of the Ministry of Finance, Internal Audit Unit, Ministry of Finance and Public Account Committee (PAC) and AG’s Dashboard for further action.

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IRBM As A Preferred Employer

• Becoming an Organisation with Optimal Workforce Size and Structure

• Developing Competent And Professional Human Resources

• Providing A Conducive Working Environment

• Strengthen Leadership And Expertise

CORE STRATEGY

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IRBM intends to be an employer of choice to individuals of high caliber and relevant expertise in line with the increasingly dynamic tax environment. In an effort to achieve this goal, IRBM focuses on four strategic objectives that is becoming an optimal organisation, providing a conducive working environment, developing competent and professional human resources and strengthening leadership and governance.

Human resource governance is strengthened through the implementation of an organisation that has an optimal staff positions size and structure by increasing the efficiency level as well as reducing the waste of human resources. The hiring of the new workforce is streamlined with emphasis on selection of criteria to ensure only the best candidates are accepted as Hasilians. Each initiative is designed to translate the IRBM commitment to provide a conducive working environment based on the “Feel Good At Work” concept.

IRBM offers decent service remuneration as well as competitive career paths. Career opportunities

with IRBM also provide the best tax experience and expertise. Emphasis is given to encourage balance between work and personal life. A healthy and safe working culture is practiced to ensure the comfort and well-being of all Hasilians.

IRBM understands the importance of competent and professional Hasilan in providing quality tax services. Hasilan is given training opportunities internally and internationally to enhance their skills, knowledge and expertise in line with current progress. One of the successful organisational elements is the ability to change according to current environmental requirements. To make the transformation a success requires leadership that can lead the change and set a clear goal to attain all the results.

IRBM will continue to implement development programmes to strengthen the IRBM leadership. This is done through the strengthening of knowledge and skills of leaders and future leaders so that they can drive Hasilians towards the achievement of organisational goals.

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BECOMING AN ORGANISATION WITH OPTIMAL WORKFORCE SIZE AND STRUCTURE

Strengthening and Aligning Human Resources:IRBM capacity is always strengthened annually to ensure planning made can be implemented on an ongoing basis. The transformation in management as well as the enhancement of staffing and each settlement has been arranged according to the expertise to ensure that the work is done wisely. IRBM in 2016, has implemented the strengthening of organisational and staffing structure according to current and up-to-date requirements by creating a total of 500 new posts covering assessments, law, accounting, information technology and administration. Strengthening talent acquisition business has also been implemented to get “the right people at the right time at the right place”.

Competitive Reward System: IRBM has a competitive and attractive rewards system to become an employer of choice. Various interesting rewards have also been provided to Hasilian such as end of service benefit, hotel panels and hospital insurance. In addition, IRBM also recognizes Hasilian that has enhanced the image of IRBM at international level, national level and organisation level by creating Hall of Fame and Wall of Fame.

DEVELOPING COMPETENT AND PROFESSIONAL HUMAN RESOURCES

Providing Training To Enhance and Improve Potential Talent : - PCB Audit Course for employees is performed by providing training in e-auditing workshops. The number of employees who have been successfully trained in e-auditing payroll workshops are as

many as 97 audit officers under Office of Federal Territory of Putrajaya, Kedah / Perlis, Pahang, Kuala Lumpur (Large Taxpayer Branch), Sabah and Sarawak.- e-Commerce briefings were conducted at nine IRBM branches to provide information related to online business. The briefing is related to auditing, profiling, e-Commerce guidelines, e-Commerce manuals and current issues.

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Training Center

Planned Course

Ad-Hoc Course

Organised by External

Parties Participants

Account and Audit 18 1 6 634

International/ Research

and Innovation

13 8 0 656

Legal 45 1 7 1,658

Information Technology 22 3 0 992

Management 23 23 1 2,476

MTAKuching 23 0 13 1,022

Providing Training Programmes That Meet Current Needs:- Training Needs Analysis (TNA) is implemented so that courses are always relevant to customer needs. Of the 290 responses received, the majority of proposals received were related to GST, fishing industry , e-commerce and MLM.- All the course contents have been revised before the course is carried out taking into account the current changes that occured. Among the training centers involved in reviewing and taking action on course contents are as follow:

Training Center Actions

Account and Audit

Update advanced course notes with latest amendments to MFRS

Develop five new simulation cases for advanced audit courses

Prepare interview technical notes for Level 2 KAP Course

LegalReview and update all course content to be in latest amendments to ITA 1967, PIA 1986 and

current amendments

Information Technology

Review and update course content for BasicService Courses (ICT module)

Management Review and update relevant course content

Schedule 1: Course Content Coordination

Source: Malaysian Tax Academy

- Evaluation of the course using e-OMR was conducted to evaluate the effectiveness of each course conducted. Result of assessment, 80% of the average score for the overall assessment of the course has been achieved.

