THE Inland Revenue Board (IRB) will pursue industries and individuals who profited during the pandemic to fill government coffers amid more spending on stimulus and mitigation measures, said tax experts.

With more unemployment because of the pandemic and more welfare and aid payouts, the IRB is likely to step up inspections of businesses involved in medical products, digital technology, logistics and insurance, which are enjoying a boom in the Covid-19-stricken economy. 

It may also target individuals who make a living off the internet, such as social-media influencers.

Reanda LLKG International managing partner Koong Lin Loong said the Finance Ministry initially targeted RM75.5 billion from companies this year. With the pandemic, however, corporate tax is likely to reach only RM59.4 billion.

Personal tax in 2020 will only reach RM35.9 billion, about a 4% drop due to retrenchments and salary cuts.

Budget 2021 is tagged at RM322.5 billion. Revenue for 2020, however, is projected to drop by 14% to RM227.3 billion compared with last year as a result of lower tax collection.

Koong, a chartered professional tax accountant and administrative auditor, estimates that for 2021, the government will set a corporate tax target of RM65 billion, an increase of 9%, and personal tax of RM43 billion, an increase of 18%. 

Companies that have a huge difference on their gross profit and net income will be the IRB’s targets.

Chua Tia Guan, head of tax & financial consulting at Asia Business Centre, said tax officers will likely spare those in the tourism industry, which has been badly affected by Covid-19.

However, companies in the healthcare sector and related industries, such as glove makers and manufacturers of masks and personal protective equipment, can expect to face greater scrutiny from the tax man. These industries are expected to continue performing well in 2021.

Chua also expects the insurance sector to be targeted, as the pandemic has seen strong take up for insurance products.

Movement restrictions, he added, have also been a boon for the logistics and e-commerce industries.

On individuals, Koong said those who frequently make donations and purchase properties are also possible targets. 

It will be the same with social media or key opinion influencers, online gig economy workers and contractors, and entrepreneurs in areas not impacted by Covid-19.

Big data will be useful in helping the IRB track such individuals, since every person is required to file a tax return.

“In the era of big data, you need to file a tax return even if you earn income as a gig worker, or a food delivery worker, or from renting out a house. The IRB will know of such income, which is not hard to obtain because of big data connections,” Koong said.

Tax officers will probe into individuals who possess luxuries beyond their means. If their sources of wealth cannot be explained, IRB can impose a heavier tax against them.

Chua said IRB has, in the last three years, developed a comprehensive audit examination system that focuses on unusual wealth.

It also has specialised teams or departments to focus on tax evasion, VIP taxpayers or individuals with high taxable incomes and money laundering, respectively. There is also a department just to scrutinise all tax returns filed by individuals and companies.

Malaysia is also one of 103 participating countries in a global information exchange on financial accounts, the Automatic Exchange of Financial Account Information (AEOI), which gives the IRB access to information on Malaysian taxpayers overseas.

This includes their overseas bank accounts, investments and offshore companies. – December 9, 2020.