The Inland Revenue BoaRd of MalaysIa - Hasil · annual Report 2008 8 JD132367 Teks BI.indd 8 6/14/10 1:47:53 PM. annual Report 2008 9 IRBM’S GOVERNANCE ... The Inland Revenue Board

The Inland Revenue BoaRd of MalaysIa

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© The Inland Revenue Board of Malaysia (IRBM)

All Rights Reserved. The articles, illustrations and contents of this book may not be reproduced, in whole or in part, in any form and by any means whatsoever, either electronic, photocopying, mechanical, recording or any other means, without the express written consent of the Chief Executive Offi cer/Director General of Inland Revenue, The Inland Revenue Board of Malaysia, P.O Box 11833, 50758 Kuala Lumpur.

Malaysian National Library ISSN 1675 - 1612

Printed by:Percetakan Nasional Malaysia BerhadJalan Chan Sow Lin50554 Kuala Lumpur

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ConTenTsTHE IRBM CULTURE 6

IRBM’S GOVERNANCE 9

ChaIRMan’s sTaTeMenT 11 BoaRd MeMBeRs 13 PReaMBle 14 ToP ManaGeMenT 16 oRGanIsaTIon ChaRT 17 60 GloRIous yeaRs 18 HASIL’S PERFORMANCE 21

oPeRaTIons 23 • IRBM’s 60 Years of Excellence 23 • Revenue Collections 24 • Refunds 27 • Tax Collection Methods 28 • Customer Service 32 • Taxpayers’ Rights 40 • Tax Compliance, Prevention, and Enforcement 41 • PTPTN Collections Agent 46

InTeRnaTIonal neTWoRK 47 • Double Taxation Agreement 47 • International Relations and Networking 47

HUMAN RESOURCE DEVELOPMENT 51

AWARDS AND RECOGNITIONS 55

QualITy PRoGRaM and ITs aChIeveMenTs 57 CusToMeR feedBaCK 59

AN ANALYSIS OF 2008’S ACHIEVEMENT BY MAIN PROGRAM 63

FUTURE PLANNING 69

HASIL’S DIARY 73

FINANCIAL STATEMENTS 79

APPENDICES 109

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The IRBM CulTuReThe IRBM culture aims to provide organisational direction and inseminate its values among all IRBM offi cers. The culture is adopted as an integral part of all functions and responsibilities to achieve better focus and effi ciency.

Vision

The IRBM as a world-class tax administrator

Mission

To provide quality taxation services to increase national revenue

Objective

To create and implement a fair and effective tax management system

Quality Policy

We are committed to provide quality service to our clients, based on the IRBM’s slogan, “Friendly, Helpful, Satisfactory”

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Functions Functions of the IRBM:

a. To act as a Government agent in the administration, assessment, collection and enforcement of income tax, petroleum income tax, real property gains tax, estate duty, stamp duty and other taxes agreed upon between the Government and the Board.

b. To provide advisory services to the Government on matters regarding taxation and to work with the Ministry and relevant statutory bodies on such matters.

c. To participate in meetings, discussions and agreements on matters relating to local and international taxation.

d. To act as a collection agent for and on behalf of any statutory body in recovering loans payable to it under any written law.

e. To carry out any other function given to the IRBM under any other written law.

ResponsibilitiesThe IRBM is responsible for the administration of the following laws:

a. Income Tax Act, 1967,b. Petroleum Act (Income Tax), 1967,c. Real Property Gains Tax Act, 1976,d. Stamp Act, 1949,e. Labuan Offshore Business Activity Tax Act, 1990,

andf. Promotion of Investments Act, 1986.

The IRBM is required to comply with all Double Taxation Agreements (DTAs) entered into by the Government of Malaysia with other governments. In addition, the IRBM is also required to comply with legislations relevant to its administration:

a. Federal Constitution, 1957,b. Interpretation Act, 1948 and 1967,c. Limitation Act, 1953, d. Courts of Judicature Act, 1964,e. Companies Act, 1965,f. Bankruptcy Act, 1967,g. National Land Code, 1965,h. Criminal Procedure Code (Act 593),i. Penal Code (Act 574),j. Company Winding Up Rules, 1965,k. Rules of High Court, 1980, andl. Subordinate Court Rules, 1980.

The IRBM also continues to administer several repealed legislations to resolve outstanding cases from previous years:

a. Estate Duty Enactment, 1941, andb. Share Transfer Tax Act (Land-based Companies),

1984.

Members of the Inland Revenue Board of Malaysia

The Inland Revenue Board of Malaysia is regulated by the following Board Members:

a. Secretary General of Treasury cum IRBM Chairman.b. Attorney General or a representative.c. Director General of Public Services or a representative.d. Two other persons representing the Government,

appointed by the Finance Minister.e. Two other persons from the private sector,

appointed by the Finance Minister.

Board members met nine times in 2008.

Offi cial AddressChief Executive Offi cer/Director Generalof Inland RevenueInland Revenue Board of Malaysia15th Floor, Block 9Government Building Complex Jalan Duta, P.O. Box 1183350758 Kuala Lumpur

Telephone : 03-6209 1000Fax : 03-6201 3798Website : www.hasil.gov.my

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IRBM’S GOVERNANCE

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Tan Sri Dr. Wan Abdul Aziz bin Wan AbdullahSecretary General of Malaysian Treasury

Cum Chairman of Inland Revenue Board of Malaysia

On behalf of the Board Members, I am pleased to present the Inland Revenue Board of Malaysia (IRBM) Annual Report for the financial year ending 31 December 2008.

The Inland Revenue Board of Malaysia (IRBM) achieved a record collection in national direct taxes in 2008 with a gross figure of RM90.651 billion. 2008’s overall gross collections increased by RM15.948 billion or 21.35% from the RM74.703 billion collected in 2007. The IRBM also resolved 558,951 refunds in 2008 compared to 400,360 cases resolved in 2007. As a result, the amount refunded correspondingly rose by RM8.560 billion in 2008 compared to RM5.394 billion in 2007.

The IRBM’s excellent performance in 2008 is the result of a combination of success factors based on the implementation of strategies that focused on improving tax administration, human resource development based on competency and professionalism, as well as the continuous effort of generating added value and emphasising on innovation in implementing the information dissemination and management system. In addition, focus was given on stepping up customer management and communication, the enforcement and administration of related laws, as well as the appreciation of positive corporate values, including integrity and transparency, in carrying out its responsibility as the national direct tax collections agent. While exploring new opportunities to improve customer service, the IRBM also focused on sharing its experience and best practices in tax administration locally and internationally. The holistic strategies implemented by the IRBM have clearly been effective in improving the quality of the services and products it provides. The IRBM’s success in 2008 was reinforced by their innovative and creative response in maintaining their service performance and their excellent revenue collections for national development.

ChaIRMan’s sTaTeMenT

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The IRBM’s performance in 2008 also reflects the taxpayers' sense of responsibility and cooperation. Taxpayers played a key role in assisting the IRBM strengthen the implementation of its taxation system for better effectiveness and in encouraging awareness of voluntary tax compliance. This responsibility is manifested within each person’s role in nation building, involving the private sector as the growth driver, the public sector as the facilitator and regulator, as well as the civil community and others as development partners. The high commitment of stakeholders in the taxation system chain is a collaborative effort that needs to be strengthened to sustain the initiative of generating direct tax collections for the wellbeing of the people.

The roles and cooperation of all parties are still required to be better prepared for the unstable economic scenario and global changes that will have an effect, directly or otherwise, on future efforts of increasing the revenue from direct tax collections. Thus, the unstable economic situation is expected to be a formidable challenge for the IRBM in its effort to maintain this excellent performance in 2009. As a proactive step in facing this challenge, the IRBM developed four core strategies to strengthen its implementation of the core activities planned for 2009. These strategies involve strengthening the organization’s capability by focusing on operational/service excellence, expanding the tax base, reducing the taxation gap, and improving the collection of direct taxes. The activities under each strategy will be implemented through education and development, with emphasis on the development of competent human resources, the improvement of internal processes related to service delivery, innovations in ICT, the improvement in customer service quality, widely-implemented tax education programmes, and financial management to stabilize the rise in tax revenue under such activities as tax collection, law enforcement, and the monitoring of tax compliance levels.

I would like to take this opportunity to record my congratulations and gratitude to all taxpayers and customers for their cooperation, as well as to the public, particularly the tax-paying community, for their concerted effort in achieving the excellent performance of the revenue collection agenda for 2008. On behalf of the Board Members, I would like to express my utmost appreciation to the management and the people of the IRBM for their continuous commitment, dedication and cooperation. My thanks also go to Members of the Board for contributing their ideas, time, and energy in consolidating the organization and ensuring that the planning and implementation of policies are duly given priority. I hope that the people of the IRBM will continue to improve their friendly, helpful, and satisfactory service to a higher level that will portray the IRBM as a respected and admired organization at all levels of society.

TAN SRI DR. WAN ABDUL AZIZ BIN WAN ABDULLAH

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BoaRd MeMBeRs

CentreTan Sri Dr. Wan Abdul Aziz bin Wan AbdullahSecretary General of Treasury, Malaysian TreasuryCum Chairman of Inland Revenue Board of Malaysia

Standing from left to rightDatuk Wira Haji Ahmad Rusli bin Joharie (Private Consultant)Datuk Nor Bee binti Ariffi n (Parliamentary Legal Draftsman, Drafting Division, Attorney General’s Chambers of Malaysia)Dato' Mohd Salleh bin Mahmud (Accountant General, Accountant General Department of Malaysia)Tan Sri Ismail bin Adam (Director General of Public Services, Public Services Department of Malaysia)Datuk Aziyah binti Bahauddin (Secretary, Tax Analysis Division, Malaysian Treasury)Dato' Sivalingam a/l Selvadurai (Private Consultant)

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Dato’ Hasmah binti AbdullahChief Executive Offi cer/Director General of Inland RevenueInland Revenue Board of Malaysia

PReaMBle

StrategyAs the national agent for direct tax collections, the IRBM is committed to the recommendations and commitment of the Government to improve the overall service delivery system of the Malaysian Public Services. As such, the strategies for the IRBM’s various programs and activities for 2008 was planned, implemented, and monitored to ensure quality and effectiveness in its delivery. Following the instability of the global economic situation, the IRBM also implemented a prudent spending policy by revising and reviewing its activities to reduce costs for 2008 without affecting its core activity of increasing revenue.

BenchmarkingTo ensure a smooth tax administration process, an innovative ICT-based approach was adopted. For example, the IRBM’s e-services, such as e-Filing and e-Bayaran, were improved to facilitate tax transactions for taxpayers. Emphasis on this strategy has resulted in the achievement for 2008 exceeding that of 2007. Performance for 2008 is assessed based on the achievement of tax collection targets, the efficiency in tax collection, the increase in refund cases resolved, the quality of customer service, and the expansion of the tax base.