- Implement the planned courses, Ad-Hoc courses and courses organised by outsiders

Course Objective 91%

Content 91%

Training Methodology 91%

Course Facilitiesc 91%

Other Criteria 90%

Average Score 90%

Schedule 2: Average Score Achievement

Source: Malaysian Tax Academy

Schedule 3: Course Types And Participants

Source: Malaysian Tax Academy

Implementing Competent Human Development Programmes / Projects Through Scholarly Writing and Knowledge Sharing:

• Cooperative training programme with international organisations: IRBM has implemented joint training programmes with the Organisation for Economic Co-operation and Development (OECD), Commonwealth Association of Tax Administration (CATA) and International Bureau of Fiscal Documentation (IBFD).

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Cooperative training programme with the Ministry of Foreign Affairs, Malaysia were also made to strengthen bilateral relations.

• National Tax Conference (NTC) Programme: Aims to strengthen the collaboration with CTIM in providing exposure on current tax issues as well as providing discussion platforms on current issues to tax practitioners. The NTC 2016 programme was held at the Kuala Lumpur Convention Center from 9 to 10 August 2016 involving 1,970 participants.

• Tax Smart Camp (Kem Cerdik Cukai) Programme: This programme aims to deliver early education to incorporate the basic of tax understanding and skills to youth. The programme was held at MTA on 27 November to 2 December 2016 involving 214 form six students and 54 teachers from 52 schools throughout Malaysia.

PROVIDING A CONDUCIVE WORK ENVIRONMENT

Each initiative is designed to translate IRBM’s commitment to provide a conducive working environment based on the “Feel Good At Work” concept. IRBM offers a service remuneration as well as competitive career paths. Career opportunities with IRBM also provide the best tax experience and expertise. Emphasis is given to encourage balance between work and personal life. A healthy and safe working culture is practiced to ensure the comfort and well-being of the Hasilians. IRBM understands the importance of competent and professional Hasilian in providing high quality tax services.

Hasilan is given training opportunities internally and internationally to enhance their skills, knowledge and expertise in line with current progress.

One of the successful organisational elements is the ability to change according to current environmental requirements. To make the transformation a success requires leadership that can lead the change and set a clear goal to all Hasilians. Throughout 2016, IRBM has implemented various development programmes to strengthen IRBM leadership. This is done through the strengthening of knowledge and skills of leaders and future leaders so that they can drive Hasilian towards the achievement of organisational goals. Among the initiatives implemented are as follows:

• Potential quality management of human resources: Management Training Center, Malaysian Taxation Academy has sent the course lecturer in the specific fields and specializations based on current requirement in domestic and international needs in order to develop the lecturer’s expertise in their respective fields as in schedules 4 and 5.

• Cultivating Continuous Life-long Learning: Optimising the seasoned lecturers expertise which exceeds five years by providing TOT (coaching or mentoring) to new lecturers as in schedule 6.

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Course Name Participants

Resolving Complexities In Accounting Workshop For GST 1

NTC 2015 (Budget Proposal Audit & Investigation Facts Or Myths) 3

GST Tax Planning Workshop 1

BEPS Seminar 1

Impact Of GST Workshop 1

MS Iso 9001-2016 Quality Management 10

Self-Development And Instilling The Culture Of Inovation 2

MS Iso 9001-2016 Quality Management 10

Investment Analysis 1

Application Of Behavioral Finance And Money Personality In Financial Planning 1

Forensic Audit & Forensic Accounting 2

Briefing On Imposition Of Goods And Services Tax 46

Transitioning Existing Businesses In Compliance With The Companies 1

National Tax Seminar 3

NTC 2016 4

Total 89

Course Name Participants

Certified Practitioner of Hypnotherapy 1

Public Speaking 1

Writing and Oral Communication 1

Self Image and Appearance 1

Know Your Personality through STIFIn 1

Schedule 4: List of Courses (Account and Audit Training Center)

