Speaking to a machine my taxes paid for

Called that toll free line just now to get some information from the Inland Revenue. Guess what? It’s as annoying as calling a bank or a mobile phone helpline. First, a machine recorded voice greets you (after ring number one, so, I suppose they technically outperformed their Client Charter), introduces the caller to the Inland Revenue, tells you to press 1 for Bahasa Malaysia, 2 for English and so on. And then, the whole labryinth of key punching begins for if you want to talk about Individual Tax, you press 1, if you wanna talk Companies, press 2 and on and on.

The good news is, when you choose English as the medium for communication, they actually have the officers speak to you in fluent English. That’s quite refreshing, I must say… given my very rusty command of the national tongue.

Once you have completed your dealings with the officer, he/ she asks you if you’d like to participate in a customer satisfaction survey. Now, I had a very simple, pain free experience because I was looking for some pretty basic information in this case, so my assessment of their phone service was sky high (its amazing how short my memory can be when I actually end my dealings with a human instead of that machine that greeted my call… oh wait, it was a machine that took my survey…) Damn!

Got me thinking though. I wonder what the outcome of the survey would be if people were calling in to object against some additional assessments or even appeal on penalties imposed. Or those in practice whose daily job is to call up the assessor in charge to talk about their clients’ cases. Imagine the number of times they’d have had to pass that “Tekan Satu untuk Bahasa Malaysia, Press Two for English” before getting to speak to an officer. Or maybe in those cases, they’ll just conveniently forget to ask the caller to complete a satisfaction survey…

Have a Happy Weekend.

Complex algebra and broken promises… yet again

The new law’s out. On insurance.

Specifically, computation of set off of tax charged for actuarial surplus.

Goes like this…

(A x B/C x D) + (E x F/G x H)

No. I’m not kidding.

And, they went back on their word. Again.

If I tagged my bonus to the company’s tax payable, I should be super performer extraodinaire in a loss company (long title, I know)

Okay. I admit it. I don’t know how to do it.

Do what?

Measure my own performance as a tax personnel in a company.

Any suggestions? Here are some that have adverse side effects…

1. Amount of tax saved… bad, bad side effect for this. What the employer will end up with is tax staff who will make aggressive claims for tax deductions to maximise their ‘bonus potential’ every year.  You’ll have staff who will lay claim to credit for every tax refundable position the company ends up with.
2. Minimising incidences of additional tax… Staff will just take very conservative positions and not take a tax deduction for anything. Tax authority’s dream taxpayer.
3. Provision of effective advice… If I could measure effectiveness, I would set up my own HR consultancy firm and earn lucrative fees.
4. Timely submission of tax returns… If the staff achieved that, it’ll be like, you managed to eat three meals a day. Woopee.
5. Technically sound… that’s jargon for being a walking tax legislation. If going for courses is how you prove it, I’m game for those IBFD organised ones in Amsterdam.

So how?

Are we doing a flip flop here, policy makers?

Just a little refresher. Or maybe not. Because the Finance Bill hasn’t really been gazetted yet.

The introduction of a peculiar form of thin capitalisation rules to our Malaysian tax scene raised quite a few eyebrows, mainly because it was… well, weird.

Normal thin cap rules are meant to curtail excessive borrowings. The objective is, if you wanna invest, have some guts and do it for the long term. Don’t borrow so much that your liability is over 3 times your share capital. There’s no distinction how you borrow or from whom… just that it ain’t healthy if you do it too much to finance the rest of your balance sheet (English: the running of your business).

The Malaysianised proposed thin cap two-subparagraphs-rule, on the other hand, says you’re not supposed to borrow too much from your related company. So here’s the big question: Is it then okay if I go and borrow more from banks or some unrelated company? What’s the whole point of this rule?

Okay, before I stray from the topic I really wanted to talk about… basically, thin cap rules (the normal format as well as the Malaysia Boleh! format) provide that if you borrow too much, your interest expense won’t be tax deductible… sorta. Don’t wanna get into too much tech talk. The point to take home is: don’t borrow excessively.

So, if the policy from 1 January 2009 is don’t borrow so much, then what the heck is this for? (For those too lazy to click on that, the headline says: Overnight Policy Rate Lowered to 3.25%)

Can somebody explain to me what an OPR reduction is for? Because its beginning to look like the mouth is saying, “No” while the head is bobbing up and down.

A tax blog closer to home

Flash: A tax blog from Singapore. Singapore’s tax regime is almost the same as Malaysia’s. So, if anything, the issues would be the same. Its the solving that differs (read: we suck).

What Other Side?

For those who do not know my universe…

Dark Side: Tax enforcement authorities

Emperor: Minister of Finance (minus the ghastly outlook…. oh wait)

Darth Vader: Director General of Inland Revenue Board (minus the heavy breathing)

Storm Troopers: Anyone signing off with “Saya yang menurut perintah”

Jedi: Tax agent firm employees/ Private sector tax personnel (and these are getting expensive)

Sith: Penolong/ Timbalan Pengarah Hasil Dalam Negeri (unlike long, long ago, in that galaxy far, far away, they are not limited to two at a time)

P.S. I need a vacation.

Friday Ponders

Would you hire from the other side?