Tax Collection TargetsThe achievement of tax collection targets for 2008 improved significantly. Overall, the total amount in direct taxes for 2008 registered a record high in the history of the IRBM. 2008’s excellent performance also reflects the organisation’s success in implementing its programs and activities to increase the overall tax collection. In 2008, the IRBM collected a gross amount in direct taxes totaling RM90.651 billion, an increase of RM15.948 billion or 21.35% from the RM74.703 billion collected in 2007. The IRBM’s net collections of RM82.091 billion

after deductions for the Tax Refund Fund (TRF) exceeded the Government’s revised net target of RM77.579 billion by 5.82%.

The performance of direct tax collections by component improved significantly in 2008 from 2007. The collection of direct taxes contributed 56.11% of RM161.558 billion of the Federal Government's overall revenue for 2008. Company income tax maintained its position as the main contributing component with a collection of RM46.902 billion (51.74%). This was followed by petroleum income tax with RM24.191 billion (26.69%) and individual income tax with RM14.347 billion (15.83%) collected. Stamp duties and withholding tax collected contributed RM3.502 billion (3.86%) and RM1.354 billion (1.49%) respectively.

Real Property Gains Tax (RPGT) collected in 2008 amounted to RM110.37 million (0.12%), a decrease from 2007. The drop is due to the Government’s policy for full exemption of RPGT from 1 April 2007 on the disposal of property carried out after this date. However, the IRBM continued to carry out the assessment, collection and enforcement of RPGT on disposals prior to 1 April 2007. Other collection components, namely cooperative income tax, Labuan offshore business activity tax (IOFC), and other revenues (compound payments [Section 124 of the ITA, 1967], court fees, interest on bank balances, legal revenue, and service damages) recorded a total collection of RM244.24 million (0.27%).

Tax Management Effi ciencyThe improvement in tax management efficiency for 2008 was most encouraging. The IRBM recorded a management cost of RM1.170 for every RM100 in tax collected compared to RM1.198 in 2007. The improved management cost ratio displays the effectiveness in the management of taxation laws despite the uncertainties of the global economic crisis.

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Tax RefundsIn 2008, the IRBM’s successful performance can also be seen through the increased number of tax refund cases resolved for the current year as well as arrears payments for previous years. Under the Self-Assessment System (SAS), refunding became a major activity of the IRBM as the performance of tax refund payments within the stipulated time became an annual service delivery standard. The IRBM resolved 558,951 refund cases in 2008 compared to 400,360 in 2007. The better service quality is a great achievement in terms of improvement in the IRBM’s system of service delivery to the public.

Customer ServiceTo ensure that revenue collections achieve the actual potential for national economic growth, integrated efforts in enforcement, compliance, collection, customer service, and education continued to be implemented. Monitoring and enforcement were carried out to continuously improve the compliance level among taxpayers, which in turn, will have an impact on the current and subsequent years’ revenue collections. The immediate impact from the implementation of the program and its activities is the broader national tax base as a result of the increased number of registered taxpayers. The entry of new taxpayers will contribute to the continued increase in national direct tax revenue.

The success of a taxation system depends on the cooperation between taxpayers and the IRBM. This will help raise the level of voluntary compliance among the public. As such, the IRBM regularly introduces innovation in its service delivery system to its customers. The approach allows them access to faster and more efficient service. For 2008, the efforts to improve the IRBM’s services were implemented in several dimensions. Examples include the improvement made to the e-Filing system, the improvement made to the payment system, and the increase in the number of Revenue Service Centres, among others. In addition to improving the service quality of its existing Customer Service Centre (CSC) at the Pandan Indah Processing Centre, Kuala Lumpur, the IRBM also launched a new CSC in Kuching in 2008. The CSC has functioned as a communication channel, thus realising the concept of ‘One Service, One Delivery, One Call’ for the convenience of taxpayers and the public.

Future PlanningThe IRBM will continue with the organisation’s planning and the action plan pursuant to the policies set by the Government. Every action and activity planned will conform to the objective of increasing the collection of national direct taxes, the quality of taxation services, and the efficiency in the administration of taxation. The IRBM will move forward, poised to face the challenges in carrying out the activities set out under each objective. The action plan is an initiative to make the IRBM a world-class tax administrator, in line with global development.

AcknowledgementOn behalf of the IRBM management, I would like to thank the Board Members for their support, advice and contribution in strengthening the IRBM’s administration. I would also like to record my appreciation to the people of the IRBM for their commitment, dedication and excellence shown every year. I hope that the staff of the IRBM will continue to join me in boosting the IRBM to greater heights of excellence in the coming years. My thanks and appreciation also go to all taxpayers and the citizens of Malaysia who have exercised their tax responsibilities in support of national development and well-being.

daTo’ hasMah BInTI aBdullah

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ToP ManaGeMenT

SittingDato’ Hasmah binti AbdullahChief Executive Offi cer/Director General of Inland RevenueInland Revenue Board of Malaysia

Standing from left to rightShahmin Ta bin Abdullah, Deputy Director General (Corporate Affairs)Che Omar bin A. Rahaman, Deputy Director General (Compliance)Dato’ Dr. Mohd Shukor bin Hj. Mahfar, Deputy Director General (Operations)Dr. Siti Mariam binti Che Ayub, Deputy Director General (Technical)

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oRGanIsaTIon ChaRT

BoaRd MeMBeRsBoaRd MeMBeRsBoaRd MeMBeRs

fInanCe CoMMITTeefInanCe CoMMITTeefInanCe CoMMITTeeReCRuITMenT CoMMITTee ReCRuITMenT CoMMITTee ReCRuITMenT CoMMITTee dIsCIPlInaRy CoMMITTeedIsCIPlInaRy CoMMITTeedIsCIPlInaRy CoMMITTee

audIT CoMMITTeeaudIT CoMMITTeeaudIT CoMMITTee

ChIef eXeCuTIve offICeRsChIef eXeCuTIve offICeRsChIef eXeCuTIve offICeRs

dePuTy dIReCToR dePuTy dIReCToR dePuTy dIReCToR GeneRal GeneRal GeneRal

(CORPORATE (CORPORATE (CORPORATE AFFAIRS)AFFAIRS)AFFAIRS)

PRoPeRTy PRoPeRTy PRoPeRTy dePaRTMenTdePaRTMenTdePaRTMenT

CoRPoRaTe CoRPoRaTe CoRPoRaTe seRvICes seRvICes seRvICes

dePaRTMenTdePaRTMenTdePaRTMenT

TeChnICal TeChnICal TeChnICal dePaRTMenTdePaRTMenTdePaRTMenT

InTeRnaTIonal InTeRnaTIonal InTeRnaTIonal TaX dePaRTMenTTaX dePaRTMenTTaX dePaRTMenT

InTeGRITy & InTeGRITy & InTeGRITy & enhanCeMenT enhanCeMenT enhanCeMenT dePaRTMenTdePaRTMenTdePaRTMenT

17 InvesTIGaTIon 17 InvesTIGaTIon 17 InvesTIGaTIon & InTellIGenCe & InTellIGenCe & InTellIGenCe

CenTResCenTResCenTRes37 BRanChes37 BRanChes37 BRanChes

13 Revenue 13 Revenue 13 Revenue seRvICe CenTResseRvICe CenTResseRvICe CenTRes

adMInIsTRaTIon adMInIsTRaTIon adMInIsTRaTIon dePaRTMenTdePaRTMenTdePaRTMenT

fInanCe fInanCe fInanCe dePaRTMenTdePaRTMenTdePaRTMenT

MalaysIan TaX MalaysIan TaX MalaysIan TaX aCadeMyaCadeMyaCadeMy

leGal leGal leGal dePaRTMenTdePaRTMenTdePaRTMenT

ReseaRCh & ReseaRCh & ReseaRCh & develoPMenT develoPMenT develoPMenT dePaRTMenTdePaRTMenTdePaRTMenT

Revenue Revenue Revenue ManaGeMenT ManaGeMenT ManaGeMenT dePaRTMenTdePaRTMenTdePaRTMenT

InfoRMaTIon InfoRMaTIon InfoRMaTIon TeChnoloGy TeChnoloGy TeChnoloGy dePaRTMenTdePaRTMenTdePaRTMenT

PRoCessInG PRoCessInG PRoCessInG dePaRTMenTdePaRTMenTdePaRTMenT

CoRPoRaTe TaX CoRPoRaTe TaX CoRPoRaTe TaX BRanChBRanChBRanCh

CoMPlIanCe CoMPlIanCe CoMPlIanCe dePaRTMenTdePaRTMenTdePaRTMenT

InvesTIGaTIon InvesTIGaTIon InvesTIGaTIon dePaRTMenTdePaRTMenTdePaRTMenT


(TECHNICAL)(TECHNICAL)(TECHNICAL)


(OPERATIONS)(OPERATIONS)(OPERATIONS)


(COMPLIANCE)(COMPLIANCE)(COMPLIANCE)

11 sTaTe 11 sTaTe 11 sTaTe 11 sTaTe 11 sTaTe 11 sTaTe dIReCToR dIReCToR dIReCToR dIReCToR dIReCToR dIReCToR offICesoffICesoffICesoffICesoffICesoffICes

InTeRnal audIT InTeRnal audIT InTeRnal audIT dePaRTMenTdePaRTMenTdePaRTMenT

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60 GloRIous yeaRs

A History of the Administration of National Direct Taxes

Formal Tax Administration

2008 marked a historical milestone when the Inland Revenue Board of Malaysia (IRBM) celebrated its 60th Anniversary as the national administrator of direct taxes. The administration of the tax organization in Malaya during the early stages of its inception was headed by a Comptroller General appointed under the Income Tax Ordinance, 1947 to administer both the tax offices in the Federated Malay States and in Singapore.

Offi ce of the Comptroller General Located in the Suleiman Building, Kuala Lumpur, the offi ce of the Comptroller General began with six offi cers in 1948, namely the Comptroller General, a Deputy Comptroller General, a general administration clerk, two stenographers and a peon. From 1948 to 1958, the number increased from six to 622 persons.

Income Tax Offi ce in London

In addition to the Income Tax Offi ce in the Federated Malay States, there was also an Income Tax Offi ce in London that assessed and collected taxes on behalf of the Federated Malay States from individuals and companies residing in the United Kingdom. The offi ce was in operation from 1948 to 1968. 1968 was the last year in which this overseas Income Tax Offi ce managed the taxes of individuals and companies residing in the United Kingdom.

Income Tax in the Federated Malay States

Income tax was fi rst introduced in the Federated Malay States on 1 January 1948 with the enforcement of the Income Tax Ordinance, 1947. In 1967, this Ordinance was merged with the Income Tax Ordinance, 1956 of Sabah and the Income Tax Ordinance, 1960 of Sarawak to become the Income Tax Act, 1967 which came into force on 1 January 1968.