Schedule 5: List of Courses (Management Training Center)

Schedule 6: New Officer involved with TOT

Training Center Participants Grade

Account and Audit 3 44

Legal 3 48

Management

1 52

2 48

3 41

Source: Malaysian Tax Academy

Source: Malaysian Tax Academy

Source: Malaysian Tax Academy

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STRENGTHENING LEADERSHIP AND EXPERTISE

The development of human capital in line with the needs and requirements of the organisation is necessary to make IRBM as a driving force for administrative excellence. Trained and guided human capital can ensure continuity and the proliferation of purity in carrying out tasks. In IRBM, human capital empowerment efforts are always made on the basis of continuous learning, practical knowledge and new practical skills or emerging knowledge and changing viewpoints of customers. IRBM conducts Cross Sharing of Knowledge and Expertise platforms with foreign tax agencies such as the Seychelles Revenue Commission, National Tax Service of South Korea and National Tax Agency of Japan.

Various initiatives have been implemented by this organisation in an effort to strengthen the leadership and expertise of its officers through the sharing of experience and knowledge in international level as follows:- Training co-operation with the Sri Lanka Inland Revenue Department where 1,200 of its officers have attended a series of training at the Malaysian Tax Academy- Working visit to the Malaysian Tax Academy by Bureau of Internal Revenue (BIR) The Republic of Philippines and Asean Development Bank (ADB)- Implementing a short term International Taxation Law (ITL) in Latin America and Southeast Asia, in collaboration with International Training Center (ITC), Leiden University, Netherlands- Received a visit from the Kenya Revenue Authority, Large Taxpayers Office to conduct benchmarks funded by the World Bank

- Implementing Programme of Action (POA): Training on e-Governance (Malaysia-India), involving 15 senior officials from India and 20 officers from various agencies in Malaysia- Sharing of best practices with the Seychelles Revenue Commision on human resource-related issues such as performance appraisal, reward system, work-life balance and career development- Sharing of national tax-related information and emphasising on International Price and Tax Transfer Issues involving 160 officers from The National Academy of Direct Taxes (NADT), India.

IRBM often receives

invitations to contribute

experiences and expertise in national and international conferences

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IRBM often accepts invitations to contribute experiences and expertise in national and international conferences, including: -- Plenary Session on Modernizing Public Services: A Case Study of IRBM in conjunction with International Conference on Public Sector Productivity organised by Ministry of International Trade and Industry (MITI) and Malaysia Productivity Corporation (MPC)- Talent Ecosystem Conference 2016 organised by Talent Intelligence at the Malaysian Global Innovation & Creativity (MaGIC), Cyberjaya in a forum entitled Talent Most Wanted: Developing Nation, Developing Leaders- Global Relations Workshop: Recent Developments On Compliance Risk Management and Offshore Compliance, Jakarta, Indonesia

- International Tax Conference and Regional Consultations on Domestic Resource Mobilization, Seoul, Korea- Regional Cooperation in Tax Matters, Asian Tax Authority Symposium, Bangkok, Thailand- Based Profit Shifting (BEPS) Action Plan, International and Vietnam’s Perspectives, Hanoi, Vietnam

Attachment and Cross Fertilization Programmes: this programme is the IRBM’s strategic initiative to transform IRBM into an organisation that prioritize aspects of success and high performance culture through knowledge sharing from other agency officials. An Officer from the Accounts and Audit Training Center, Malaysian Tax Academy was placed at UniRazak from 14 September 2015 to 13 June 2016 through a research & academic placement (Pepena) programme in the appropriate industry.

