Another Bombshell: More Than RM16B Tax Refunds Owed to Taxpayers

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Hopefully the last “mega exposé” from the Finance Ministry in relation to alleged misappropriation and misuse of taxpayer’s money by the Barisan government.

  • Previous government had not refunded excess income tax and real property gains tax of RM16.046 billion paid by taxpayers
  • Involves more than 1.6 million companies, individuals, societies, foundations
  • RM14.56 billion not transferred from consolidated fund to Tax Refunds Trust Fund (TRTF)
  • Similar to GST tax refunds not paid, not enough money allocated to TRTF despite Inland Revenue Board’s (IRB) request
  • Transfer of funds handled by Cash Management Committee headed by former Treasury sec-gen Irwan Serigar
  • Like in the case of GST tax refunds, this is falsification of account and misappropriation of tax refunds for other purposes or to conceal the actual deficit and present a surplus
  • Now taxpayers can apply to set-off outstanding tax refunds from IRB against current year tax payable
  • Remaining tax refunds will be carried out based on ability of government depending on its fiscal position

The Finance Ministry has dropped another bombshell, claiming that the previous Barisan Nasional government hasn’t refunded a total of RM16.046 billion of excess income tax and real property gains tax to taxpayers – with some being owed these refunds for the last six years.

In a statement issued on Wednesday (Aug 22), Finance Minister Lim Guan Eng said the total amount involves 1,653,786 incidents consisting of companies, individuals, societies and foundations, as of May 31 this year.

According to Lim, 29 percent (RM4.6 billion) of the total amount, which consists of RM3.09 billion of tax refunds for companies and RM1.503 billion for individuals, societies and foundations, have not been refunded to taxpayers for over six years.

And 22 percent (RM3.539 billion) of the figure, consisting of RM2.759 billion for companies and RM780 million for individuals, societies and foundations, comes from a backlog stretching back four to five years.

Also, 38 percent (RM6.125 billion) of the total amount, consisting of RM5.212 billion for companies and RM910 million for individuals, societies and foundations, haven’t been refunded for a period of between two and three years.

Finally, 11 percent (RM1.789 billion) of the total amount, made up of RM1.356 billion for companies and RM433 million for individuals, societies and foundations, have not been refunded to taxpayers over the past one year.

Lim said that the amount of outstanding tax refunds was due to a shortage of transfers from the direct tax revenue collected in the Tax Refunds Trust Fund (TRTF).

“As of May 31, 2018, the balance in the TRTF is only RM1.486 billion based on the records from the Accountant General’s Department, which is far lower compared to the RM16.046 billion required for the refunds that need to be made.

“In other words, there exists a shortfall of RM14.56 billion as of May 31, 2018, which resulted in 1,653,786 taxpayers not receiving their tax refunds as far back as more than six years ago.

“Therefore, it is clear that the RM14.56 billion, which was not transferred from the Consolidated Funds to the TRTF, had already been recognised as government revenue by the previous government.

“This means that the government revenue that was reported by the previous government is not accurate and larger than what it actually was,” Lim said.

He alleged that the arrears in tax refunds of more than six years were because the Cash Management Committee under the Finance Ministry did not allocate enough funds to the TRTF as requested by the Inland Revenue Board (IRB).

Lim added that this committee was chaired by former Treasury secretary-general Tan Sri Dr Mohd Irwan Serigar during Barisan’s administration.

“As I have explained before, this amounts to the falsification of accounts and the misappropriation of tax refunds for other purposes or to conceal the actual deficit and present a surplus,” Lim claimed.

To address this issue, he said the Pakatan Harapan government was now allowing taxpayers who have outstanding tax refunds from the IRB to make an application to set off the amount against the tax payable for the current year.

According to Lim, this application must be submitted to the IRB for verification and consideration for approval.

“Besides that, the remaining tax refunds will be carried out based on the ability of the government depending on its fiscal position.

“We hope that the failure to return RM16.046 billion of tax refunds is the last mega exposé related to the misappropriation and misuse of taxpayers’ money by the previous government,” Lim said.

“The new Pakatan Harapan government which upholds the principles of Competency, Accountability, and Transparency (CAT) will do its utmost best to resolve such scandals, including through returning the tax refunds,” he added.