The fi rst Income Tax Return Form was issued on 1 November 1948. In November and December 1948 and in early 1949, 60,000 Income Tax Forms were sent to potential taxpayers and 51,000 of those form were returned.

The Income Tax Department and the Inland Revenue Department

The Income Tax Offi ce became known as the Income Tax Department and was then renamed the Inland Revenue Department (IRD) in 1957. From 1948 until 1967, the post of Comptroller General was held by a foreigner. On 14 January 1967, Tan Sri Lim Leong Seng was appointed as the Director General of the IRD, the fi rst local person appointed to that post. The IRD was incorporated in 1996 and renamed the Inland Revenue Board of Malaysia (IRBM).

The offi ce of the Comptroller General in the Suleiman Building, Kuala Lumpur

Logo of the Inland Revenue Department of Malaysia

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Prior to its incorporation, the IRD was headed by a Director General and three Deputy Director Generals who were responsible for the administration of 27 assessment branches, three collection branches and 12 divisions at the Headquarters level, staffed by 6,300 offi cers.

Assessment activities were the main operations and were carried out by 60% of the IRD offi cers. Assessments involved reviewing the Income Tax Forms, assessing the tax and issuing assessment notices to taxpayers. The IRD functioned as the tax administrator for 49 years and was responsible for implementing the national taxation policies as well as collecting taxes for national development.

Establishment of the Inland Revenue Board of Malaysia The IRBM was established on 1 March 1996 following a Government proposal to incorporate the IRD during the tabling of the 1993 Budget by the Finance Minister on 30 October 1992. The establishment of the Board was a follow-up of the enforcement of the Inland Revenue Board of Malaysia Act, 1995 (Act 533), gazetted on 16 February 1995. The act empowers the IRBM to act as a Government agent and provide services with regard to taxes or other revenues under the act administered by the Board.

The Evolution of the IRBM’s Leadership After 60 years of evolving from a small government department into a dynamic and expanding government agency, the IRBM has now become the largest collections agent of Federal Government Revenue. The development of the IRBM is continuing, keeping pace with economic growth and national development. The development and progress of this organization was led by 15 prominent leaders. They comprise the following Comptroller Generals, Director Generals, Executive Chairmen, Chief Executive/Director Generals, and Chief Executive Officers/Director Generals:

Comptroller General

R.B. Heasman (1948 – 1950)

E.M. McDonald (1950 – 1952)

A.W. Hodgers (1952 – 1955)

R.F. White (1955 – 1960)

E.S. Thomas (1960 – 1965)

L.A. Varty (1965 – 1967)

Director General

Tan Sri Lim Leong Seng (1967 – 1971)

Tan Sri M. Sundram (1971 – 1976)

Eu Boon Hor (1976 – 1980)

Y.M. Raja Dato’ Seri Abdul Aziz bin Raja Salim (1980 – 1990)

Tan Sri Dato’ Abu Bakar bin Mohd Noor (1990 – 1996)

Executive Chairman

Dato’ Mohd Ali bin Hassan (1996 – 1997)

Chief Executive/Director General

Datuk Najirah binti Mohd Tassaduk Khan (1997 – 2000)

Chief Executive Offi cer/Director General

Tan Sri Dato’ Zainol Abidin bin Abd. Rashid (2000 – 2006)

Dato’ Hasmah binti Abdullah (2006 – present)

The IRD/IRBM offi ce that began operation in the Government Building Complex, Jalan Duta since 1970

Logo of the Inland Revenue Board of Malaysia

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Organisational Leaders in the History of the IRD/IRBM

BINTI

SERI

60TH ANNIVERSARY OF THE IRD/IRBM

1948-2008

DIRECTOR GENERAL OF INLAND REVENUE MALAYSIA

(1971-1976)


( 01.09.1976 - 30.06.1980 ) DIRECTOR GENERAL OF INLAND REVENUE MALAYSIA

( 01.07.1980 - 31.05.1990 )


( 01.06.1990 - 31.05.1996 )

EXECUTIVE CHAIRMAN

INLAND REVENUE BOARD OF MALAYSIA

( 01.03.1996 - 30.07.1997 )

CHIEF EXECUTIVE/DIRECTOR GENERAL OF INLAND REVENUE


( 01.08.1997 - 31.07.2000 )

CHIEF EXECUTIVE OFFICER / DIRECTOR GENERAL OF INLAND REVENUE


( 01.08.2000 - 18.10.2006)

CHIEF EXECUTIVE OFFICER / DIRECTOR GENERAL OF INLAND REVENUE


( FROM 19.10.2006)


(1967-1971)

COMPTROLLER GENERAL OF INLAND REVENUE DEPARTMENT

(1965-1967)

YBHG TAN SRI M. SUNDRAM

YBHG DATUK NAJIRAH BINTI MOHD. TASSADUK KHAN

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HASIL’S PERFORMANCE

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22

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oPeRaTIonsIRBM’s 60 Years of Excellence

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Percentage

Federal Revenue Net Collections

Percentage Of Gross Collections In Federal Revenue

Gross Collections

Million

Revenue Collections

Revenue Collections

ChaRT 1: IRBM Revenue ColleCTIons

ChaRT 2: ConTRIBuTIon of dIReCT TaXes To The fedeRal GoveRnMenT’s Revenue

The IRBM collected a total of RM90.65 billion in taxes in 2008. This marks a new record high in national direct tax collections. Their superb performance is owing to the strong economic growth of the country, creating a conducive business climate as well as a continuous rise in the price of petroleum, a main export of this country. Total tax collections of RM90.65 billion contributed 56.11% of the total Federal Government income of RM161.56* billion for 2008.

* Source : Estimated 2009 Revenue Of The Federal Government.

Gross Collections

Percentage of Gross Collections in Federal Revenue

Net Collections

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Percentage

The Government’s Revised Projection

Percentage of Revised Projection

The collection of taxes above includes income and other taxes. Income tax comprises company, individual, petroleum, cooperative, organisational, trust bodies, and withholding taxes. Other taxes comprise stamp duty, Real Property Gains Tax (RPGT), Labuan offshore business activity tax (IOFC), estate duty, and business registrations (Sarawak).

ChaRT 3: neT dIReCT TaXes ColleCTed CoMPaRed aGaInsT The GoveRnMenT’s RevIsed esTIMaTes

The Government projected a net revised estimation less refunds of RM77.58 billion for 2008. Nevertheless, the IRBM made a net collection of RM82.09 billion, exceeding the Government’s revised estimation by 105.81% (Chart 3).

ChaRT 4: PeRCenTaGe of ConTRIBuTIon By TaX CoMPonenT To The oveRall ColleCTIon of dIReCT TaXes

Note: The other tax components comprise cooperative tax, withholding tax, IOFC, and other revenues such as court fees, compounds (Section 124 of the ITA, 1967), interest on bank balances, legal revenue and service damages.

Percentage of Revised Estimates

Government's Revised Estimates

The IRBM’s Net Collections

Individual

RPGT

Stamp Duty

Others

Petroleum

Company

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Company taxpayers remained the main and biggest contributor to the Government’s revenue, with RM46.90 billion collected, making up 51.74% of the total collections. This was followed by petroleum income tax and individual income tax, contributing 26.69% and 15.83% respectively (Chart 4).

2008 revenue collections recorded an increase of 21.35% from 2007 (Table 1). Collections from all direct tax components increased significantly except for RPGT. The reason for the decrease is that effective from 1 April 2007, RPGT is no longer

imposed on profits earned from the disposal of real estate. However, in 2008, the IRBM continued to assess, collect and impose RPGT on outstanding cases (disposals prior to 1 April 2007).

Stamp duty is imposed on legal, commercial and financial documents that are listed in the First Schedule of the Stamp Act, 1949. Documents subject to duties are called instruments. In 2008, stamp duty imposed on stamped documents totalled RM3,501.88 million, compared to RM3,394.92 million the previous year, an increase of 3.15% (Table 2).

TaBle 1: ColleCTIon of dIReCT TaXes In 2008 and 2007

TaBle 2: assessMenTs and ColleCTIons of sTaMP duTIes aT IRBM sTaMP duTy offICes and Revenue seRvICe CenTRes

* Other taxes comprise compounds (Section 124 of the ITA, 1967), court fees, interest on bank balances, legal revenue and service damages.

Direct Tax Component

2008(RM Million)

2007(RM Million)

Variance(RM Million)

Percentage Variance

Company 46,902.04 37,574.55 9,327.49 24.82Petroleum 24,191.04 20,453.02 3,738.02 18.28Individual 14,346.52 11,592.18 2,754.34 23.76Cooperative 204.65 188.99 15.66 8.29Stamp Duty 3,501.88 3,394.91 106.97 3.15RPGT 110.37 277.43 -167.06 -60.22Withholding Tax 1,354.11 1,189.44 164.67 13.84IOFC 16.58 12.87 3.71 28.83Other Taxes* 23.71 19.82 3.89 19.63Total 90,650.90 74,703.21 15,947.69 21.35

Type of Document2008 2007

No. Amount of Duty (RM Million)

No. Amount of Duty (RM Million)

Property and Share Transfers 641,829 1,910.83 525,123 1,700.17Property Leases and Rentals 669,962 61.71 544,649 46.26Equipment and Other Leasing Securities 4,358,125 859.58 3,898,916 688.30Memorandums/Articles of Association 110,805 7.68 116,193 6.65Other Documents/Assessment Fees/Compound Duties/Mail Franking/Sale of Revenue Stamps 7,905,484 654.16 7,770,346 947.71Documents Charged With Penalties 245,108 7.92 205,209 5.83Total 13,931,313 3,501.88 13,060,436 3,394.92

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In 2008, the IRBM continued its approach of giving priority to tax refund cases for the current year and for arrears on refund claims for previous years.

Tax Refund Service Performance

In line with the Government’s call to improve the effectiveness of public services delivery system, the IRBM continued to focus on resolving tax refunds according to schedule.

Delays in tax refunds are often raised in public complaints about the IRBM’s service. To address this, the IRBM set a target of 90 working days to act on and resolve refund cases for Income Tax Return Forms (ITRFs) submitted manually and 30 working days if the ITRF was sent through e-Filing. Setting a target to expedite the processing of refunds is consistent with the practice in other countries, such as Australia, Canada, Ireland, South Korea, New Zealand, Singapore and South Africa, all of which have determined that timely refunds is an annual performance standard for service delivery.

An upward trend can be seen yearly in the number of tax refunds resolved, from 183,731 cases in 2006 to 400,360 cases in 2007, and 558,951 cases in 2008. Refunds issued amounted to RM8,559.69 million in 2008 compared to RM5,394.27 million in 2007. This represents an increase of RM3,165.42 million or 58.68% (Table 3).