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AWARDS & RECOGNITIONS

AWARDSRECOGNITIONS

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LIST OF AWARDS & RECOGNITIONS

IRBM is not only famous and is recognised as the sole tax collector on behalf of the government, with the cooperation and endeavor of the entire Hasilan in elevate the organisation in terms of direct tax administration and administration, even in the aspect of its organisational management demonstrate the real ability of IRBM. For every recognition achieved by IRBM appears to open the eyes of many parties as well as at the international level. Among the awards and recognition received by IRBM throughout 2016 are as follows:

Visionary Veteran Motivator of the Year21 January 2016 - CEO of IRBM received the ‘Visionary Veteran Motivator of the Year’ award by Mc Millan Woods Global Awards 2016 at Hotel Kuala Lumpur.

Excellent Services19 February 2016 - Wangsa Maju Branch office received the ‘Excellent Services Award’ from PNB-ASNB for the high quality service provided by the officers of Wangsa Maju Branch / Stamp Duty Unit.

MS ISO 9001: 2008 Certification24 February 2016 - LHDNM has retained the MS ISO 9001: 2008 certification for the period from 28 February 2016 to 27 February 2017 with the addition of 2 new scopes. The scopes of new certification are:• Execution of the Company’s External Audit Case (Audit Focus)• Individual Refund Process Paying for e-Filing Case / m-Filing

• Implementation Procedures for Temporary Release and Cancellation of Travel Restrictions Apart from the Director of the Company (New Scope)• Implementation of Acceptance, Preparation and Filming Writ of Summons and Claim Statement (WSPT) for OG files for Income Tax Cases (New Scope)

5-Star Rating for PMO’s Public Sector Star Rating Index Assessment4 April 2016 - IRBM received the 5-Star Rating for PMO’s Public Sector Star Rating Index assessment (SSR) 2015 - 2016. The award ceremony was officiated by YBhg. Tan Sri Dr. Ali Hamsa, Chief Secretary to the Government of Malaysia

Top FPX Merchant4 April 2016 - The LHDNM is awarded the “Top FPX Merchant” in conjunction with the Malaysian e-Payments Excellence Award 2016. The award was organised by Malaysian Electronic Clearing Corporation Sdn. Bhd. (MyClear).

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Global Risk AwardsApril 2016 - IRBM received the Global Risk Award 2016 in the ‘Newcomer of the Year’ category awarded by the Institute of Risk Management, United Kingdom.

Global Lifetime Brand Icon19 May 2016 - The CEO of IRBM is awarded with Global Lifetime Brand Icon in Taxation & Inland Revenue Agency Transformation from the leaders at this date.

The Brandlaureate Transformational Organisation Brand Awards2 June 2016 - The IRBM is awarded with the Brandlaureate Transformational Organisation Brand Award 2015-2016.

The Diamond Eye Awards25 July 2016 - IRBM received The Diamond Eye Award For Quality Commitment And Excellence by the Association Otherways Management & Consulting received in Rome, Italy.

The Asia HRD Awards26 July 2016 - IRBM received the Contribution to Organisational Award in The Asia HRD Awards 2016. This award recognises role models which bring significant impact to the organisation in the field of human development.

Asia Pacific Entrepreneurship Awards26 August 2016 - CEO of IRBM received the Asia Pacific Entrepreneurship Awards, APEA 2016 for the Financial Services Industry category at the APEA 2016 Gala Dinner at Majestic Hotel Kuala Lumpur.

Second Place in KIK Convention CompetitionSeptember 2016 - The Wangsa Maju Branch’s KIK Group (Speed 26) won second place the competition organised by MoF.

Pangkor Dialogue Awards7 September 2016 - IRBM receives the Pangkor Dialogue Awards 2016: Excellent In Public Services in conjunction with Pangkor Dialogue.

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Lifetime Achievement Awards23 September 2016 - The CEO of IRBM received the Lifetime Achievement Awards in Nation Building at the 2016 Asia-Pacific CSR Council Awards held at Grand Ballroom, The Place @ One City.

The BrandLaureate Hall of Fame13 October 2016 - The CEO of IRBM received the BrandLaureate Hall of Fame Award - Lifetime Achievement Brand Icon Leadership Award 2016 in conjunction with The BrandLaureate Brand Icon Leadership Awards 2016.

The BrandLaureate Industry Champion13 October 2016 - IRBM received The BrandLaureate Industry Champion - Brand Icon Leadership Awards 2016 for Income Tax Category in conjunction with The Brandlaureate Brand Icon Leadership Awards 2016.

