Government loses RM70 billion per year for unregistered and illegal business activities by foreigners

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KUALA LUMPUR: The Inland Revenue Board (IRB) is chasing after foreigners who are conducting non-registered businesses and also identifying the locals who have been hiding behind the illegal activities as it had contributed to the losses in the national revenue.

The losses in national revenue are contributed by the failure of such groups to submit their income reports that will eventually cause the country to incur losses from the shadow economy.

As reported by Sinar Harian, the IRB Chief Executive Officer, Datuk Dr. Abu Tariq Jamaluddin said, the shadow economy has contributed to a major effect on the taxes gap in Malaysia.

According to Abu Tariq, foreigners who have garnered incomes in the country should contribute to the national revenue as they have enjoyed the infrastructure, development and safety facilities provided by the government.

“IRB will focus specifically related to the shadow economy that has been carried out by foreigners under their names or the local people.

“We will ensure that investigations will not only involve foreigners but also those behind them whether they abide to the taxation laws.

“If there is tax that had not been declared or reported by this group, reasonable penalty will be imposed on them,” he said to the reporters at the Engagement Session with the Media here Thursday.

Last year the media reported that Malaysia had incurred losses involving RM70 billion every year in the form of taxes from business activities that were not registered and illegal business activities known as shadow economy.

Meanwhile, the Economic Survey Report 2021 released by the Ministry of Finance (MoF) had estimated the size of the shadow economy on average was 33.7 per cent from the Gross Domestic Product (GDP) between years 1990-2019.

“Generally, it is not wrong for a company to make a taxation plan but however if a transaction does not benefit others besides taxation, a review on the tax over the transaction will be implemented by IRB,” he said.

He stressed that IRB will take action on an institution, organisation and fund that had been given the status of exemption under Section 44(6) ACP if it has expired and have no exemption approvals.

“Prosecuting action will also be taken if there is an element of misappropriation of funds by organisation such as using the funds for personal interest and not like what is “intended,” he said to Sinar Harian.


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