Refunds

Submission of ITRFs via e-Filing shortens the processing time for tax refunds

TaBle 3: PeRfoRManCe of Refunds of oveRPaId TaXes

year

Non-Companies Companies Total Increase

No. of Cases

Amount(RM Million)

No. of Cases

Amount(RM Million)

No. of Cases

Amount(RM Million)

No. of Cases

(%)

Amount(%)

2008 531,930 1,963.77 27,021 6,595.92 558,951 8,559.69 39.61 58.682007 371,042 1,497.68 29,318 3,896.59 400,360 5,394.27 117.91 24.222006 170,691 2,029.26 13,040 2,313.13 183,731 4,342.39 13.34 32.54

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Tax Collection MethodsTax collection mechanisms via Call-Out Centres, instalments, schedular tax deductions, withholding tax, visits to premises, bans from leaving the country, and civil suits were continuously implemented with emphasis on taxpayers who failed to pay their taxes.

Call-Out Centres

Call-Out Centres make calls to taxpayers who have outstanding taxes. The purpose of these calls are:

To remind the taxpayer about their responsibility •to settle their tax debts;To inform taxpayers about the enforcement •measures that will be taken if payment is still not made; andTo assist taxpayers with cash flow problems •by re-scheduling their instalments according to their financial affordabilities.

In 2008, 69,913 calls were made as compared to 58,409 calls in 2007 (Table 4).

Tax Collection by Instalment

There are two categories of tax collections by instalment:

Indiv idual taxpayers with incomes from •businesses:

Tax collection is by bimonthly instalments via an instalment notice (Form CP 500) issued by the Director General of the IRBM (Table 5);The instalment schedule is from March to January of the following year; andAn application for amendment (Form 502) can be made before 30 June of the same year.

Companies, cooperatives, trust bodies, unit •trusts, and investment trusts:

Tax collection is by monthly instalments based on the estimated tax (Form CP 204) submitted by the taxpayer (Table 5);The instalment schedule is from the second month of the basis period of a year of assessment; andAn application for amendment can be made in the sixth or ninth month, or both, of the accounting period.

Failure to comply with the instalment schedule by both the above categories will result in a 10% increase in taxes on the balance of unpaid instalments.

TABLE 4: PERFORMANCE OF CALL-OUT CENTRES

year No. of CallsAmount in Tax Arrears

(RM Million)Amount of Tax Arrears Collected

(RM Million) Percentage Variance

2008 69,913 827.46 219.53 26.532007 58,409 1,586.64 622.53 39.24

TABLE 5: COMPANY TAX ESTIMATES (FORM CP204) AND INDIVIDUAL INSTALMENTS (FORM CP500)

2008 2007No. of CP204 Forms Received 247,483 242,049Tax Estimates in CP204 Forms* (RM Million) 32,916.24 25,897.28No. of CP500 Forms Issued 224,067 251,737Instalments in CP500 Forms** (RM Million) 1,244.98 1,106.84

* The tax estimate stated in CP204 (for companies, cooperatives and trust bodies) is before any amendments and payments. ** The CP500 instalments (for non-companies) are stated prior to any amendments or payments.

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Schedular Tax Deductions

In 2008, RM9,364.69 million was collected through the Schedular Tax Deduction (STD) scheme. This represents 10.33% of direct tax collections(Table 6). Action will be taken against non-compliant employers through audit activities. Should the employer still refuse to comply, legal action may be taken. Continuous monitoring as well as such strict enforcement measures have succeeded in increasing tax collections.

Increased collection was also attributed to the provision of various payment facilities, the use of the STD software and tax education programs for employers. STD payments via counters of appointed banks recorded an increase of 24.51%. Payment of STDs via electronic banking also received good response with an increase of 56.96% (Table 7).

Withholding Tax Collections

The tax collection for some types of payments received by non-residents from residents of Malaysia is made through withholding tax method. Withholding tax includes provisions under Sections 107A (contract payment) and 109/109B (interests, royalties, fees, rentals and other payments) of the Income Tax Act (ITA), 1967, as well as the amounts charged due to the delay in remitting withholding taxes. However, effective from 30 August 2008, withholding tax imposed under Section 109C of the ITA, 1967 in relation to interests paid to residents is fully exempted. In 2008, a total of RM1,354.11 million in withholding tax was collected, contributing 1.49% to the total revenue collection (Table 8).

TaBle 6: ColleCTIons vIa sTd aGaInsT ToTal Revenue ColleCTIons

2008 2007 PercentageCollections via STD (RM Million) 9,364.69 7,514.03 24.63Total Revenue Collections (RM Million) 90,650.90 74,703.21 21.35Percentage of Contribution 10.33 10.06 -

TABLE 7: TOTAL STD COLLECTIONS BY PAYMENT METHOD (RM MILLION)

2008 2007 Variance PercentageIRBM Payment CountersTotal 8,626.22 6,940.50 1,685.72 24.29Bank CountersCIMB/BCBB 279.18 229.61 49.57 21.59PBB 341.38 268.81 72.57 27.00Total 620.56 498.42 122.14 24.51Internet BankingCIMB/BCBB 34.24 22.95 11.29 49.19PBB 73.67 52.17 21.50 41.21RHB 10.00 0.00 10.00 -Total 117.91 75.12 42.79 56.96Grand Total 9,364.69 7,514.04 1,850.65 24.63

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Visits to Premises

Visits to premises are a proactive effort by the IRBM to:

Deliver tax arrears reminder letters or notices of •demand to the taxpayer, and hold discussions with the taxpayer on the payment;Advise the taxpayer on how to make payment via •the approved payment methods;Explain to taxpayers the impact or action that shall •be taken against failure to settle tax arrears; andServe summons to the taxpayer who defaults on •payments of arrears after notices of tax arrears demands have been issued.

Taxpayers whose notices or summonses fail to be served will be traced from the information in the IRBM Data Warehouse as well as other appropriate sources. A civil suit will be made if no feedback is received, or if the taxpayer fails to comply with the payment schedule that was agreed upon.

Travel Restrictions

The IRBM will serve a ban from leaving the country (Section 104 of the ITA, 1967 and Section 22 of

the RPGT Act, 1976) on taxpayers whose taxes and RPGTs remain unpaid and who are believed to be planning to leave Malaysia. In 2008, with the cooperation of the Immigration Department of Malaysia, the IRBM banned 4,696 taxpayers from leaving Malaysia, with a total tax arrears of RM127.41 million (Table 9).

yearSection 107A

(RM Million)

Section 109 /109B

(RM Million)

Section 109C

(RM Million)

Section109d

(RM Million)

Total

(RM Million)2008 88.94 1,215.81 23.74 25.62 1,354.112007 74.56 1,092.46 10.87 11.55 1,189.44

An IRBM Offi cer checking fi les and documents of the taxpayer during a visit to their premises

TaBle 8: WIThholdInG TaX ColleCTIons

TaBle 9: TRavel ResTRICTIons

No. of Cases Effective

(January – December 2008)

Amount of Tax Involved

(RM Million)

No. of Cases Effective Until

2008*

Amount of Tax Involved

(RM Million)

Income Tax 3,974 110.56 46,655 1,540.59Real Property Gains Tax 722 16.85 7,262

152.06

Total 4,696 127.41 53,917 1,692.65* No. of cases effective as at 31 December 2008 (including cases prior to 2008).

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Civil Suits

Under the ITA, 1967 and RPGT Act, 1976, a civil suit can be taken against a taxpayer who fails to pay taxes. Legal action will be taken on a case-to-case basis to collect outstanding taxes, depending on the amount of taxes involved.

In 2008, the IRBM filed 8,325 civil suits in court to collect RM804.83 million in tax arrears. Of this total, 7,030 cases were individual taxpayers with taxes amounting to RM140.21 million, whilst the remaining 1,295 cases were company taxpayers with a total amount of RM664.62 million in taxes (Table 10).

Once judgement is obtained, enforcement or implementation of the judgement is carried out,

such as by writs of confiscation and sale, judgement debtor summonses or bankruptcy orders for individual taxpayers. Winding up procedures will be taken against company taxpayers. A total of 2,849 bankruptcies were filed in court against individuals, involving RM259.81 million in taxes. Meanwhile, 263 winding up procedures were filed against companies, with taxes amounting to RM190.39 million.

In 2008, bankruptcy orders were filed with the Malaysian Department of Insolvency on 1,298 individual taxpayers and 258 company taxpayers were issued with winding up orders. As a result of these actions, 1,588 individual cases involving RM39.87 million in taxes and 200 company cases involving RM95.63 million in taxes were fully resolved (Tables 11 and 12).

TaBle 10: CIvIl suITs

TABLE 11: WRITS OF CONFISCATION AND SALE, JUDGEMENT DEBTOR suMMonses oR BanKRuPTCIes

TaBle 12: WIndInG uP oRdeRs aGaInsT CoMPanIes

2008 2007No. of

Summonses FiledTax Amount (RM Million)

No. of Summonses Filed

Tax Amount (RM Million)

Individual 7,030 140.21 8,293 157.57Company 1,295 664.62 1,146 771.18Total 8,325 804.83 9,439 928.75

2008 2007No. of Cases Filed in Court 2,849 2,138Tax Amount (RM Million) 259.81 67.24No. of Cases Registered at the Malaysian Department of Insolvency 1,298 943No. of Cases Resolved 1,588 1,163Tax Amount (RM Million) 39.87 36.43

2008 2007No. of Cases Filed in Court 263 362Tax Amount (RM Million) 190.39 230.47No. of Cases Registered at the Malaysian Department of Insolvency 258 501No. of Cases Resolved 200 74Tax Amount (RM Million) 95.63 42.36

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Customer ServiceThe IRBM customer service is a guidance program implemented with the objective of creating awareness and increasing knowledge on taxation among individual taxpayers, companies, tax agents, employers, and potential taxpayers.

Tax Learning Program

The Tax Learning program is designed to provide initial exposure to the public on changes in the national tax administration system following the implementation of the Self Assesment System (SAS). The program is carried out to guide taxpayers in fulfilling their tax obligations.

T • ax Briefi ngs and Education

Under the SAS, the taxpayer calculates the tax payable himself. To minimize errors, tax education is conducted through briefings, workshops and talks. The program is conducted free of charge at all IRBM branches and taxpayers’ premises by experienced IRBM officers.

A total of 5,637 briefing sessions on the SAS and e-Filing were held in 2008 compared to 4,988 in 2007, an increase of 13.01% (Table 13). The number of participants also increased by 23.78% from 314,426 participants in 2007 to 389,191 participants in 2008.

In addition, in 2008 the IRBM entertained 13 visits involving 560 participants from various institutions of higher learning, government agencies and the private sector. The visitors were briefed on the aspects of taxation in relation to direct taxes.

