Electronic invoicing to improve the tax system

PETALING JAYA: To improve the efficiency of the tax system, the government aims to gradually introduce e-invoicing (e-invoicing) system from 2023, Finance Minister Tengku Datuk Seri Zafrul Abdul Aziz said.

“E-invoicing will also contribute to the implementation of a sustainable e-commerce ecosystem and provide a more reliable audit trail, which will result in increased tax transparency and is considered one of the main strategies to increase tax revenue,” he said in his speech. at the 51st Annual Meeting of the Study Group on Asia-Pacific Tax Administration and Research (SGATAR) yesterday.

Tengku Zafrul noted that e-invoicing would complement a government target for small and medium-sized enterprises (SMEs) under Malaysia’s 12th plan, which is to digitize 90% of SME operations by 2025.

He added that electronic invoicing will also support the use of tax identification number, which will be mandatory for all documents and instruments.

“This will be a move to expand income tax collection, ensuring a sustainable source of revenue for the government. This is in line with the Organization for Economic Co-operation and Development (OECD) report which identifies digital identity as one of the key elements of a future transparent tax administration,” said Tengku Zafrul.

He pointed out that SMEs play an important role in the Malaysian economy, accounting for over 97% of total registered businesses in 2020.

In 2021, SMEs accounted for 37.4% of gross domestic product and employed nearly 48% of the workforce.

“As a result, more efforts need to be made to improve and strengthen SME tax compliance knowledge, and digitalization is the way forward to support their compliance while reducing the administrative burden,” said Tengku Zafrul.

Meanwhile, Malaysia has also agreed to implement the two-pillar approach, to create a competitive environment for foreign and domestic direct investment, and to prevent cross-border tax evasion.

“This is under consideration and should start in 2024,” Tengku Zafrul said.

The OECD’s two-pillar proposal for global tax reform aims to ensure that multinational enterprises (MNEs) will be subject to a minimum tax rate of 15% and to reallocate profits from the largest and most profitable MNEs to countries around the world.

He added that tax policies and strategies must play a role in encouraging companies to adopt and implement environmental, social and governance policies.

Malaysia has adopted the 2030 Agenda for Sustainable Development, which includes priorities to reduce greenhouse gas emissions by 45% of GDP by 2030.

“We are also committed to achieving carbon neutrality by 2050 and have urged all government-linked investment companies, as well as government-linked companies, to set similar net zero targets.

To support this effort, the government is working on carbon taxation and studying the feasibility of a carbon pricing mechanism,” said Tengku Zafrul.

He pointed out that there are also proposals to extend the tax deduction for green investments and the green income tax exemption for qualifying green activities, which have been extended to include energy storage systems. solar and battery power.

In a bid to eradicate extreme poverty, the 2023 budget had proposed setting aside RM1 billion to help very poor households improve their incomes.

Tengku Zafrul also pointed out that women’s participation in the labor market remains relatively low at 55.7% compared to men’s participation in the labor market of 82.6%, mainly due to women leaving the market. work to take care of their families.

“To support working mothers, the government has provided various tax incentives, including for employers to provide childcare facilities in the office or to provide childcare allowances to their employees.

In addition, the 2023 budget proposed tax relief of RM3,000 for childcare expenses as well as an income tax exemption for women returning to work after a career break,” a- he declared.

Established in 1970, SGATAR is an annual forum for tax administrators to enhance cooperation, improve administration and discuss issues related to tax administration.

There are currently 18 members including Australia, Cambodia, China, Indonesia, Japan, Laos, Malaysia, Mongolia, New Zealand, Papua New Guinea, Philippines, Korea South, Singapore, Thailand and Vietnam.

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