National Chief Secretary Special Award15 November 2016 - The KIK Hybrid Group SYNERGY 10, which consisted of members from IRBM and custom, emerged as the winner of the competition.

Overall Champion of MoF’s Sports Fair 22 November 2016 - IRBM successfully emerged as the overall champion in the MoF’s Sports Fair 2016, organised by the Langkawi Development Board (LADA).

MS ISO 9001: 2008 Re-certification21 December 2016 - IRBM successfully recertified the MS ISO 9001: 2008 certification for the period from 28 February 2017 to 14 September 2018.

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1MALAYSIA PEOPLE’S AID (BR1M)

1MALAYSIAPEOPLE’S AID (BR1M)

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BR1M The government started implementing subsidy rationalization initiatives by providing financial assistance to target groups through 1Malaysia People’s Aid (BR1M) 1.0. This grant was first provided in December 2011 involving an allocation RM2.6 billion to some 5.2 million applicants. This initiative is then channeled annually with an allocation of RM3 billion (BR1M 2.0), RM4.6 billion (BR1M 2014) and RM5.3 billion for BR1M 2015.

The total allocation of

BR1M 2016 is RM5.9 billion

which benefit 4.7 million

households and

2.7 million single

individuals.

The government started implementing subsidy rationalization initiatives by providing financial assistance to target groups through 1Malaysia People’s Aid (BR1M) 1.0. This grant was first provided in December 2011 involving an allocation of RM2.6 billion to some 5.2 million households. This initiative is then channeled annually with an allocation of RM3 billion (BR1M 2.0), RM4.6 billion (BR1M 2014) and RM5.3 billion for BR1M 2015.

In the Budget 2016, the government announced that the 1Malaysia People’s Aid (BR1M) also will be provided this year in order to ease citizens’ cost of living. The amount of grant has been increased for BR1M 2016 as follows:

i. RM950 to RM1,000 (For households with a monthly gross income of RM3,000 or less);

ii. RM750 to RM800 (For households with a monthly gross income of RM3,001 to RM4,000);

iii. RM350 to RM400 (For single individuals with a monthly gross income not exceeding RM2,000).

The government also provides the BR1M aid worth RM1,050 for the recipients from the e-Kasih list, those who earn a monthly gross income below RM1,000.

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Total Application

Total Application

Approved

Approved

Denied

Denied

8,348,479

222,343

7,081,188

204,370

1,267,291

17,973

Total Application

Total Application

Approved

Approved

Denied

Denied

8,259,377

166,780

7,286,309

150,823

973,068

15,957

New and Updated Applications

Appealed Applications

Provision

5.9 BillionRecipient

7.4 MillionProvision

5.3 BillionRecipient

7.1 Million

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IRBM DIRECTORY

IRBM DIRECTORY

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Johor Bahru BranchKluang BranchMuar BranchBatu Pahat RSCSegamat RSCKota Tinggi RSCMersing RSCPontian RSCJohor UTC

Melaka BranchJasin RSC

Alor Gajah RSCMelaka UTC

Seremban BranchTampin RSC

Kuala Pilah RSCPort Dickson RSC

Jempol RSC

Duta BranchNon Resident Branch

Kuala Lumpur Bandar BranchCheras Branch

Wangsa Maju BranchKuala Lumpur UTC

Kuala Lumpur Payment CenterLarge Taxpayer Branch

IRBM Headquaters, CyberjayaMTA Bangi

IPCHCL

Shah Alam BranchKlang Branch

Petaling Jaya BranchHulu Langat RSC

Cyberjaya RSCRawang RSC

Kuala Langat RSCSabak Bernam RSCKuala Selangor RSC

Petaling RSC

Ipoh BranchTeluk Intan Branch

Taiping BranchManjung RSC

Kuala Kangsar RSCParit Buntar RSC

Perak UTC

Pulau Pinang BranchBukit Mertajam Branch

Seberang Perai RSC

Alor Setar BranchSungai Petani Branch

Kulim RSCLangkawi RSC

Kubang Pasu RSCYan RSC

Baling RSCKedah UTC

Kangar Branch

Kuantan BranchRaub BranchTemerloh BranchBentong RSCJerantut RSCPahang UTC

Kota Bharu BranchTanah Merah RSCKuala Krai RSCPasir Puteh RSCPasir Mas RSCGua Musang RSC

