Caretaker Finance Minister Tengku Datuk Seri Zafrul Tengku Abdul Aziz said Malaysia has agreed to implement the “two-pillar approach” in taxation to create a competitive environment for both foreign and domestic direct investment.
The approach, which also prevents cross-border tax evasion, is being studied at present and estimated to begin in 2024, he said in his keynote speech in the 2022 annual meeting of the 51st Study Group on Asia-Pacific Tax Administration and Research (SGATAR) on Tuesday (Oct 18), Bernama reported.
The two-pillar approach refers to the Base Erosion and Profit Shifting (BEPS) 2.0 initiative spearheaded by the Organisation for Economic Co-operation and Development (OECD) and the Group of 20.
Tengku Zafrul also said the caretaker Government intends to phase in the electronic invoicing system (e-invoicing) starting next year in order to improve the efficiency of the tax system.
“The implementation of e-invoicing will also aid in the implementation of a sustainable electronic business ecosystem and provides a more reliable audit trail, resulting in increased tax transparency, and is viewed as one of the primary strategies for increasing tax revenue,” he said.
According to him, this would complement one of the Government’s targets for small and medium enterprises (SMEs) under the 12th Malaysia Plan, which is to digitalise 90% of SMEs’ operations by 2025.
“The implementation of e-invoicing will also support the use of the tax identification number, which will be mandatory for all documents and instruments.
“This is a measure to broaden the collection of income taxes, ensuring a sustainable source of revenue for the Government,” he explained.
According to Tengku Zafrul, the implementation is consistent with the OECD report on digital identification of taxpayers, which recognises the digital identity as one of the key building blocks for a future seamless tax administration.
Meanwhile, Inland Revenue Board chief executive officer Datuk Dr Mohd Nizom Sairi said e-invoicing will tighten up leakages in the taxation system, and next year will be the year to prepare towards the implementation.
“We are looking into having a pilot run, maybe in 2024,” he told reporters on the sidelines of the meeting.
He said SGATAR has played a vital role to provide a platform in enhancing the performance of tax administrations in the Asia-Pacific region by promoting collaboration and communication among member tax administrations.
“This time around, the heads of delegations will focus on three areas of discussions, namely addressing new challenges in the tax administration with a focus on human resources and the organisational structure; improving voluntary compliance; and recent developments in the tax administration and updates on tax reform,” he added.