Malaysia’s taxation system is a tangled mess that is in many ways similar to the US tax code.
Its complicated structure, its lack of clear and consistent rules and its lacklustre enforcement are all parts of a very complicated and confusing tax system.
Malaysia’s system is currently a mess, according to the latest figures from the OECD, a tax watchdog organisation that monitors tax affairs across the globe.
The OECD estimates that the country’s tax system as of September was worth about US$1.3 trillion (AU$1 trillion).
That’s the equivalent of US$2.1 trillion in current account deficit, or an estimated $1.7 trillion in taxes collected by the Malaysian government in the last year.
As the Guardian’s Alastair Leithead reports, the OECD’s latest data show that Malaysia’s current account is the world’s second largest after China, with an estimated US$7.4 trillion of external trade.
In the same period, the country was estimated to have collected US$4.5 trillion in tax revenue.
But with no real clear cut answer on how to fund its finances, Malaysia is currently facing a growing economic crisis, with the country already facing a sharp decline in domestic demand.
According to a recent study, the number of Malaysians earning more than $100,000 a year dropped by almost half between 2012 and 2017, from an estimated 10.5 million to 4.2 million.
At the same time, the nation is struggling to attract foreign investment, with just 0.5% of companies reporting plans to expand their operations in Malaysia.
While Malaysia’s economy is recovering, its tax system is so convoluted that it is now a full three years late to the party.
Malay tax officials are currently attempting to implement new reforms that will help tackle the countrys looming fiscal crisis.
On Tuesday, Malaysia’s new Finance Minister was expected to propose a new framework to simplify the countryfinance system.
A new framework would allow Malaysia to tax multinational companies, simplify and speed up the filing of its tax returns, and increase the amount of money a company has to pay in taxes, while lowering its corporate tax rate from 7% to 4%.
But in a speech in the country, Finance Minister Datuk Seri Dr Ahmad Zahid Hamidi said that Malaysia still does not have the revenue necessary to fund the reforms.
“We are not yet there yet.
But we are moving on,” he said.
This is why Malaysia is considering a new set of reforms, according a Reuters report, which said the government would consider increasing the tax rate to 10% from 5%.
