15 Dec - 3 min read
Tax experts have highlighted that the Inland Revenue Board (LHDN) will no longer need to inform or obtain consent from taxpayers to get their bank account details for reviews or investigations. This is following the passing of the Finance Bill 2021, which proposed the inclusion of a new Section 106A to the Income Tax Act 1967.
According to tax expert and the managing partner of Reanda LLKG International Chartered Accountants, Koong Lin Loong, Section 106A states that LHDN can now bypass taxpayers in the process of obtaining their bank account information for investigation. This direct access to taxpayers’ bank details differs from existing procedures that require individuals to sign a consent form before banks can divulge such details to authorities.
On top of that, the new section also notes that “financial institutions shall not disclose to any person that such request was made to the financial institution”. In other words, banks are not allowed to inform taxpayers of such requests once they is made either.
“The authorities can also request for taxpayers’ information from association to check whether income tax was filed from the angle of donations,” Kong further shared, adding that the Personal Data Protection Act (PDPA) will not be applicable when enforcing Section 106A.
Although this move may potentially help LHDN to address the issue of tax evasion in Malaysia – which is estimated at RM300 billion each year, equivalent to 18% of the country’s gross domestic product (GDP) – Kong expressed his concern over the possibility of data abuse. “While the tax authority has every right to examine the bank account of taxpayers, the utmost concern is how to prevent abuses as guidelines can be easily breached by unscrupulous staff at both the bank and IRB ends,” he said.
Meanwhile, the head of tax and financial consulting at Asia Business Centre Malaysia, Datuk Chua Tia Guan pointed out that banks could be fined under the new requirement if it does not comply with the prohibition to inform taxpayers of LHDN’s requests. “The Section states that banks are liable to a fine of between RM200 and RM20,000 or a maximum jail of six months or both for violation,” said Datuk Chua, who is also the founding member of the Special Task Force to Facilitate Business (PEMUDAH) at the Prime Minister’s Department.
This prohibition is actually also hinted at in the Income Tax (Exchange of Information) Rules 2021, which was gazetted earlier this month to replace the previous 2011 edition. Under the updated 2021 Rules, banks are also not strictly required to inform taxpayers when authorities (local, and approved foreign governments via the Director-General of LHDN) request for their bank account information.
To note, the Income Tax (Exchange of Information) Rules 2021 is carried out in line with the Convention on Mutual Administrative Assistance in Tax Matters, which allows foreign governments to request for their taxpayers’ information in Malaysia, and vice versa.
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