One itsy bitsy question was asked… maybe

Since the emergence of that article, I’ve been searching high and low for any references or information on the legislative jurisdiction of the government in controlling prices of fuel to the point of setting it above the market price, i.e. imposing something like a fuel tax on the Rakyat. Now, I’m no expert in what the government can or cannot do, but I’ve always been under the impression that before the government can do anything to that effect, there must first be a proposal made, a Bill drawn up, debate of the Bill, passing of that Bill in Parliament… yadda yadda yadda… gazetting of the Bill, etc before the government is even “authorised” to impose what is effectively a tax. You know, kinda like how they play with excise duty to keep the price of cars beyond the reach of mere mortals… it required the yearly admendments to the indirect tax laws.

Well, I don’t know… which is why I think it’s a good question to ask, don’t you think? 

Anyway, and I think this is another case of bad reporting (am starting to lose count of such occurences, really), the news reporter was probably trying to pose that question to our Domestic Trade and Consumer Affairs Minister. He/ she probably meant to ask that itsy bitsy question about whether the Ministry had authority to fix the price of fuel at above market price. But perhaps the nonsensical answer that came across had to be made to sound intelligent and to the point, which was why that question was probably rephrased on paper (I’m speculating, of course). Anyway, here it is. Read the last sentence in that article… reproduced here -

On controlling the prices of goods, he said the government has the power to control prices through the issuance of licences to suppliers. 

Sorry if I’m not making sense. Petroleum tax is a new animal to my tax vocab.

Deciphering that chain mail

Yes. Its been circulating. Goes something like this -

If you choose to contribute 8%, you will end up paying more income tax to the government, which will make the government richer. Finance Minister Najib said this measure is meant to boost up the slow-down market, but from this example we see that the money does not go into the market. Instead the money goes direct into the government’s pocket through the greater amount of income tax that we will have to pay.

Obviously this measure does not help the market at all. Do we still want this kind of government that doesn’t have the best interest of the people in mind?

So, the question would be: Is this chain mail to be believed? Does lowering your monthly EPF contribution from 11% to 8% actually have you end up paying more income tax?

The short answer would be: Yes and No.

I’ll show you why -

1. The maximum EPF you can take a tax deduction on in your final tax returns is RM6,000 per annum.
2. Under the 11% contribution, if you were earning RM4,545.45 and below, your maximum contribution at 11% would never have exceeded RM6,000. So, if EPF is reduced to 8% for you, coupled with that obvious fact that you’d have less going to your retirement fund, you’d have less tax deduction against your annual gross salary brought to tax. Hence, you’d end up paying more tax.
3. Now, if you were earning RM6,250 and more, the reduction does nothing to your taxes. Because your 8% (the minimum rate now granted) is never going to be below RM6,000. So, you won’t have any additional tax to pay even if you opt to go for the 8% reduced rate.

The question to be asked on Numbers (2) and (3) would be whether it’s worth the additional tax to be paid or additional cash in our pockets to opt for the reduction? Well, if you were to have a bird’s eye view of the impact of that EPF reduction on your total wealth, and your goal is to preserve whatever puny wealth there is, the answer would be: Its never worth it.

Not only would you have additional tax to pay in the case of those earning less than RM6,250, you’d have lost out on 6% of income for every ringgit taken out of your forced savings (assuming that EPF’s dividend is around that as claimed by some). And let’s say the money goes into your savings account at the bank, at most, you’d be deriving 3% interest rate. At the very least (yes, those earning RM6,250 and more, I’m refering to you), that’s half your potential earnings lost because you got the money in your bank account as opposed to your EPF account.

But having said all that, the whole point for the government in proposing this reduction is to get us (read: workforce and taxpayers) to spend more and hence revitalise the sluggish economy. If the public were educated enough, this kinda method to spur the economy shouldn’t really work. Because we are all merely individuals seeking to preserve what little wealth we have to call our own. That’s my view anyway. What do you think?

In theory, it’s supposed to work…

Here’s a question to ponder. Do we really have 6 years statutory limitation?

If you’re in a loss position, you’re open to scrutiny and adjustments by the mighty Board up till six years after you first become tax payable. So, if you happened to be one of those poor shmucks who are down on their luck for seven generations… well, my only advice is try some feng shui.

In the meantime, some salt on that wound.

The new Section 97A says that the Director General may (as opposed to “must”) notify you in writing that you have no assessment by issuing you a Notification of Non-Chargeability, if you happened to be in a loss position for instance.

There’s no time frame set on him to do that, by the way. So, he can sit on it till your tax manager becomes eligible to cash in his retirement benefits for 20 friggin’ years and there’s nothin’ you can do about it. By then, the warehouse in which you stored your documents would’ve been torn down because the leasehold term has expired and there’s nothin’ you can do about it. By then, those documents are already three quarters on their way to full decomposition, so obviously there’s nothin’ you can do about it.

And if by then, he issues you with that Notification, guess what? He’ll expect an answer back in 30 days, failing which he’ll deem his adjustments as final and conclusive. And by then, he can cascade that new (usually massively reduced) loss down to your current years and BANG! BANG! BANG! (sounds better than Form JA! Form JA! Form JA! doesn’t it?)

And there’s nothin’ you can do about it.