Friday, March 2, 2012

Giving Credit Where Its Due

I had to snigger when I read this (excerpt):

IRB's 26% increase in collection "extraordinary," says PM

CYBERJAYA: The success of the Inland Revenue Board (IRB) in raising collection by 26.79% last year was an extraordinary achievement, Datuk Seri Najib Tun Razak said.

The Prime Minister said IRB's success in collecting RM109.674bil last year not only enabled the government to provide numerous services to the people, but also a stimulus to the private sector to increase their investments.

He said it would also give confidence to investors in the domestic market after evaluating the methods of managing the national economy, because in the current global era, the global market place factor was most crucial.

Revenue growth was, in fact, pretty extraordinary last year but not quite a shocker. You can do a pretty good forecast of any given year’s revenue collection using the previous year’s GDP numbers. That stands to reason as even with PAYE, the bulk of tax collection still depends on the previous year’s income and profits – and 2010 was a pretty good year for corporate profits and income growth.

Saying the growth in tax collection was an “extraordinary achievement” of the Inland Revenue Board is like commending the Meteorological Department for making it rain.

To be fair, let’s not forget the context – the PM was officiating over a new IRB building and presumably pep talking the “troops”. And the IRB does have an impact on tax collection, through increasing the efficiency of tax collection, ensuring compliance and through its random audits. But how big of an impact is that compared to the sheer increase in taxable income? I calculate about 15% at best.

And guess what? 2011 was a pretty good year for corporate profits and personal income too. Which probably means tax collection is going to be “extraordinary” this year too.


  1. IMHO, IRB should also put their expert Heads togather so that our deduction are more accurate instead of over payment when filling up the tax form.

    The monthly salary deduction tables was done when there was minimal deductions allowed. Today, we have deductions for children in University, deduction for payment for parent's illness, and many more.

    So the monthly salary deduction tables should be enhanced accordingly.

    In this way IRB may be able to reduce staff who are needed to prepare checks for overpayments.

    BTW, we put our bank account number in the tax form but why IRB still write cheque. Direct banking would be better. No ?

    Just thinking outside the box.

    Just a thought.

    Nani PJ.

  2. Only 1 million out of 1o million working Malaysian pay taxes now (well, that's what I was told). IRB should think of ways to get the 9 million to pay up just like I do!

  3. I think the actual figure is a little under 2 million (out of 14 million).

    The reason why Malaysia's tax base is so small is pretty simple - most of those 12 million odd non-taxpayers simply don't earn enough to be taxed. Fully a quarter of households earn a little above the poverty line, and nearly two thirds earn less than RM3000. Taxing those households would be needlessly oppressive.

    The irony of it is more than half of the benefits of subsidies goes to those above those income levels.

  4. IIRC, only 2 million out of 14 million are eligible to pay income tax. There's no way the IRB can force the rest to pay, just because they earn less than RM2,500 per month. They don't qualify even for the lowest bracket.

    Out of that 2 million taxpayers, only half actually paid their due.

  5. Anon,"IRB should think of ways to get the 9 million to pay up just like I do!"

    I guess frustration of normal businessmen & professionals are pretty understandable.

    Relative of mine was earning more than RM8K/month at MNC was very pissed with how his income being taxed. He left for Qatar earning multiples of before and not taxed.

    But to square the burden on already low paid workers might be a bit misdirected.

    Personally I wished there would be more discussion on how to tax labour vs wealth in a balance way. And rarely discussed stuff like how to tax speculation and how to tax unearned income(inheritance, windfall and capital gain, getting rich through corporate paper shuffling)