Kuala Terengganu BranchKemaman RSCBesut RSCDungun RSCHulu Terengganu RSC

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MTA KuchingHRCC

Kuching BranchMiri Branch

Bintulu BranchSibu Branch

Limbang RSCMukah RSC

Sri Aman RSCSarikei Stamp CenterLawas Stamp Center

Miri UTCKota Kinabalu BranchKeningau BranchTawau BranchSandakan BranchKudat RSCLahad Datu RSCSabah UTC

Labuan Branch

MTA : Malaysian Tax AcademyRSC : Revenue Service CenterUTC : Urban Transformation CenterHCL : HASiL Care LineHRCC : HASiL Recovery Call CenterIPC : Information Processing Center

INDEX

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FINANCIALSTATEMENT

FINANCIALSTATEMENT

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FINANCIAL PERFORMANCE

REPORT

FINANCIAL PERFORMANCE

REPORT

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INCOMEIRBM’s Total Income for the year ending 31 December 2016 is RM1,992.29 million which consists of:

Agency Fees: IRBM’s main revenue is the Agency Fees received from the Federal Government for its services as stated out in Section 10 of the Inland Revenue Board of Malaysia 1995 Act. The estimated calculation of the receivable Agency Fees from the government is based on the estimated amount of gross tax collection revenue obtained in a given year. The total Agency Fees received in year 2016 is RM1,846.04 (2015: RM1,818.54) million. The fee is 92.66% of IRBM’s total income.

Grants by the Federal Government: In the current year, IRBM received grants from the Federal Government amounting to RM59.18 million (2015: RM128.00 million) which covers the provision of BR1M of RM39.00 million (2015: RM68.00 million) and End of Service Benefits (STP) of RM20.18 million (2015: RM60.00 million). The total grants amortised in 2016 were RM58.76 million (2015: RM99.92 million) for the Development Allocation Grants (RM56.91 million) and Trust Fund Grants (RM1.85 million).

Other Income: In addition to the agency’s fees and government grants, IRBM’s income was also attain from various sources such as Investment and Loan Interests of RM23.46 million (2015: RM8.05 million) and other income such as rental, prior years repayments, penalties and punishment and profit loss on sales of assets in the amount of RM4.85 million, (2015: RM3.58 million).

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Chart 1: Income for the Year Ending 31 December 2016

Overall, There is a slight decrease in IRBM’s income for the year 2016 by 3.20% compared to RM2,058.09 million in 2015. The decrease in income is due to the decrease in income received from government grants. However, income from investment and loan interests showed an increase of RM15.41 million.

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EXPENDITURESSummary of Expenditure:IRBM’s Total Expenditures for the year 2016 is RM1,957.16 million (2015: RM1,963.95 million). Labour costs are the largest expenditures for IRBM costing RM1,354.23 million (2015: RM1,387.44 million) followed by professional and hospitality services amounting to RM147.92 million (2015: RM124.01 million), gifts and fixed charges of RM112.92 million (2015: RM47.48 million) and rental of RM103.92 million (2015: RM99.44 million).

Labour Cost

Professional and Hospitality Services

Gifts and Fixed Charges

Rental

Depreciation / Impairment Loss ofProperty, Plant and Equipment

Communication and Utilities

Maintenance and Minor Repairs

Travel and Subsistence

Amortised Cash Expenditure

Finance Costs

Other Expenses

Chart 2: Expenditures for the Year Ending 31 December 2016

In addition, other expenditures include depreciation / impairment loss of property, plants and equipments of RM73.65 million (2015: RM101.36 million), communication and utilities of RM60.86 million (2015: RM73.89 million), maintenance and minor repair of RM31.38 million (2015: RM30.52 million), travel and subsistence of RM16.41 million (2015: RM21.88 million), amortised cash expenditure of RM9.71 million (2015: RM26.33 million), finance costs RM7.88 million (2015: RM16.00 million) and other expenses amounting to RM38.29 million (2015: RM35.60 million).