SAS briefi ng by an IRBM offi cer

Visit by students of higher learning institutions to the IRBM

TABLE 13: SAS AND e-FILING BRIEFINGS

TaBle 14: TaX eduCaTIon vIa The MedIa

2008 2007 No. Increased Percentage Increase

No. of Briefi ngs 5,637 4,988 649 13.01No. of Participants 389,191 314,426 74,765 23.78

2008 2007Learning via TV 15 sessions 11 sessionsLearning via Radio 8 sessions 8 sessionsExclusive Interviews 5 sessions 3 sessions

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Small Traders’ Support Service Unit •

The Small Traders’ Support Service Unit offers special programs for small and medium traders who are not represented by tax agents. The program covers education on the method of business record-keeping, the preparation of simple business accounts and operational matters on tax assessment and payment. 10,493 taxpayers attended the training at the IRBM premises in 2008 compared to 8,492 in 2007. The program will be diversifi ed in the future to include special briefi ngs for taxpayers identifi ed to have failed in preparing books and keeping proper business records.

Tax Education Programs on Print Media, • Radio and TV

Tax education programs through the print and electronic media were also conducted to disseminate information on taxation to taxpayers. Every year, TV and radio stations would usually extend invitations and offer air time to communicate relevant information especially during the peak period of ITRF submissions (Table 14).

Hasil Speech Competition •

The Hasil Speech Competition is an annual event organised by the IRBM in collaboration with the Ministry of Education Malaysia to enhance awareness on taxation among form six students so that they may become tax-literate adults in the future. A total of 801 students took part in the competition at district and state levels nationwide. Of this total, 16 participants were selected to compete at the national level.

Announcements and Publicity Through The Media

Publicity plays a role in enhancing the IRBM’s image and disseminating information on taxation to the public. Publicity was actively pursued through the print media (newspapers, banners, and buntings) and the electronic media (TV and radio including e-billboards at Putrajaya). Among items frequently posted are reminders on the deadline for the submission of ITRFs, coverage on business census activities, events and current news. The deadline for the submission of ITRFs and information on the opening of off-site service counters are also announced as crawlers on TV at suitable times.

In 2008, the IRBM published an advertisement on the submission of 2007 ITRFs from 25 April 2008 to 29 April 2008 in 11 major newspapers nationwide (Table 15).

The prizes being given away by YB Dato' Kong Cho Ha, Deputy Finance Minister to the winners of the 2008 National Hasil Speech Competition

IRBM publicity via radio

TaBle 15: MedIa PuBlICITy

2008 2007e-Filing Advertisements in Major Newspapers 11 advertisements 11 advertisementse-Filing Advertisements on TV 289 telecasts 90 telecastse-Filing Advertisements on the Radio 3,003 broadcasts 2,322 broadcastse-Filing Advertisements in Online News Pages (2 weeks) 5 press sites 5 press sitese-Filing Banners in Highways (4 months) 11 locations 11 locations

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Taxation brochures and magazines published by the IRBM

Tax Information through the Internet

Online services, a current technological development, also helps the IRBM disseminate taxation information through its official website at www.hasil.gov.my. The website can be accessed by all levels of society regardless of status or age group. Postings on this website are frequently updated to ensure that its contents are kept abreast with current developments.

Tax Relations Offi cer

The IRBM introduced a Tax Relations Officer (TRO) appointment program at various government departments and private companies. The TRO functions as a link in communicating information that can help employees improve their knowledge on taxation to fulfil their tax obligations. The number of TROs appointed in 2008 was 5,761 compared to 4,311 in 2007.

IRBM Publications

The IRBM republished 18 taxation brochures in a more concise and simple format, which were distributed to the public through the service counters of all IRBM branches. In addition, the IRBM also publishes Berita HASiL, its official magazine, three times a year. Berita HASiL reports IRBM activities throughout the year.

Customer Service Centre

The Customer Service Centre (CSC) operating at the Processing Centre in Pandan Indah, Kuala Lumpur was upgraded to provide better service to taxpayers. A toll-free hotline, 1-300-88-3010, was introduced for taxpayers to easily contact the IRBM.

The number of taxpayers who obtained the services of the CSC increased by 23.82% in 2008 with 306,087 calls received compared to 247,202 calls in 2007 (Table 16). The continuous increase year after year in the number of taxpayers obtaining the CSC services, particularly via telephone and e-mail, shows that their services are very much in demand. The service is a facility that helps taxpayers improve their knowledge and skills on taxation issues. With the positive response from taxpayers to the services of the CSC, another CSC was opened in Kuching in August 2008.

TaBle 16: CusToMeR seRvICe CenTRe

Service 2008 2007 Percentage Variance

No. of Telephone Calls 248,782 213,920 16.30No. of e-Mails 54,415 29,962 81.61 No. of Consultations/Interviews 2,890 3,320 -12.95

Total 306,087 247,202 23.82

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Revenue Service Centres

Revenue Service Centres (RSCs) were f irst established in 2004 with the objective of taking over stamping services from the District Offices to improve its efficiency, to ensure accuracy in stamp duty assessment and collection, and to provide taxation services. In 2008, two more RSCs were opened in Kuala Pilah and Segamat. This brings the total number of RSCs to date to 13.

Stamp duty collection at RSCs increased from RM78.97 million in 2007 to RM107.68 million in 2008, an increase of 36.36% (Table 17). The increase is due to the higher accuracy in stamp duty collections at RSCs.

IRBM Infoline

In 2008, the IRBM launched a 24-hour paid Infoline service that operates seven days a week as an additional facility for taxpayers to obtain information on taxation. The number for this service is 03-42893636. 30 lines were provided, enabling it to handle 30 calls simultaneously at any one time.

mySMS under the Malaysian Government sMs Portal

The application is a group SMS facility for all government departments and agencies managed by the Malaysian Administrative Modernisation and Management Planning Unit (MAMPU). Initially, the IRBM provided Information-on-Demand (IOD) services, which allowed taxpayers access to the addresses, telephone numbers, and fax numbers of all branches and RSCs by sending an SMS to 15888. The first phase was launched on 31 July 2008.

SMS facility for the convenience of taxpayers

TaBle 17: sTaMP duTy ColleCTIons aT Revenue seRvICe CenTRes

RSCs 2008 (RM Million)

2007 (RM Million)

Percentage Increase

Manjung 20.26 13.38 51.42 Batu Pahat 23.64 20.41 15.83 Hulu Langat 43.53 36.25 20.08 Kudat 0.22 0.19 15.79 Lahat Datu 1.06 0.73 45.21 Limbang 1.50 1.17 28.21 Mukah 0.23 0.15 53.33 Kemaman 5.71 4.65 22.80 Bentong 3.54 1.43 147.55 Sri Aman 1.07 0.20 435.00 Tampin 3.36 0.41 719.51 Kuala Pilah 1.81 - -Segamat 1.75 - -Total 107.68 78.97 36.36

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No. of Visitors

No. of Visitors

Counter ServicesTaxpayers’ Service Month (TSM) •

The TSM is the IRBM’s annual program that assists taxpayers with various tasks, such as how to complete their ITRFs manually or by e-Filing, calculate income tax, submit and obtain ITRFs, register income tax files and obtain other tax advisory services. In addition to counters at their offices, off-site service counters at shopping centres, government offices, private company offices, hospitals, schools, banks, and public halls were also opened.

During the TSM program held from 1 March to 30 June 2008, 721,833 taxpayers visited the IRBM offices or off-site service counters, compared to 884,748 in 2007. Most of the taxpayers came for guidance on how to submit their ITRFs via e-Filing. The number of off-site service counters opened was reduced to 6,340 as all IRBM branches extended their operating hours to beyond office hours and on weekends, especially as the deadline for ITRF submissions was drawing closer (Table 18 and Chart 5).

CHART 5: TOTAL NO. OF VISITORS AT TSM COUNTERS

Off-site IRBM service counters

TaBle 18: TsM seRvICe CounTeRs

2008 2007 Percentage VarianceNo. of Counters 6,340 7,103 -10.74 No. of Visitors 721,833 884,748 -18.41

Visitors

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Information Counters/Expos •

IRBM information counters were opened during trade expos, exhibitions and public functions organised by the Government, statutory bodies and private companies as a positive step to reach out to taxpayers. Information counters offer such services as registration, verification of tax accounts and receipt of ITRFs. Among the expos participated were the Entrepreneur Movement Expo, the Love Malaysia Expo, the Independence Expo, the SMS Portal Launch Ceremony, and the National Taxation Conference.

Payment Counters •

IRBM Tax Collection Centres are set up at collection branches located in Kuala Lumpur, Kuching in Sarawak and Kota Kinabalu in Sabah. These payment counters accept tax payments by cash, cheque, bank draft, postal order or money order. Tax payments can also be made by post to these branches.

To facilitate the payment of income tax and RPGT, CIMB Bank Berhad (CIMB), Public Bank Berhad (PBB), and Maybank Berhad were appointed as income tax receiving agents. In 2008, the amount collected through the banks recorded an increase of 21.35% compared to 2007 (Table 19). The IRBM continues to work with all three banking groups to offer several new methods of payment for the convenience of all taxpayers.

One-Stop Counters •

The One-Stop Counter Service is provided by the Customer Service Unit (CSU) at all IRBM branches to enable taxpayers to manage all their taxation matters more conveniently at a single location. Taxpayers can visit these one-stop branch counters or interact with the CSU officers via telephone, fax, letter or e-mail. As part of its effort to improve these counter services, taxpayers are also given the opportunity to give their views and lodge complaints through the feedback forms distributed.

One-stop counter service at Jalan Duta Branch

TaBle 19: TaX PayMenT faCIlITIes

Payment Counters* and Mail

(RM Million)

Bank Counters

(RM Million)

Internet Banking

(RM Million)

Other**

(RM Million)

Total

(RM Million)

2008 73,415.42 13,684.25 209.80 3,341.43 90,650.902007 58,916.11 11,998.42 100.20 3,688.47 74,703.21Percentage Variance 24.61 14.05 109.38 -9.41 21.35

* Payment counters at the Kuala Lumpur, Kuching, and Kota Kinabalu Collection Branches.** Including stamp duty, estate duty, IOFCs and business registration fees.

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Electronic Services

In line with the Government’s effort to include electronic services in all transactions, the IRBM placed greater focus on electronic services in its service delivery system to taxpayers. Innovations continued to be introduced to provide convenience and to expedite the process of tax assessment and payment.

Online Submissions of Income Tax Return •Forms (e-Filing)

The e-Filing application was introduced in February 2006. Individual and company taxpayers can submit their ITRFs electronically via the internet. From 2008, e-Filing was extended to non-residents, partnerships, and employers. The IRBM has simplified e-Filing and has increased the server capacity to shorten the time that taxpayers need to complete and submit their forms.

In 2008, the number of ITRFs filed through e-Filing increased by 35.78% to 1,188,130 compared to 875,051 in 2007 (Table 20). This exceeds the target of one million e-Filing users set by the IRBM in the third year of its implementation.

The electronic submission of ITRFs saves time and cost for taxpayers. The IRBM also reduced printing costs, delivery costs, and scanning costs of the ITRFs. The IRBM now no longer physically (manually) issues ITRFs to taxpayers who had used e-Filing the previous year. Costs savings is estimated at RM8.17 million in addition to a reduction in the workload of processing physical ITRFs.

