Raising revenue through the anti-money laundering law

By P Gunasegaram

HERE’S something for Finance Minister Lim Guan Eng to consider very seriously in terms of raising revenues given the very ostentatious, and even crude, display of wealth of many in society who may not be paying the requisite amount of tax.

It’s been a bone of contention with salaried workers and small-time self-employed people that the Inland Revenue Board or IRB notoriously targets the small man/woman while those who are much richer and have plenty of assets get away with, not murder, but not even paying taxes in some cases.

For instance, taxpayers who have been regularly paying taxes under the pay-as-you-earn scheme are sometimes fined more than a couple of thousand ringgit for merely filing the tax returns late, even by a day.

And this is when your tax obligation may be of the order of RM14,000 for the full year.

If you are charged RM2,000 for paying a RM14,000 obligation a day late that’s an interest rate of 14.3% a day or 5,200% a year – 520 times the 10% a year rate which is usually the late payment charge.

But till today, that system still operates as an easy means of garnering quick income for the government from the unsuspecting small man who may have been derelict only in terms of late filing, although he has long since made the payment.

It comes as a shock later when IRB, which is under the finance ministry, sends you a letter for the payment of that amount and casually lists it as income tax arrears when it is not – it is a penalty charge, only 520 times the usual one!

How do I know? It happened to me – and I had a valid reason.

It is still puzzling that as the government hunts high and low for government revenue, forcing the sale of valuable Khazanah Nasional assets amongst others, the IRB has not tapped into a very simple way of collecting tax – investigate those who have assets they can’t account for, be they cars, houses or expensive paintings.

Obvious targets

There are registers of car and house ownership which can be easily checked by name and if they don’t declare the kind of income that can explain the assets, well, its most of the time an open-and-shut case. IRB already has the power to do that.

Ministers/former ministers with dozens of cars in very expensive houses with similarly pricey underground garages are an example of an easy target.

And on top of that, you can even use the powerful Anti-Money Laundering, Anti-Terrorism Financing and Proceeds of Unlawful Activities Act 2001 (Amla).

First, the IRB moves in and questions them about their assets.

If they can’t provide valid reasons, tax them on the implicit income and put a penalty on that – I would like to see them charge the 5,200% a year like they did me.

That is, if that income is from legal activities and that income was not declared.

And then, if it is apparently illegal income, bring in the big guns via Amla which allows the finance minister to appoint a “competent authority” to investigate the wrongdoing.

Wide-ranging law

Under Amla, it is an offence to:

  • engage, directly or indirectly, in a transaction that involves proceeds of an unlawful activity or instrumentalities of an offence;
  • acquire, receive, possess, disguise, transfer, convert, exchange, carry, dispose of or use proceeds of an unlawful activity or instrumentalities of an offence;
  • remove from or bring into Malaysia, proceeds of an unlawful activity or instrumentalities of an offence; and
  • conceal, disguise or impede the establishment of the true nature, origin, location, movement, disposition, title of, rights with respect to, or ownership of, proceeds of an unlawful activity or instrumentalities of an offence.

The person who commits a money laundering offence shall on conviction be liable to imprisonment for a term not exceeding 15 years and, hear this, shall also be liable to a fine of not less than five times the sum or value of the proceeds of an unlawful activity or instrumentalities of an offence at the time the offence was committed or RM5 mil, whichever is the higher.

To my mind, if the IRB and the finance ministry can work hand-in-hand with the Malaysian Anti-Corruption Commission (MACC), there are billions and billions of ringgit out there which the government can recover.

Why, it may even dwarf the net funds lost via 1MDB.

Not just that; Amla allows for the forfeiture of a property or asset upon prosecution for an offence.

The courts can make an order for forfeiture of any property relating to the commission of such offence and are bought with the proceeds of an unlawful activity.

Even if you have sold the property, you cannot escape. Where the offence is proved against the accused but the property has been disposed of, “diminished in value or cannot be traced, the court shall order the accused to pay as a penalty a sum which is equivalent to, in the opinion of the court, the value of the property, and any such penalty shall be recoverable as a civil debt due to the Government of Malaysia and shall not be subject to any period of limitation prescribed by any written law.”

No time limit, in other words.

All these powers to bring the powerful and wealthy to book and nobody is doing a damn thing about this.

Instead, the poor small man or woman is made to pay 5,200% in interest per year on tax he has already paid!

Obvious cases stand out

If you thought, for any reason, that there is only small money here, think again. Consider this case reported by Bernama in August this year:

“The mother of a former minister, the late Tan Sri Jamaluddin Mohd Jarjis, has failed to reach a settlement through mediation for her suit against her two grandchildren over their failure to include three company shares worth RM1.3 bil in the list of her son’s estate.”

Three company shares worth RM1.3 bil – and that’s not all of the inheritance assets that we are talking about. It’s a hell of a lot of money to be in the hands of a career Umno politician and minister who never had a large business to talk about.

Remember, if all of these are ill-gotten gains under the law, then it is laundered money and the penalty is a fine of not less than five times the illegal proceeds.

The estate may be liable for at least RM6.5 bil! This amount can be recovered through a civil process.

I don’t see why the finance ministry and the MACC don’t use these powerful laws at their disposal to recover monies but instead continue to mope about the previous government running up a large debt.

Why, you can even take action against them now because many of them embezzled money and are living in a style far in excess of their incomes.

And there are many more in other sectors of the economy.

I can’t see why the finance ministry is not taking such action. Can you?

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