Monthly Tax Submissions?
The Malaysia Inland Revenue Board (IRB) is introducing a new schedular tax deduction (STD) system to avoid tax over-deduction. Under the new system, employers and employees will have to do more as they are required to file tax exemptions on a monthly basis instead of once per annum. This new system will take effect from 1 January 2009.
According to Inland Revenue Board chief executive officer Datuk Hasmah Abdullah, the new system would ensure that an accurate amount was deducted, and would reduce the instances of over-payments and refunds or under-payment involving three million people (quote from The Star article). IMHO, the move is downright silly. Monthly submissions mean employers and employees have to handle a whole lot more paperwork. Imagine one form per individual over twelve months as opposed to one form per individual once a year. You do the math.
I personally don’t believe that it will make much difference in terms of reducing the instances of over/under-payments. This is simply load shifting with little thought given to the consequences. Quite frankly, I have no issues with the over-deduction and it should be IRB’s responsibility to process the refunds. They will have to balance the accounts anyway at the end of the year, so what’s the point of shifting the load to the tax payers?
Sure hope that they still allow you the option to submit exemptions at the end of the year. Imagine if they limited submissions to only that particular month. That means if you missed a month, you’ll lose out on your exemptions. That also translates to more tax revenue for the government (or to line someone’s pocket). That’s simply unfair to the tax payers. But then again, if they did allow year end submissions, then everyone will just opt for that, which is no different from the current system. Probably some additional incentives for submitting monthly exemptions? Unless it’s a big chunk, I don’t see myself doing it.
I don’t mind doing monthly submissions if the process is simple but it will definitely be a serious pain and an overhead that I would rather do without. The IRB should really rethink the strategy. I’m looking forward to seeing how they’ll manage the enforcement of the new system.
For the curious, information on existing STD can be found on the IRB website.
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Monthly Tax Submissions? | kozmom Said,
December 24, 2008 @ 11:38 am
[…] details: Monthly Tax Submissions? […]
attahun Said,
January 3, 2009 @ 10:28 am
actually i thought it was a way for the government to collect the tax in this so called times of recession; people losing jobs..
on normal basis, lets say you earn RM3K, if you work for six month and then have no job for the other 6m months, your yearly salary would be RM18K and thus you wont be eligible for the tax bcoz of the rebate.
but with this monthly tax system, during the 6 months where you are working, you are already paying the government your ‘monthly tax’ regardless of when u dont have a job.
but then again, i’m not really sure if it is monthly tax submission or monthly tax exemptions. :)
G: Technically speaking, as long as you’re working and your salary is above the taxable income, the company you work for will submit the deductions to LHDN. That is applicable even on the old system and if you wound up working for 6 months as in the scenario you outlined above, the government will need to refund you the deductions that your company made automatically on your behalf. The new system is simply a means of making ‘more accurate’ deductions. Having said that, I think the current system is plenty accurate. Quite frankly, the exemptions do not contribute much to the miscalculations. More often than not, it’s the annual bonuses that screws up and skews the taxes paid. Especially those who get huge bonuses.
attahun Said,
January 6, 2009 @ 9:38 am
yes i agree with u. then it doesnt make sense to do monthly tax submissions is it? i’m not sure bout the system but what i thought was that the government wanted to collect the tax on monthly basis rather than yearly, so the exemptions would be divided to monthly amounts, which means everyone will be eligible for tax if my assumptions are real. I do hope i’m wrong.
If its just monthly declaration, i dont see any point in that since there wont be much difference to the current PCB method instead of incurring more problems to processing monthly salary and deductions and tax value.
why the hassle?