Payment of Income Tax via Electronic Banking •(e-Bayaran)

Electronic payment (e-Bayaran) is a facility provided for taxpayers under the Electronic Government (e-Government) initiative. Taxpayers can make income tax payments online via the e-Bayaran portal after submitting their ITRFs via e-Filing.

Presently, taxpayers may utilise the electronic banking services offered by CIMB Bank Berhad, Public Bank Berhad, Bank Islam Malaysia Berhad, Maybank Berhad, Hong Leong Bank Berhad, and RHB Bank Berhad.

This internet banking method has received encouraging response from taxpayers. 85,646 tax payment transactions were made through this facility in 2008, compared to 19,436 in 2007, an increase of 340.66%. The amount collected also recorded an increase of 109.35% from RM100.22 million to RM209.81 million in 2008 (Table 21).

The e-Filing application allows ITRFs to be submitted electronically via the internet

TaBle 20: eleCTRonIC fIlInG PeRfoRManCe

Type of Form 2008 2007 Percentage IncreaseBE 1,011,193 762,153 32.68B 157,058 110,942 41.57C 6,209 1,956 217.43M 2,854 - -P 10,572 - -E 244 - -Total 1,188,130 875,051 35.78

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Real Property Transfer Assessment System •(RPTAS)

The RPTAS was developed to facilitate stamp duty assessments on the transfer of real property. The system can be accessed at http://[email protected]. The number of agents and legal firms who have used the RPTAS facility shows a continuous increase year by year (Table 22). The number of legal firms and agents who have recently registered to use the RPTAS in 2008 is 2,746 users as compared to 1,895 users in 2007. This brings the overall number of legal firms and agents who have registered to 4,641. The number of transactions using the RPTAS in 2008 increased by 102.62% with 181,541 transactions made compared to only 89,598 in 2007. Stamp duty collection assessed through the RPTAS recorded an increase of 36.86% from RM614.37 million from RM448.90 million in 2007. This represents 17.54% of the RM3,501.88 million in stamp duty collected in 2008.

Tax Agent e-Filing •

Launched on 4 March 2008, Tax Agent e-Filing is an ITRF submission application for tax agents. The application allows tax agents to file ITRFs electronically on behalf of their clients with the client’s consent. For the purpose of this consent, the client must complete the Electronic Filing of Statement Authority Form (CP55).

e-Daftar •

Innovated in 2008, e-Daftar facilitates the online registration of income tax files for individual and company taxpayers. The registration of income tax files was first implemented on 1 April 2008 for individuals and on 1 July 2008 for companies. As at 31 December 2008, 8,833 individual files and 663 company files were registered using this application.

Launching of the IRBM Tax Payment Service via Maybank on 10 June 2008

TaBle 21: InTeRneT BanKInG

TABLE 22: NO. OF LEGAL FIRMS/AGENTS REGISTERED AND TOTAL TRansaCTIons vIa The RPTas

2008 2007 Percentage VarianceNo. of Taxpayers 85,646 19,436 340.66 Amount Collected (RM Million) 209.81 100.22 109.35

No. of Legal Firms/ Agents Using the

RPTas

No. of Transactions via the RPTAS

Total Amount of Duty Collected via the

RPTas (RM Million)

2008 4,641 181,541 614.372007 1,895 89,598 448.90 Increase 2,746 91,943 165.47

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Taxpayer Rights

Objections and Appeals Taxation laws grant the right to the taxpayer to submit an appeal on the assessment raised by the IRBM. Any appeal regarding tax assessments or amended assessments issued by the IRBM must be submitted within 30 days from the date of the assessment notice. The IRBM will review the appeal before making a decision. Should the taxpayer still be dissatisfied with the decision of the IRBM regarding their appeal, they can submit subsequent appeals to the Special Commissioner of Income Tax (SCIT) by filling up Form Q. The Director General of Inland Revenue (DGIR) will present the case to the SCIT, who will make a decision after considering the facts of the appeal. Further appeals may be made by any party to the High Court and subsequently to the Court of Appeals. The number of taxpayers who submitted official objections in 2008 is shown in Tables 23 and 24. Tax objections and appeals submitted must refer to the

relevant act and law books

TaBle 24: aPPeals To The sPeCIal CoMMIssIoneR of InCoMe TaX and To The CouRT

appeal High Court Court of Appeals Federal Court2008 2007 2008 2007 2008 2007

In Process (b/f)* 44 26 10 8 0 1Filed in the Year 22 26 7 4 1 0Total 66 52 17 12 1 1Resolved 19 8 6 2 0 1In Process (c/f)** 47 44 11 10 1 0

* b/f: brought forward from previous year** c/f: carried forward to following year

TABLE 23: OFFICIAL OBJECTIONS

* Includes trust bodies, organisations and partnerships** b/f: brought forward from previous year*** c/f: carried forward to following year

ObjectionIncome Tax RPGT

Company Individual*2008 2007 2008 2007 2008 2007

In Process (b/f)** 12 10 2 2 5 3Filed in the Year 45 46 6 8 6 8Total 57 56 8 10 11 11Resolved 45 44 8 8 8 6In Process (c/f)*** 12 12 0 2 3 5

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Tax Compliance, Prevention, and Enforcement

Street Survey

The street survey program was implemented to improve the level of compliance as well as to expand the tax base by tracking down taxpayers who have not contributed to the national taxes. Through this activity, IRBM officers visited business premises. The objective of the street survey is to encourage the public to voluntarily come forward and register themselves as taxpayers. The activity not only improved the rate of compliance among taxpayers, but the tax education provided during the visits also succeeded in changing the negative attitudes among taxpayers on taxation issues.

However, street survey activities were slowed down in 2008 to allow officers to focus on STD auditing activities. In 2008, the IRBM made 36,438 visits to taxpayers’ premises compared to 51,711 in 2007. As a result of these visits, the IRBM managed to register 4,091 new taxpayers and 798 of them were referred to the field audit team for further investigation (Chart 6).

Tax Audits

The implementation of an effective tax audit program is an important factor in improving the level of tax compliance in an SAS environment. An effective and planned tax audit program will improve the level of compliance in declaring income among taxpayers, thus contributing towards the increase in tax collections. Therefore, the IRBM focuses primarily on enhancing and implementing their tax audit programs.

In 2008, the number of company and non-company cases audited was 1,052,939 compared to 279,175 in 2007. The amount of additional taxes and penalties earned from the resolution of audits in 2008 increased to RM1,697.16 million from RM1,410.57 million in 2007 (Table 25).

Field Audits •

Field audit is conducted to detect any tax-reduction measures taken by the audited taxpayers. At the same time, it is intended to create awareness among taxpayers who have not been audited on the possibility that they too may be selected to be audited in the future.

In 2008, the numbers of cases audited and resolved were 13,985 and 8,459 respectively, an increase of 118% and 23% respectively from 2007. However, collections through these activities declined from RM745.49 million in 2007 to RM631.58 million in 2008 (Chart 7). The decline is because the cases audited included those that recorded losses. By conducting field audits, those loss claims were reduced, resulting in tax savings of RM325.19 million for company cases and RM3 million for non-company cases.

Desk Audits •

In addition to field audit, an activity that requires officers to review taxpayers’ accounts at their business premises, desk auditing was also enhanced. Its main focus areas are:

To review and raise additional assessments, and to impose penalties on cases of under-reporting, failure to report income, and making excessive claims, based on reviews of the ITRFs and financial information submitted by the taxpayers; andTo manage refunds.

TaBle 25: TaX audITs Resolved

2008 2007No. of Cases

ResolvedTaxes and Penalties

(RM Million)

No. of Cases Resolved

Taxes and Penalties

(RM Million)Company Cases 27,843 185.99 11,848 538.20Non-Company Cases 1,025,096 1,511.17 267,327 872.37Grand Total 1,052,939 1,697.16 279,175 1,410.57

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No. of Cases audited

Million



Number of Cases

Cases Referred for

External Auditing

Non-Compliance

of STD

Non-Compliance

of

Form E/ITRF

Newly-Registered

Files

ChaRT 6: sTReeT suRvey

Cases Referred for

Field Audits

Non-Compliance

of STD

Non-Compliance of

Form E/ITRF

Newly-Registered Files

No. of Cases

Cases Audited

ChaRT 7: fIeld audITs

Cases Resolved

Taxes & Penalties

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Taxes & Penalties

Million

Chart 8 shows the number of cases resolved, including taxes and penalties collected, increased from year to year. In 2008, 1,044,480 audited cases were resolved with RM1,065.58 million collected, an increase of 284% and 60% respectively from 2007.

The sharp increase in the number of audited cases resolved is attributed to the desk auditing, conducted since 2007, of individuals with employment and business incomes.

yearNo. of

Employers Audited

Non-compliant Employers

Insuffi cient Tax Deduction

(RM Million)

Compounds (RM Million)

Amount of Tax and Compounds

(RM Million)

Number of Offences

Charged in Court

No. %

2008 27,555 6,793 25 74.96 10.98 85.94 1,7212007 35,968 7,943 22 94.15 7.15 101.30 2,570

TaBle 26: sTd audIT aChIeveMenTs

ChaRT 8: desK audITs

Cases Resolved

Taxes & Penalties

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Employer Audits (STD Audits)

The employer audits program (STD Audits) was carried out simultaneously with tax auditing. The purpose is to determine employers’ compliance levels in implementing tax deduction of employees’ salaries and remitting it to the IRBM according to the regulations stipulated in the Income Tax Rules (Salary Deduction), 1994.

27,555 cases were audited in 2008, with the rate of STD non-compliance increasing from 22% in 2007 to 25%. Meanwhile, collections from insufficient tax deductions declined by 20.38% from RM94.15 million to RM74.96 million. On the other hand, compounds imposed increased by 53.57% from RM7.15 million to RM10.98 million (Table 26).

Investigations

The IRBM enhanced its enforcement programs through civil and criminal investigations as well as intelligence. To strengthen its intelligence and investigation activities, the IRBM's investigation officers were trained and exposed to various areas of intelligence, particularly in Forensic Accounting, Transfer Pricing, Money Laundering, e-Commerce and Computer Forensics, among others. In addition, to ensure that tax investigations are implemented in a fair and transparent manner, investigation officers carried out their duties according to the Investigations Framework and the Work Procedures and Instructions for Civil Investigations.

Civil Investigations •

The Civi l Invest igat ion Divis ion carr ies out investigations to address deliberate as well as erroneous tax reports. In 2008, 648 cases under investigation were successfully resolved, compared to 755 cases in 2007, a decline of 14.17%. However, the amount of additional taxes collected as a result of resolving cases under investigation recorded an increase of 9.38% from RM686.43 million in 2007 to RM750.83 million in 2008 (Table 27).

