Tax evasion impairs economic growth

KUALA LUMPUR: Second Finance Minister Datuk Seri Ahmad Husni Hanadzlah reminded taxpayers here not to evade their tax responsibilities as it could depress the country's economic growth.

Quoting figures from from Athens-based Foundation for Economic and Industrial Research, he said between 3 to 4 per cent of gross domestic product (GDP), or about RM63 billion a year in Europe, is lost due to tax avoidance.

This is made worse with European Union currently grappling with sovereign debt crisis, public debt, fiscal deficit and the government's budget deficit.

"This situation in Europe serves to remind us how critically important Inland Revenue Board (IRB) is to the maintenance of our country's financial and economic well-being.

"Indeed, the efforts of the tax industry in educating the public on their tax responsibilities are very important," he said yesterday when opening the National Tax Conference 2011, themed "Economic Transformation: Role of Taxation".

Also present were IRB chief executive officer and director-general Datuk Dr Mohd Shukor Mahfar, Chartered Tax Institute of Malaysia president S M Thanneermalai and Malaysian Tax Academy director Mohd Nizom Sairi.

Husni said Malaysia's tax compliance rate for individuals has increased steadily in the last four years, from 79 per cent in 2007 to 91 per cent last year.

This, he said, compares well with the corresponding compliance rates for 2009 in Singapore, New Zealand and India.

Despite the favourable numbers, he said further education and culturalisation of the responsibilities of taxpayers is needed, especially when Malaysia introduces goods and services tax, and lowering of individual and corporate taxes.

In Malaysia, tax revenue accounts for more than 60 per cent of the Treasury's income, of which 51 per cent and 18 per cent is from direct and indirect taxes, respectively.