tax case

Sunday March 30, 2008 [The Star]

It’s that time of the year when taxpayers frantically try to submit their tax returns on time. With the Inland Revenue Board’s improved delivery system, the process should be painless, yet the public's dealings with the tax people are still problematic.

Case 1:

You are notified that you have a refund of RM13,000 coming but when the cheque arrives it is only for RM300. When you check with the IRB you are informed that after a re-assessment, only RM300 is owed to you.

Case 2:

You pay the IRB what you owe but when you check your account, your ledger has not been updated and instead your account shows that you still owe the tax office money.

Case 3:

After your self-assessment, your tax returns show no shortage and no excess. Then comes a notice from the IRB, which says that you owe them money.

EVERY March, a taxpayer who only wants to be known as Neil Cho, will duly declare his earnings.

Last year, his diligence paid off when he received a refund within a few months after submitting his returns. However, it was too late to change his opinion of the Inland Revenue Board (IRB).

“I have been paying taxes for more than a decade and the confusion and heartache have gone on too long. They say I have a refund but I am still paying them for what they say I owe. Why couldn’t they have just redirected my refund?” he laments.

It’s that time of the year when taxpayers frantically try to submit their tax returns on time and with the IRB's improved delivery system, the process should be painless.

However, like Cho, there are many taxpayers who still face problems in their dealings with the tax office despite the improvements. Raise the topic of income tax at any gathering and there will be stories forthcoming about frustrations, misinformation and even downright anger because one can be slapped with a huge “bill” out of the blue despite paying one's taxes diligently.

A common complaint among taxpayers is that the IRB does not give them a true picture of their status, or that they are hit with a payment demand without prior notice, even when they declare their income returns regularly.

The delivery system is not perfect yet, admits IRB chief executive officer and director-general Datuk Hasmah Abdullah who spearheaded the revamps after taking office in 2006.

“We are committed to taking the improved delivery system to the next level. The fact that we have fine-tuned our system at least three times in the last decade is testimony to this but we have encountered a number of these so called discrepancies,” she says, adding that the tax office realises that sometimes a taxpayer may be told different status reports at the counter.

“This is because at the time when the taxpayer called at the counter, the debit or credit balance given to him was based on the ledger at that point in time. Subsequently in processing the refund, our audit officers may find that additional arrears have already been raised or adjustments have already been made. That is why in the end, their assessments may turn out to be different and they will not get a refund,” she explains.

One reason, Hasmah tells, is that employers pay bonuses for a particular year in the following year or on a staggered basis. Another reason, she adds, is that there are employers who do not make deductions based on the Schedular Tax Deduction table provided by the IRB.

But, says Hasmah, more often than not, the discrepancies are due to errors in the claim for relief or deduction made by the taxpayers.

“This usually ends up as lesser refunds. So, I would like to advise taxpayers to check their receipts when making claims for reliefs such as medical for self and wife/husband, purchase of books and others to ensure actual expenses are claimed except when they exceeded the maximum allowed. We want to give refunds to taxpayers but not at the expense of unsubstantiated claims for relief,” she adds, acceding the fact that the board is not doing enough to explain such matters to the public.

But surely this does not explain a discrepancy that is huge. How can a check at the IRB counter show a refund of RM30,000 when the final tally shows that the taxpayer owes RM300 instead?

When there is a discrepancy, the tax person will check out the ledger to explain why there is a difference in the account. However, as Hasmah puts it, the ledger is too complex for the average taxpayer to understand: “Our ledger is not as straightforward as the bank or EPF; we can print out the ledger and give it to the taxpayer but they won’t be able to read it.”

This is an area that the IRB is working to improve by developing and upgrading their accounting system, she adds.

“We take note that they need to be advised on the discrepancies upon refund to avoid confusion to the taxpayers.

“Hence, we are simplifying the ledger specifically for taxpayers. We are also working with the IT people to enable taxpayers to check their status online. It should be ready by the end of the year.”

Better service

Some good news for taxpayers is that the IRB is clearing refunds faster due to the improvements made to their system.

This was evident last year as the record shows that the IRB cleared 392,457 refund cases totalling RM5.3bil, an increase of 113.6% over the previous year's figures (183,731 in 2006).

According to Hasmah, this comes up to only 80% of all refunds.

“Although we cleared refunds much faster in 2007 than in previous years, we still did not achieve the time frame for all cases because we were clearing the current year together with the previous years’ backlog right to the end of the year.

“About 20% of the returns were also found incorrectly filed because of doubtful claims for relief and other deductions. The cases will have to be audited before we can make the refund,” she says.

Another improvement is the e-filing system, which has been extended to include tax agents to enable them to e-file on behalf of their clients using the IRB's newly developed e-filing software.

More than one million taxpayers are expected to file their income tax returns using the e-filing system this year. Since the launch of the service two years ago, the number of income tax returns received through e-filing has increased by 369%, says Hasmah.

“Last year was encouraging; a total of 874,814 taxpayers e-filed their tax returns compared with 186,343 in 2006.”

The IRB has introduced another new feature in the service, the Roaming Public Key Infrastructure, which enables taxpayers to file their income tax returns from any computer without the need to repeatedly download the digital certificate.

Hasmah gives the assurance that the system has adequate security features to protect the confidentiality of taxpayers' information.

More importantly, stresses Hasmah, the public should file their income tax returns early for faster processing of tax refunds.

In the past, she says, between 60% and 70% of taxpayers filed their forms at the last minute, causing a delay in the processing time.

“We seriously seek the cooperation of the public to file their returns early or well before the dateline of April 30 (for non-business income) and June 30 (for business income). The last-minute filing creates a volume that stretches our processing time beyond the 30-day deadline for e-filing and the three-month limit for those who submit them manually.”

Hasmah hopes this year will show a difference with taxpayers encouraged by the news of early refunds through e-filing, to submit their returns earlier.

To assist taxpayers e-File their 2007 tax returns, the IRB is again holding its taxpayers’ service month until June 30. In conjunction with the taxpayers' service month, more than 100 public counters have been opened at shopping complexes and workplaces.

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My advise : Tax payer should submit form and pay tax earlier than the due date to avoid jam.