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Expenditure Analysis: IRBM spends 69.19% of the total expenditures on financing the cost of permanent, contract and part-time employees. Human resources are the most important asset that guarantees the achievement of IRBM’s KPI. While the overall cost of labour showed a decrease of 2.46% compared to 2015, it was influenced by the number of financial interests approved for 2016 and the prudent expenditure policies by the IRBM for overtime work allowances. The second largest expenditure is the cost of professional and hospitality services which includes expenses such as computer license fees, legal services, printing services, advertising, medical and others.

Comparison of Expenditures: Overall, IRBM’s expenditures decreased by 0.35% compared to RM1,963.95 million by 2015. The largest contributor

Type of Expenditure 2016 (RM) 2015 (RM)

Labour Cost 1,354,229,282 1,387,439,679

Professional and Hospitality Services 147,918,199 124,014,692

Gifts and Fixed Charges 112,917,264 47,479,910

Rental 103,924,373 99,443,807

Depreciation/Impairment Loss of Property, Plant and Equipment 73,653,839 101,356,529

Communication and Utilities 60,859,3 33 73,886,390

Maintenance and Minor Repairs 31,376,384 30,524,871

Travel and Subsistence 16,414,675 21,884,265

Amortised Cash Expenditure 9,707,697 26,329,296

Finance Costs 7,876,388 15,997,243

Other Expenses 38,286,285 35,589,238

Total 1,957,163,718 1,963,945,920

Table 1: Comparison of IRBM’s Expenditures for the year 2016 and 2015

to the decreased in expenditure was the finance cost of 50.75% due to the settlement of the term loan for IRBM’s building financing in 2016. In addition, amortised of cash expenditure for Development Allocation Grant and Trust Fund Grant show a decline of 63.12% due to the reconstruction of the proposed development projects.

However the gifts and fixed charges show a significant increase of more than 100% (137.82%) due to the provision and payment of the End of Service Benefits (STP). The STP’s allocation for 2017 needs to be accounted for in accordance with the standard accounting requirements of Malaysian Private Entities Reporting Standards (MPERS). Whereas the STP payment for retirees before 1 April 2014 was paid in 2016 after receiving the provisions from the Ministry of Finance at the end of 2015 and early 2016.

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Type of Expenditure 2012 RM Million

2013RM Million

2014RM Million

2015RM Million

2016 RM Million

Income 1,696.55 1,948.13 1,886.96 2,058.09 1,992.29

Expenditure 1,582.77 1,907.27 2,016.55 1,963.95 1,957.16

Income Surplus / (Deficit) 113.78 40.86 (129.59) 94.14 35.13

Accumulated Reserves 619.30 660.15 530.56 1,184.01 1,148.88

Non-Current Assets 1,405.07 1,609.95 1,509.33 1,673.77 1,605.37

Current Assets 327.38 343.15 358.78 450.48 400.94

Current Liabilities 62.82 58.90 137.22 91.13 19.94

Long Term Liabilities 79.61 48.01 26.52 89.21 63.14

Table 2: Financial Performance in Five-Year Period

SUMMARY OF IRBM’S BALANCE SHEETThe decrease in current assets by 11.00% was due to the Agency Fees for the year 2015 which was received in early 2016. The implementation of several prudent expenditure initiatives and rescheduled development projects allow the allocated funds to be channeled to short-term investments for optimum profit.

For current liabilities, a decrease of 71.19% was due to the full settlement of the loans using Retirement Fund (Incorporated) for paying IRBM’s buildings of Petaling Jaya Branch and the Malaysian Tax Academy Kuching in 2016. Other than that, this decrease is also due to limited cash flow in 2015 where the outstanding payments have been made on 2016.

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Chart 4: Performance of Income Statement Components in Five-Year Period

Chart 3: Performance of Balance Sheet Components in Five-Year Period

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SUMMARY OF IRBM’S INCOME STATEMENTIRBM’s income plays an important role in planning current and non-current expenditures for IRBM. IRBM income is an Independent Variable where revenue receipts will affect the current expenditure pattern and the IRBM’s long-term expenditure planning. The decreased in expenditure for 2016 compared to the previous year that is 0.35% was due to several prudent initiatives frugal spending by IRBM at the end of 2015 and in 2016.

