Last year, individuals and companies tried to avoid paying RM6.34 billion in taxes, according to the Inland Revenue Board, eclipsing the amount spent on development by several key ministries. This staggering sum was discovered through 137,453 cases of tax evasion in 2023, with an estimated RM70 billion lost to the shadow economy.
The largest share of unpaid taxes – RM4.2 billion or 66.3% – was owed by companies, leading to RM3.52 billion in additional taxes and RM686 million in penalties. Salaried workers were the second largest culprits, owing 23.4% or RM1.48 billion, resulting in RM1.44 billion in additional taxes and RM46 million in penalties.
Construction companies were among the top evaders, with 40,732 cases involving companies, while 96,721 individual cases accounted for 70.5% of the total. Sectors such as wholesale and retail trade, construction, accommodation and food service activities, other service activities, professional, scientific, and technical activities, and agriculture, forestry, and fishing were identified for non-compliance.
Individual taxpayers make up an average of 24% of the country’s income tax revenue, according to data from 2013 to 2022.
Tax evasion primarily involves individuals and companies trying to avoid income tax by intentionally showing lower taxable income or failing to report income to the Inland Revenue Board. Offenders who assist others in tax evasion are also considered guilty.
Non-compliance by tax evaders involves underreported sales, making false purchases, claiming false expenses, owning high-value assets or property without proper reporting, and employers failing to remit Monthly Tax Deductions (PCB) within the specified period. Furthermore, transfer pricing and relocating operations to countries with lower tax rates contribute to tax evasion, leading to job reductions in specific sectors.
The country launched an online complaint system known as e-Pelarian Cukai (e-PC) on Jan 1, 2023 to report cases of tax evasion. Meanwhile, the Special Voluntary Disclosure Programme 2.0 (SVDP) allows individuals who haven’t declared their income to pay taxes without penalties until May 31.
Since 2023, 7.8 million citizens and permanent residents have received a Tax Identification Number (TIN) and have until January 31 to disclose their income voluntarily. The SVDP excludes employers with cases involving unreported or under-reported income.