Among the factors that contributed to the decline in the number of resolved cases are:

Focus was given on resolving outstanding cases from the two previous years (2006 and 2007), which were more than five years old. This caused a decline in the investigation of new cases, andFocus was also given on big cases involving groups of companies. Company cases contributed 92.41% (RM693.84 million) of collections, with 493 cases resolved or 76.08% of the total number of cases resolved (Table 27).

The special operation to resolve outstanding cases resulted 83.1% of cases resolved in 2008. (Table 28).

TaBle 27: InvesTIGaTIon Cases Resolved By fIle TyPe

yearNon-Companies Companies Total

No. of Cases

Amount(RM Million)

No. of Cases

Amount(RM Million)

No. of Cases

Amount(RM Million)

2008 155 56.99 493 693.84 648 750.832007 218 108.21 537 578.22 755 686.43

TaBle 28: Resolved BaCKloGs

year Cases Brought Forward


Total Amount Resolved

(RM Million)Case Carried

ForwardPercentage Resolved

2008 65 54 - 11 83.12007 239 174 103.97 65 72.8

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Criminal Investigations •

Criminal investigations are carried out to investigate tax evasion and subsequently take legal action in court. Criminal investigations started at the Headquarters and have now been expanded to investigation centres. Offences investigated comprise those under Sections 113, 114, and 153 of the ITA, 1967. As at the end of 2008, 67 cases were investigated as compared to 52 cases in 2007. Of this total, 39 cases were investigated in 2008 compared to 32 cases in 2007. In 2008, 22 cases were charged in court, 3 cases were compounded and 14 cases were convicted (Table 29).

Intelligence •

The Intelligence Division was established to assist in selecting appropriate cases for investigation. The division gathers information from various sources, such as government and private agencies, as well as

from public complaints received. Of the 2,088 cases under intelligence in 2008, 1,615 were referred for further action, such as civil investigation, criminal investigation, auditing, etc (Table 30).

Forensics Laboratory •

The Forensics Laboratory Division plays a very important role in civil or criminal investigations. Its main activity is to detect and analyse information in electronic or physical documents that has been erased, deleted or altered, to be used as court evidence for criminal investigation cases, as well as findings, omissions and non-declarations of incomes for civil investigation cases.

TABLE 29: NO. OF CRIMINAL INVESTIGATIONS

TABLE 30: NO. OF INTELLIGENCE CASES

Type of Action 2008 2007Investigated 67 52Resolved 39 32Charged in Court 22 21Compounded 3 3Convicted 14 14

Intelligence Cases No. of Investigations No. of ReferralsCivil Investigations 2,081 1,484Criminal Investigations 5 13Auditing/Others 2 118

TaBle 31: sTaTIsTICal RePoRT of The foRensICs laBoRaToRy dIvIsIon

Item 2008 2007No. of Cases Undertaken 48 134No. of Cases Resolved 47 130No. of Media Items Examined (Compact Discs/Diskettes/Others) 847 48No. of Physical Documents Examined 3 4No. of Electronic Forensics Cases 3 0

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Payers

Million

Payers

Loan Repayment Amount (RM)

Apart from the tasks of collecting, assessing, and enforcing the ITA, 1967 and other related acts, the IRBM also acts as the Government’s collections agent. The IRBM was appointed on 1 July 1997 as a collections agent on behalf of the National Higher Learning Fund Corporation (PTPTN) and started collecting repayments of loans given to students on 1 August 1999.

In 2008, the IRBM collected RM73.83 million from 43,946 borrowers, compared to a collection of RM61.49 million from 37,857 borrowers in 2007. Total collections and the number of payers recorded an increase of 20.07% and 16.08% respectively from the previous year. Overall, the increase in collection is attributed to the higher number of borrowers who made their loan repayments through salary deductions (Table 32 and Chart 9)

PTPTN Collections Agent

TaBle 32: ToTal RePayMenTs of PTPTn loans ReCeIved

2008 2007 Increase PercentageNo. of Payers 43,946 37,857 6,089 16.08Amount Collected (RM Million) 73.83 61.49 12.34 20.07

No. of Payers

ChaRT 9: ColleCTIon of PTPTn loan RePayMenTs

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InTeRnaTIonal neTWoRK

As with many other countries, both developed and developing, Malaysia is working towards improving its trade and investment with other countries. In its economic policy, the focus is on the development of international trade. In line with the objective to continue growing and liberalising international trade, Malaysia needs an attractive and competitive taxation mechanism to facilitate business with its trade counterparts.

Double Taxation Agreement

With the increasing rate of industrialisation and foreign direct investment in this country, tax agreements with other countries play a role in giving foreign investors the assurance and guarantee on tax-related matters.

The Double Taxation Agreement (DTA) is an agreement signed with contracting countries:

To create a more encouraging environment •for attracting foreign investments into the country;To make the tax incentives provided by Malaysia •more effective for taxpayers from capital exporting countries;To improve tax compliance among taxpayers who •are involved in borderless transactions; andTo prevent tax defaulters and evaders by •exchanging information on taxation matters with the contracting countries.

The DTA provides foreign investors with assurance and guarantee on the taxation of incomes acquired in Malaysia. The DTA also determines the taxing rights between the contracting countries and provides tax credits or tax reliefs to eliminate double taxation on residents in both countries.

In 2008, two rounds of negotiations were held with the Turkmenistan government. Negotiations were also held with five other countries, namely Cyprus, Ukraine, Slovak, San Marino, and Senegal. As of 31 December 2008, DTAs in effect had increased from 58 to 62 with the inclusion of Chile, Myanmar, Spain, and Syria in the list.

International Relations and Networking

The IRBM will continue to foster good working relationships at the international level through its involvement with the various tax organisations of which it is a member. In 2008, the Chief Executive Officer of the IRBM was chosen to represent Malaysia as a member of the Reference Group of Commissioners (RGoC) for the OECD Forum on Tax Administration (FTA).

Members of the RGoC consist of 11 tax administration Commissioners from OECD member and non-member countries, of which Malaysia is the sole non-member country. Other than Malaysia, the RGoC is also represented by Australia, Austria, Belgium, Canada, Denmark, Ireland, Mexico, New Zealand, Switzerland and the United Kingdom. The RGoC was established to oversee the development and progress of the FTA’s vision in the next five years.

The FTA is a tax forum attended by 35 to 45 countries every year to share information and experience as well as to develop best practices in tax administration for taxpayer services and tax compliance.

The attendance of the IRBM’s Chief Executive Officer at the forum will elevate the image of Malaysia, and particularly the IRBM’s, as well as establish close international networking with foreign tax administrators.

IRBM involved directly in international forum via various taxation bodies

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The IRBM also established networking with foreign tax administrators through the following conferences:

The 29th CATA Technical Conference

The 29th CATA Technical Conference was held in Yaounde, Cameroon from 9 to 14 November 2008.

The topics of discussion in the conference were:

Role of Taxation in Economic Development •Information Technology – Opportunities and •Challenges for Tax Administrations

Also in this conference, Malaysia presented a paper entitled, ‘The Role of IT in Audit Selection Tools and Effective Debt Management’.

In conjunction with the 29th CATA Technical Conference, the Deputy D i rec tor Genera l (Compliance) also attended the CATA Management Committee Meeting on 14 November 2008. The meeting was also held in London on 8 and 9 May 2008 and Malaysia was represented by the IRBM’s Chief Executive Officer.

The 38th SGATAR Meeting and the 5th SGATAR Meeting of Heads of Training Institutions (MHTI)

China’s State Administration of Taxation (SAT) was given the honour of organising the 38th SGATAR Meeting and also the 5th SGATAR MHTI from 4 to 6 November 2008 in Guangzhou, China. The conference was attended by 80 representatives from the 15 SGATAR member countries. Members of SGATAR include Australia, China, Hong Kong SAR, Indonesia, Japan, Republic of Korea, Macao

SAR, Malaysia, New Zealand, Papua New Guinea, Philippines, Singapore, China Taipei, Thailand, and Vietnam.

The taxation topics discussed were:

38th SGATAR Meeting •

Addressing Tax Administration Challenges Posed by Globalisation of Tax Base;Improving Tax Compliance Through Better Taxpayer Service; andCase Selection in Tax Audit.

5th SGATAR MHTI •

The Construction of a Longlife Training System

Participants of the 29th CATA Technical Conference held in Yaounde, Cameroon

YBhg Dato’ Hasmah binti Abdullah with the Commissioners and Deputy Commissioners from Indonesia, Hong Kong, Macao and South Korea during the 2008 SGATAR Meeting in China

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The 2008 5th ATAIC Technical Conference

Malaysia also attended the 2008 5th ATAIC Technical Conference in Bali, Indonesia from 26 to 31 October 2008.

Topics of discussion were:

The Statute of Association of Tax Authorities of •Islamic Countries;Tax Treatments on Sharia Financial Instruments; •andAdministrative Reforms. •

In the Heads of Delegation Meeting, Malaysia was selected as the coordinator of the ATAIC Statute Drafting Committee and will be responsible for preparing the ATAIC Statute in three languages, which are English, Arabic, and French, for approval by the Heads of Delegation Meeting in conjunction with the 6th ATAIC Technical Conference in 2009.

The 2008 10th SGATAR Working Level Meeting

Malaysia was given the honour of organising the 10th SGATAR Working Level Meeting from 26 to 29 August 2008 at Hilton Hotel, Kuching, Sarawak. For this purpose, an Organising Committee was formed and managed by the International Tax Department with the cooperation of the IRBM’s Kuching branch officers, who are members of the Organising Sub-Committee.

25 Delegates (including two from Malaysia), representing 13 of the 15 SGATAR members, attended the meeting. 10 officers from the IRBM branches and its Investigation and Intelligence Centres in Sarawak also benefited from attending the meeting as observers. An expert in transfer pricing from the OECD was invited to share some experience and knowledge in transfer pricing issues from the perspective of the OECD.

The purpose of the meeting is to provide a platform for SGATAR members to exchange experience and best practices in current international taxation issues, such as Transfer Pricing, e-Commerce, and Advance Pricing.

The meeting discussed the following topics:

Recent Developments in Transfer Pricing; •Trans fe r P r i c i ng : Recen t Trends and •Developments;Application of Arm’s Length Principle to Inter- •Company Finance Transactions;Transfer Pricing of Intangibles Related to •Marketing and Manufacturing;Practical Aspects: Taxation of e-Commerce; •Transfer Pricing: Royalties Project; and •Transfer Pricing: Malaysia’s Perspective. •

The Sarawak State Government also leveraged on the 10th SGATAR Working Level Meeting to promote Kuching as a tourist destination. The selection of Kuching as the location for an international meeting was welcomed by the Sarawak State Government. As a token of its appreciation, the Sarawak State Government included the meeting in the program for its “Sarawak’s 45 Years of Development in Malaysia” celebration. Part of the official program of the meeting was to enjoy some local cuisine on the Sarawak River Cruise, a visit to the Sarawak Cultural Village, and a visit to the Sarawak State Museum.