OPERATING EXPENSES BY PROGRAMMES AND ACTIVITIESIRBM’s income is distributed and spent accordingly on six main programmes with consist of eight subactivities. Tax-related programmes which are conducted at headquarters are those related to taxation services, compliance, policies, taxation and management operations, whereas state programmes cover activities at branch office level throughout Malaysia. The expenditure statistics for the tax programmes conducted are as follow:

Programme 2016 (RM) 2015 (RM) Difference

Tax Services 129,915,071 120,977,905 7.39

Compliance 86,251,017 94,291,066 (8.53)

Policies 27,180,751 28,733,799 (5.40)

Tax Operations 210,978,049 194,911,878 8.24

Management 254,711,177 189,224,038 34.61

State 1,112,824,809 1,157,071,486 (3.82)

Total 1,957,163,718 1,963,945,920 2.05

Table 3: Expenditures based on programmes for the year 2016 and 2015

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Tax Services Programme: Expenditures under the Tax Services Programme cover activities involving tax research, corporate services, internal audits, inspectorates, risk management, tax appeals, intelligence, special investigations and financial management. IRBM has allocated a portion of the expenditure on tax awareness programs such as tax-related advertising and involvements through radio, television and newspapers. Expenditures under the tax services programme showed an increase of 7.39% in 2016 because of the additional STP expenditures for retired IRBM retirees from 1997 to March 31, 2013.

Compliance Programme: The Compliance Programme expenditures cover all expenses for activities such as policy formulation related to tax compliance, investigations, corporate tax audit, multinational and petroleum corporation audits. Enforcement and investigation activities for tax-related offenses are fundamental to national tax compliance. There types of programmes and activities are implemented by several departments and divisions which are under the IRBM Headquarters.

Policy Programme: The Policy Programme is comprised of all the activities involved in fomulating policies for tax operations at national and international level. It also includes legal functions such as handling court cases and acting as a legal advisor to IRBM. This programme requires the lowest expenditure of the total income with only 1.39% spent from the total income of 2016 and the majority of it are used to fund the costs of labour, travelling and living.

Tax Operations Programme: The Tax Operations Programme is the most important component to spend income on to ensure tax collection processes are well-managed and convenient to both IRBM officers and taxpayers. Activities under this programme encompass all tax operation activities, revenue collection and the usage of information technology. The highest expenditure under this programme was spent on computer services and data processing. This expenditure was made necessary to ensure that customers receive high quality service from IRBM.

Management Programme: The Management Programme consists of activities involving the development of organisation, human resource management and training courses, as well as the management of assets and all IRBM offices. IRBM gives emphasis on comprehensive training and human resource development. The implementation of these activities is seen as a long term investment for IRBM to produce officers of high competency who are able to carry out all the tasks which have been outlined.

State Programme: The State Programme is a programme that contributes to the largest expenditure at IRBM with 56.86% of the total expenditures are spent on this type of programme and over 50% of this expenditure involves labour costs. Activities under state programme include state administration activities, tax audits, collection, stamp duty, investigation, intelligence, legal and customer service.

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IRBM’S CAPITAL EXPENDITURE FOR THE YEAR 2016In 2016, the approved capital expenditure is RM101,194,100 which are used to fund implementation of the overall ICT Project costing at (RM55,744,600) and the Office Infrastructure Project at (RM45,449,500). The approved ICT project is to create an efficient tax management system in line with the latest technological developments. It is constructed online to provide conveniece to the taxpayers which will ultimately result in the positive growth of the total revenue collected.

On the other hand, the Office Infrastructure Project was approved and implemented to provide more convenient and safe facilities at IRBM’s own office buildings for both the employees and the taxpayers.

OVERALL ACHIEVEMENTOverall, the financial management of IRBM is carried out in a transparent, prudent and ‘value for money’ manner. All expenditures were made so that the core functions of IRBM to collect income tax for the country can be carried out smoothly and professionally. The decrease in overalll spending by 0.35% in 2016 (RM1,957.16 million) compared to 2015 (RM1,963.95 million) shows that this organisation’s finances and expenditures are all well-managed, mirroring other fundemental achievements and attained ‘above-the-target’ KPI success by

IRBM this year in areas of annual revenue collected, expansion of the tax base, number the taxpayers audited, number of investigation cases solved, amount of arrears reduced and other non-tax-related goals, set by IRBM earlier in the year 2016.

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