How will IRB tackle revenue leakages with new Finance Bill 2021 powers?

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IRBM to Address Revenue Leakages with Enhanced Powers Under Finance Bill 2021

The Inland Revenue Board of Malaysia (IRBM) is now better equipped to tackle revenue leakages following amendments introduced in the Finance Bill 2021. These legislative changes empower the IRBM to obtain crucial taxpayer information and implement new tax measures aimed at preventing the loss of government revenue. The Finance Ministry has outlined these enhancements as part of its strategy to bolster tax compliance and close existing loopholes.
Access to Taxpayer Bank Account Information

A significant new provision under the Finance Bill 2021 grants the IRBM the authority to request a taxpayer's bank account details directly from financial institutions. This information can then be used by the IRBM to apply to the court for a garnishee order, a legal mechanism to recover outstanding tax debts from a taxpayer's bank accounts. This direct access to financial data is a key tool in ensuring that individuals and entities meet their tax obligations.
Introduction of Withholding Tax on Certain Payments

Furthermore, the amendments introduce a 2.0 per cent withholding tax on specific payments made to resident individuals acting as agents, dealers, or distributors. This measure applies to payments exceeding RM100,000 received by these individuals. The implementation of this withholding tax is designed to capture revenue that might otherwise be difficult to trace and tax effectively, particularly in business-to-individual transactions.
Broader Initiatives to Curb Cross-Border Tax Evasion

Beyond the specific powers granted by the Finance Bill 2021, Budget 2022 also saw the introduction of broader initiatives to combat revenue leakage. These include measures targeting cross-border tax evasion and the complex issue of double non-taxation. A notable change was the removal of the tax exemption previously available on foreign-source income received in Malaysia by Malaysian tax residents, thereby ensuring such income is subject to Malaysian tax laws.
Enhanced Compliance through Tax Certificates and Identification Numbers

In addition to these direct tax measures, the government has also strengthened compliance requirements. A Tax Compliance Certificate is now a mandatory prerequisite for any tenderer seeking to participate in government procurement processes. Moreover, the implementation of a Tax Identification Number system is being pursued as part of the broader strategy to enhance tax administration efficiency and improve the identification of taxpayers, further contributing to the efforts to curb revenue leakages.

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How will IRB tackle revenue leakages with new Finance Bill 2021 powers?

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