By Pauline Lum, Tax Executive Director, PwC Malaysia
The new Government brings with it a resurgence of initiatives to revive a sleeping Asian Tiger - in line with the theme of Budget 2019, tabled on 2 November 2018.
Malaysia is one of the early adopters of digital taxes, whilst providing both fiscal and non-fiscal support to accelerate the adoption of smart technology. This places Malaysia amongst digital forerunners including Australia, China, Singapore, and the United Kingdom. Simultaneously, the proposals are cognisant of other initiatives on the environmental and macroeconomic front, for instance, green initiatives and the RM3 billion-worth Industry Digitalisation Transformation Fund.
Getting our house in order has been the focus of the government over the last few months. This theme continues in the Budget proposals. Using the analogy of a house, this exercise is not limited to the building blocks (fiscal and non-fiscal) and the cement (legislation). We also saw proposals tabled to get the structure in order (e.g. controls, framework and legislation), through these measures:
Strengthening the fiscal administration
Streamlining government procurement
Setting up of a debt management office
Transparency and building trust are not just catchphrases. They are high on the government’s list of priorities to ensure a strong foundation to support Malaysia as we compete in the global marketplace. Increasingly, digital, mobile and global taxpayers require more support from the authorities. The Organisation for Economic Co-operation and Development (OECD) has also been watching this space closely and has issued guidance on the shift in the roles of tax authorities, which is moving from that of practical operational watchdogs to stewards of the wider tax ecosystem.
Over 32 countries have reviewed their traditional tax administrations in line with the disruptions brought about by digitalisation. The move from watchdog to a more collaborative, risk-based administrative approach has proven to be successful in bringing down compliance cost, improving risk management and substantially increasing taxpayer satisfaction.
The OECD cites the United Kingdom HM Revenue and Customs (HMRC) as a country that has successfully led the charge for modern tax administrations, with a recorded reduction (amongst others) in compliance cost (GBP7.3 billion compliance yield over 2014 - 2015). The increase from 39,000 UK taxpayers filing their Self-Assessment tax returns digitally in the year 2000 to more than 7,000,000 by 31 January 2017 is a noteworthy achievement. The change in approach has improved the management of country revenue and benefitted the wider economy.
With the move towards collaborative engagements in a digital environment, authorities and taxpayers alike face similar challenges and opportunities as follows (not exhaustive):-
A clear vision and strategy has to be developed and operationalised holistically, taking into account all stakeholders’ requirements. This has to address the various dimensions that support a conducive tax ecosystem i.e.:-
people (skills, accountability, roles, etc)
process (controls, governance, work instructions, etc)
tools (e.g. technology as an enabler)
Malaysia has already begun her transformation journey, with exchange of information, country-by-country reporting, big data and other digitalisation initiatives (e.g. e-filing, digitalisation of helaian kerja in year of assessment 2019, etc). We hope to continue to see our wider tax ecosystem built on sound footing. This means being:
Collaborative and integrated to meet taxpayers’ expectations
Data and insight led
Better informed in compliance management
Transparency in the governance and management of our country’s revenues coupled with unlocking efficiencies to focus on citizen-centric engagements, will prove to be beneficial for the wider economy. As players awaken and take stock of their needs to get ready for this dynamic environment, what will you do?
Taking the first step to dealing with tomorrow’s tax challenges, starts today.
Tax Executive Director, PwC Malaysia
Tel: +60 (3) 2173 1059