The Ministry of Finance (MOF) has clarified that the Inland Revenue Board of Malaysia (LHDN) runs its own operations but still acts as a government agency.

In a written reply to Parliament, the ministry explained that LHDN is a statutory body under the Inland Revenue Board of Malaysia Act 1995 (Act 533). This means it has control over how it manages its staff and finances, but tax policy and national fiscal matters remain under the ministry’s control.

How The Law Defines LHDN’s Role

The Finance Ministry said the law clearly sets LHDN’s main duty as collecting and managing taxes for the government.

LHDN officially became a statutory body on 6 January 2015. From then on, it gained more independence in managing its own finances, salaries, and internal operations.

However, this independence does not mean LHDN works alone. It still follows government laws and policies when carrying out its duties.

Board Oversight And Legal Responsibilities

Under Act 533, LHDN is led by a Board of Directors that ensures the agency is run in a fair, transparent, and accountable way.

The main tax laws managed by LHDN include the Income Tax Act 1967, Stamp Act 1949, Real Property Gains Tax Act 1976, Labuan Business Activity Tax Act 1990, Petroleum (Income Tax) Act 1967, and Investment Incentives Act 1986. These laws guide how Malaysia’s direct taxes are collected and enforced.

Parliamentary Question On LHDN’s Structure

The clarification came after Datuk Seri Dr Wee Ka Siong (BN–Ayer Hitam) asked if the government would study how tax agencies work in the United Kingdom and Australia. In those countries, the tax authorities report directly to Parliament to reduce political or fiscal influence.

The Finance Ministry said it welcomed Dr Wee’s suggestion and agreed that improving governance is important. It added that any changes to LHDN’s structure must still protect taxpayers’ rights and ensure fair treatment.

Independent, Yet guided By Government Tax Policy

According to the ministry, LHDN’s autonomy allows it to manage its daily work more efficiently. At the same time, keeping it under the Finance Ministry helps ensure that tax administration supports Malaysia’s fiscal goals and annual budget.

“The structure provides operational, financial, and human resource autonomy, but alignment with the ministry ensures taxation policy continues to support fiscal policy and annual budget goals,” the statement said.

The government also said it remains open to reviewing LHDN’s governance model. This includes studying international practices to make the Board more credible, transparent, and independent.

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