Malaysian Tax Case Study

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1.1 Background of Study The taxation system in Malaysia is dynamic following the changes of business world. It was firstly designed by Straits Settlements Legislative Council in 1910 for the purpose of country development and withdrawn later as public opposed to pay the tax (Kasipillai, 2000). Over the years, Malaysian tax system is transformed and growth. Inland Revenue Board of Malaysia (IRBM) introduced the Self-Assessment System (SAS) for corporations in 2001 and followed by all other taxpayers (included individuals) in 2004, to replace the former Official Assessment System (OAS) (Loo, Evans, & McKerchar, 2010; Fatt & Khin, 2011). In the OAS system, taxpayers have to file their yearly tax returns within stipulate time and will be assessed…show more content…
It is hard for the taxpayers to up-to-date with the constant changing of the taxation rules or amendments of taxation laws. Yet, the taxpayers could enjoy an optimal tax benefits if they have solid foundation knowledge on tax laws and compliance requirements. This is because the taxpayers could do their tax planning within the rules and regulations of taxation for the purpose of eliminate, minimize, or postponement their tax liability. The taxpayers could minimize the amount of taxes to be paid for a stipulated period by think of various strategies to implement. In general, tax planning is legal way of tax compliance while tax evasion is illegal. Tax planning is done by taking advantage of loopholes or lacunae in the tax code to reduce tax liability. It is consider legal if the transactions involved are bona fide without violation of the provision of Income Tax Act 1967. Following concepts and ideas are involved in tax planning for the aim of tax savings: Utilization of tax exemptions and tax incentives; Reduction on the overall tax rates of the chargeable income; Maximization of deductible expenses and minimization of non-deductible expenses; Advanced on expenditure such as major repairs; Organization of transaction on income arises as capital gain, thus would not be subject to income tax; and Deferment…show more content…
OECD (2009) also suggest that revenue bodies could obtain important information about the risk of non-compliance by bank via understanding how banks’ governance functions when developing products, including CSFTs, and testing its effectiveness. Past research has discussed that aggressive corporate tax planning which indicated by low effective tax rates or high retain of unrecognized tax benefits, would cause rises of firm risk, in that way firm managers should take note of the risk precaution when involve in tax

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