Ernst & Young indicates GST on its way

by Justin Yap. Posted on October 19, 2011, Wednesday

PREPARATION FOR TAX AUDIT: (From left) Lee, Ng, Yoon and Koh
during the Ernst & Young 2012 Budget seminar held at Riverside Majestic Hotel here.

KUCHING: Goods and services tax (GST) should not be brushed aside simply because it was not mentioned in the recently-tabled Budget 2012 announcement, said Ernst and Young Tax Consultants Sdn Bhd (Ernst & Young) director Koh Siok Kiat.

He was speaking at the sideline of the ‘Ernst & Young 2012 Budget’ seminar held at a local hotel here yesterday. The annual event was specially organised for Ernst & Young’s clients with the hope of keeping them abreast of changes proposed in Budget 2012.

“In fact, the Prime Minister Datuk Seri Najib Tun Razak himself has announced that it will be implemented after our general election,” he added.

“In the long run there has to be a wider tax base to generate the necessary income to reduce the budget deficit.”

Koh further pointed out that the tax burden should be shared by all and not confined to only a small percentage of population, who are currently paying more income taxes, financing all the development activities of the country.

Therefore, even though there was no mention of GST in the budget this time around, all indications had shown that it was on its way, Koh hinted.

“Get ready now and carry out a thorough assessment of your systems and procedures while you can afford the time.

“GST can be a rather complex tax and a thorough assessments is the way to go in order to avoid any GST nightmares in the future,” he advised.

On the other hand, many regarded the Budget 2012 as ‘expansionary’ in tough times.

“The lower income group have reasons to rejoice for this,” said Ernst & Young East Malaysia head Yong Voon Kar, to which he viewed the once-off payment of RM500 to households with a monthly income of RM3,000 and below as benefitting more than half of all households in Malaysia.

Ernst & Young executive director Azhar Lee, meanwhile, pointed out, “Much to our delight, there is no new tax and no increase in existing taxes except for the small increase in real-property gain tax (RPGT) from five per cent to 10 per cent for gains from sale of property within two years.

“However, what this means is that the government would have to generate more income from its existing tax systems both direct and indirectly,” Azhar said.

“The government would need more income to continue providing more of everything – more infrastructure development, more efficient services, more jobs and more financial assistant.”

Hence, he said, “Get your tax affairs in order and be prepared for tougher enforcement measures and Inland Revenue Board (IRB) audit. This brings us to the importance of always keeping sufficient records and documentations.”

According to the IRB, many audit resulting in additional taxes and penalties were due to lack of

documentation to prove the authencity of claims for deductions and incentives.

“Whenever there is a doubt, IRB will make the necessary adjustments to disallow the claims for deductions or incentives and issues ‘best judgement’ assessments which may be difficult to dispute simply because of the lack of documentary evidence to prove otherwise,” explained Lee.

He further pointed out that another area of increasing concern for IRB was the transfer pricing that often resulted in tax leakage.

“Transfer pricing issues may not just concern multinationals. Local corporations are equally targeted. Without transfer pricing documentations in place, transfer pricing audits could possibly be another source of income for the IRB.”

Another speaker, Ernst & Young director Ng Siaw Wei added that one quick avenue for IRB to increase its coffers was to impose stiffer penalties.

“Indeed, the IRB has done so recently without giving any advance notice. With effect from this October 1, penalties for late submission of tax return have been increased, ranging from 20 per cent to 35 per cent, depending on how late the tax returns are submitted after the deadline.”

IRB had also been provided with greater powers in the Budget 2012 to call for information, having access to computerised data and generally to collect tax faster without issuing any assessment.

Apart from that, Ernst & Young director Robert Yoon, during the budget seminar also spoke about the many targeted initiatives proposed in the budget especially with regards to innovation, education, talent, financial services and franchise fee as well as hybrid cars amongst others.

“All of these are welcome and in the right direction as they are all intended to propel our nation to a high income economy in one way or another,” he said.

Read more: http://www.theborneopost.com/2011/10/19/ernst-young-indicates-gst-on-its-way/#ixzz2dPmXaL00