IT is estimated that the shadow economy or informal economy could be equivalent to about a third of Malaysia’s gross development product (GDP), and hence regulating it could generate hundreds of millions in tax revenue.
However, this will require stronger enforcement to boost tax compliance.
“The shadow economy and tax administration are the immediate areas which we should be looking at while we push the economy forward,” MIA President Dr Veerinderjeet Singh pointed out at the recent Malaysian Tax Conference 2021.
“No other taxes should be implemented until we reach the status of a high income and highly-developed nation.”
Meanwhile, Veerinderjeet stressed that tax practitioners must be aware of the latest developments and risks in the global tax environment.
“Corporate tax has become a leading governance consideration, specifically in terms of corporate income tax responsibility; and disclosure targeting aggressive tax strategies,” he explained when addressing a panel session entitled Reconstruction of the Malaysian Tax System: Where are We Heading?
“As such, boards should include tax risks, tax governance and tax transparency within the scope of their accountability.”
He added that board audit committees especially should take the lead in strengthening tax governance of listed entities with the ultimate aim of enhancing value to investors in many aspects such as tax administration and compliance.
“Audit committees and boards should consider requiring listed entities to issue a tax risk policy statement or a tax strategy statement in their annual reports,” Veerinderjeet recommended.
He also advised boards to pay attention to ESG (environmental, social and governance) considerations.
This is as it is likely that the Malaysian regulatory institutions will encourage listed entities to uphold the ESG framework including ‘tax transparency’ so as to enhance their value to all investors, given the increasing momentum of ESG. – April 20, 2021