Shadow economy involving foreigners not exempted from tax – LHDN CEO

KUALA LUMPUR: The shadow economy involving foreigners who carry out business activities in their own names or that of our citizens should also contribute to the country’s revenue, said the Inland Revenue Board (LHDN).

LHDN chief executive officer Datuk Abu Tariq Jamaluddin said if there was any tax that the group failed to report, a commensurate penalty would be imposed.

“We (will) make sure not only the foreigners themselves but the people behind them (because) there are also many foreigners who may be using local people’s licences and so on.

“So we will check on the local citizens whether they comply with the taxation law (or otherwise).

“We (also) will go to the field to meet with these groups to identify them (foreigners) and also the parties behind them,” he told the media after the Taxation CEO With the Media 2024 engagement session programme at Sunway Putra Hotel here today.

According to the LDHN, shadow economy activities have created a large impact on the country’s tax gap and it is often associated with unregistered and unlicensed businesses that do not make tax declarations, including part-time jobs that receive salary or wage payments in cash to avoid reporting income and income tax payment.

Last year, the media reported that the country lost about RM70 billion annually in tax revenue from shadow economy activities.

That amount is about 20 per cent of the estimated total income of the shadow economy worth RM350 billion a year which is 30 per cent of the Gross Domestic Product (GDP).

Abu Tariq said that in 2024, the direct tax collection target is RM197 billion and to achieve this target, the LHDN has planned various strategies to ensure tax compliance is at an optimal level.

He said that in addition to focusing on shadow economy activities, the LHDN will focus on individuals who have assets and wealth that are not commensurate with the tax report filed.

“Under the law, the LHDN can reopen a case for the past five years and if there is an element of negligence and fraud there is no time limit set.

“The LHDN will also focus on any individual or company that generates income through online activities,” he said.

The LHDN will celebrate the 28th Revenue Day on March 1, 2024 with various programmes including the Rahmah Cash Donation Counter; Tax Counter/e-Services/HASiL Hub; Public and Private Agency Service Counters; and Briefing and e-invoicing Counter. – BK