The Inland Revenue Board (LHDN) will be able to access taxpayers’ bank account details without needing permission from banks for review or investigation. This is a new ability under new proposed amendments to Section 106A of the Income Tax Act.
Previously, banks would need a signed consent form from the taxpayer before they could access their bank account for information. But with the proposed clause, authorities would be able to request this directly from banks, and banks will not be allowed to disclose these requests to anybody either. If banks do not comply, the Section states that they are liable to a fine of “between RM200 and RM20,000, or a maximum of six months’ jail, or both, for violation”.
Among the reasons for adding the amendment is to reduce tax evasion. It is estimated that tax evasion amounts to a whopping RM300 billion each year—or 18% of the country’s gross domestic product. Tax audit and investigation executive director Mohd Fariz Mohd Faruk also noted that it is important for Malaysian taxpayers to “really understand this new power granted” to LHDN under Section 106A “so that they are not misguided”.
“…a civil proceeding must have been instituted against a person and a judgment has been obtained against that person for the IRB (LHDN) to be able to obtain the bank account information of that person from the financial institutions,” he explained.
“The authorities can also request for taxpayers’ information from associations to check if income tax was filed from the angle of donations,” said tax expert Koong Lin Loong.
Koong also added that the Personal Data Protection Act (PDPA) would not apply when Section 106A is enforced. According to the PDPA, banks would still need to acquire taxpayers’ consent before furnishing bank account details to LHDN.
Malaysia had signed agreements with 150 countries on automatic exchange of information—which is basically co-operation between tax administrations to “fight against tax evasion and protecting the integrity of tax systems”. The country is also participating in the Organisation for Economic Co-operation and Development (OECD) to comply with international requirements on tax planning.
The Convention on Mutual Administrative Assistance in Tax Matters states that foreign governments are allowed to request taxpayers’ information in Malaysia. Malaysia would also be able to ask for the bank information of taxpayers in other countries.
[ SOURCE, IMAGE SOURCE ]