Abstract
This essay analyses the amendments made to Sec.24 of the Malaysia Income Tax Act 1967 that charges income tax on income received in advance (deferred income) as opposed to the traditional accrued basis. These changes are controversial on five grounds. First, it causes cash flow constrains to businesses due to upfront payment of tax without receipt of the actual income. Secondly, there will be a temporal mismatch between the time of which the income is assessed and deduction that is available for deductible expenses. Thirdly, the treatment will lead to misalignment between tax codes and accounting practices, in contrary to international efforts to align both for better governance. Fourthly, a system that is deemed unjust will inculcate deliberate non-compliance; and fifthly, taxing on deferred income is a double-jeopardy on top of the existing goods and services tax. The amendments are unreasonable, unprincipled and unequitable. Yet, it takes effect from year of assessment 2016 while many doubts remain unanswered. It is proposed that the changes be halted permanently or temporarily pending further adjustment. The revenue board is also being cautioned on the importance of being congruent with internationally accepted standards and trade practices.
Original language | English |
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Title of host publication | Malaysia’s Taxation System: Contemporary Practices, Issues and Future Direction |
Editors | Mohamed Ariff Syed Mohamed, Kim Leng Yeah |
Place of Publication | Kuala Lumpur |
Publisher | Sunway University Press |
Chapter | 5 |
Pages | 106-128 |
Number of pages | 23 |
ISBN (Print) | 978-967-13697-9-1 |
Publication status | Published - 2020 |
Keywords
- Income Tac Act
- Section 24
- Malaysia
- deferred income
ASJC Scopus subject areas
- General Business,Management and Accounting