Note:ATAIC : Association of Tax Authorities of Islamic CountriesCATA : Commonwealth Association of Tax AdministratorsOECD : Organisation for Economic Co-operation and DevelopmentSGATAR : Study Group on Asian Tax Administration and Research

YBhg Dato’ Dr. Mohd Shukor bin Hj. Mahfar, Deputy Director General (Operations) of the IRBM, attended the 2008 5th ATAIC Technical Conference in Bali, Indonesia

Among the SGATAR members who attended the 10th SGATAR Working Level Meeting in Hilton Hotel, Kuching from 26 to 29 August 2008

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HUMAN RESOURCE DEVELOPMENT

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52

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The IRBM commits strongly to its Human Capital Development Program with the objective of producing officers who are competent, professional, knowledgeable, skilled, disciplined, and with integrity. To this end, human resource development programs are given focus and priority. Training programs are continuously planned and implemented to equip officers with the ability to adapt to current changes and needs. Various training programs were conducted by qualified trainers at the IRBM’s following training centres:

Malaysian Tax Academy; •Investigation Training Centre; •Audit Training Centre; •Stamp Duty Training Centre; and •Organ isa t iona l Deve lopment D iv i s ion , • Administration Department.

In addition to enhancing its internal training programs, the IRBM also constantly keeps itself up-to-date with the latest taxation practices of foreign tax administrators as a guide for benchmarking the capability and knowledge of IRBM officers. Training in skills and core competencies such as auditing, investigation and customer service are also given priority. Other areas focused on include best practices in current taxation issues, such as audit issues, criminal investigation, transfer pricing and advance pricing arrangements, e-commerce, cross-border trading, financial forensics, acquisition of digital evidence, tax enforcement, etc. In this regard, the IRBM employs foreign expertise to train IRBM officers through collaboration with the following overseas organisations:

Organisation For Economic Co-operation and •Development (OECD);The Commonweal th Associat ion of Tax •Administrators (CATA);Study Group on Asian Tax Administration and •Research (SGATAR);International Bureau of Fiscal Documentation •(IBFD);Asian Development Bank Institute (ADBI); •Japan International Cooperation Agency (JICA); •andFederal Law Enforcement Training Center •(FLETC).

The IRBM also organises training in collaboration with several local organisations, such as the Economic Planning Unit of the Prime Minister's Department under the Malaysian Technical Cooperation Program and the education-in-service program for IRBM officers with Universiti Teknologi MARA (UiTM).

huMan ResouRCe develoPMenT

Induction Courses are among the training programs that must be attended by new IRBM offi cers

Technical courses on desk audits can enhance the skills and effi ciency of IRBM offi cers

Malaysian Tax Academy Training Centre in Bangi, Selangor

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Various grades of IRBM offi cers and staff

Physical training for IRBM offi cers helps boost their spirit of competition

Category No. of Positions Filled VacantManagement 2,643 2,245 398Assessment 6,491 6,038 453Collections 1,009 919 90Investigation 414 374 40Total No. of Positions 10,557 9,576 981

Grade No. of Positions

No. of Recruitments by CategoryTotal No. of

RecruitmentsTop Management

Assessment Legal Information Technology

Accounting Administration Group Positions

1 - 4 23 23 - - - - - - 235 58 - 39 4 6 3 5 2 59

6 396 - 329 14 20 10 16 8 3977 2,842 - 2,426 54 93 26 65 30 2,694

8 - 9 1,565 - 1,169 2 73 46 69 1 1,36010 - 16 5,673 - 1,178 - 524 198 3,142 1 5,043Total 10,557 23 5,141 74 716 283 3,297 42 9,576

TABLE 33: JOB, RECRUITMENT AND VACANCY PROFILES BY CATEGORY

TaBle 34: PRofIle of ReCRuITMenT of offICeRs By CaTeGoRy

To achieve its vision, open-minded, committed, competent, innovative, and competitive IRBM officers are needed to carry out the duties in their respective functions. This is to optimise the achievement of desired outcomes. Thus, direct recruitment continues to be practised in line with job requirements to increase set targets. In 2008, 1,006 officers were appointed to fill vacancies in various job grades. The IRBM’s human resource profile as at 31 December 2008 is shown in Tables 33 and 34.

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AWARDS AND RECOGNITIONS

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56

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Among the focus areas and achievements of the Quality Program for 2008 are:

2008 IRBM Quality DayThe 2008 IRBM Quality Day celebration, carrying the slogan, ‘Integrity is the Core of Quality’, was held simultaneously at all IRBM branches on 23 October 2008. This year saw the introduction of Quality Day with the Chief Executive Officer (CEO), to be celebrated by rotation. Various activities were held at branch and Headquarters levels, such as the quality talk, a cleanliness competition, quizzes, public speaking, dikir barat, the quality visit, health screening, aerobics, and the presentation of quality awards by category.

MS ISO 9001 : 2000 Certifi cationAs part of our continuous effort in practicing a quality management system, the IRBM is actively pursuing the MS ISO 9001:2000 Certification for the e-B/e-BE Refund Management and for the Implementation of

Field Audits for Company Cases. Several Introductory Briefings and Workshops on ISO and Auditing were held for the Implementation Branches to this end. To date, the IRBM has obtained the MS ISO 9001 : 2000 Certification for the following scopes:

Assessment and Collection of Real Property •Gains Tax and Stamp Duty;Management and Operation of Training • Programs, including the development of the training program design and related support processes; andHuman Resource Management, including •recruitment, performance appraisal, promotion, resignation, retirement, training, and discipline.

Key Performance IndicatorsThe IRBM focused on Key Performance Indicators (KPIs) for its main processes which is auditing, counter services, and expanding the tax base. As a start, branches in the Klang Valley were selected, among which are the Corporate Tax Division, Wangsa Maju, Cheras, Kuala Lumpur Bandar, Kuala Lumpur Collections, Petaling Jaya, and Jalan Duta Assessments.

The 5S PracticeThe 5S Guidelines has been developed and is currently undergoing its final review before being established as a reference for the IRBM. At this juncture, the IRBM’s Administration and Investigation Departments have obtained the 5S Certification from the Malaysia Productivity Corporation.

Quality Visits

QualITy PRoGRaM and ITs aChIeveMenTs

Trophies and certifi cate awarded to IRBM for 5S Practice from Malaysia Productivity Corporation

Presentation of the quality award by Encik Che Omar bin A. Rahaman, Deputy Director General (Compliance) IRBM

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Quality VisitsQuality visits were made to improve service quality as well as to benchmark and learn the best practices of similar and different organizations. Six applications for visits from Departments/Branches were approved in 2008.

Quality AwardsThe IRBM received several nomination invitations for various Quality Awards. In 2008, the IRBM participated in the 2008 Public Service Innovation Award for its Digital Printout of the Income Tax Return Form, the 2008 CAPAM International Innovation Award for its e-Filing of Tax Return Forms, and Asia’s 2008 Government Technology Awards for its Roaming Public Key Infrastructure (PKI) for the e-Filing System.

2008 National 5S Quality Award

The IRBM’s Administration Department won the National 5S Quality Environmental Practice Award for the Public Sector category, sponsored by the Malaysian Productivity Corporation. Their victory was announced at the 2008 National 5S Quality Environmental Practices Convention on 29 October 2008. The award is recognition, not only of the

Administration Department staff, but also of the people of the IRBM in general, for their diligent effort in ensuring that 5S is practiced in their daily work.

Best Green Strategy for a Data Center Gold AwardThe Server Consolidation/Virtualization project developed by the IRBM’s Department of Information Technology won the Best Green Strategy for a Data Centre Gold Award in the 2008 Hitachi Data Systems Asia Pacific IT Inspiration Awards held in Cebu, Philippines from 5 to 7 November 2008.

The award is the result of strategic efforts by Hitachi Data Systems in recognizing the contributions by companies that have succeeded in making information technology the golden key for mobilising their respective business activities. In addition, the award presentation ceremony was held to honour the inventive minds and inspirations spawned by information technology entrepreneurs in the Asia Pacific region.

The IRBM staff with Deputy Director General (Compliance) IRBM after winning awards at the 2008 National 5S Quality Environmental Practices Convention

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CusToMeR feedBaCK

"The IRBM has been taking proactive steps to engage the tax profession in discussing ways and means in which the delivery system in terms of the design, availability and filing of Income Tax Return Forms (ITRF) can be further enhanced.

A notable step has been the improvements in the e-Filing mode of submission of tax returns. With continuous focus and consultation, the process can certainly be further improved so as to make things easier for tax payers and tax agents alike.’’

"The IRBM has taken constructive and proactive steps in educating the public on their role in the equal distribution of the national income. The early exposure to the IRBM at school level through the Hasil Speech Competition may somewhat improve knowledge on taxation among students, the future leaders of our country."

Dr. Veerinderjeet Singh Managing Director TAXAND Malaysia Sdn Bhd

Puan Ashimah binti AhmadThe Head of

SMK Lembah Subang Kelana Jaya

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"The e-Filing system can be considered to be the IRBM’s greatest success. With continuous effort being made to increase public awareness of e-Filing, it is believed that more people will use the service.

Many journalists have benefited from the taxation workshops organised yearly by the IRBM. The workshops are a convenient way for the IRBM to disseminate information to Malaysians through the mass media. The IRBM is now on the right track to achieving the same level of tax compliance as that of developing countries, and with an efficient system, this will consequently increase the amount of tax collections.”

Puan Hamisah binti HamidJournalist

Business Times, News Straits Times

"In my opinion, the IRBM’s function is to secure the well-being and maintain the standard of living of Malaysians. For instance, the IRBM has implemented steps to assist people in the low income group. In addition, the role of the IRBM is also to develop the country. The IRBM is a very important government agency in Malaysia."

John TayManaging Directorone IT store

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"I have visited the IRBM counter on several occasions to settle my tax problems and to submit the 2006, 2007 and 2008 tax forms for myself and for my husband. So far, all counter officers have been helpful and have provided me with clear information. I find that the e-Filing system is quick and efficient. In future, I will continue to use e-Filing."

"With the e-Filing system, the IRBM was able to make a large impact on the collection of income sources and on economy generation, as information on income obtained from taxpayers is now faster, organised, accurate, and simple.

The system provides ease and convenience to customers because they can declare their incomes virtually without the hassle of having to be physically present at the IRBM office to do so.

In line with the increased usage of IT in government agencies, the IRBM has demonstrated its capability to be a strong competitor to the other agencies as a major income contributor to the national economy.”

Puan Achamma GeorgeTrained NursePPUM, Kuala Lumpur

Puan Chindarahadineh binti Jinti Bank Offi cer

RHB Bank Berhad

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62

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AN ANALYSIS OF 2008’S ACHIEVEMENT BY MAIN PROGRAM

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ColleCTIons PRoGRaMNo. Program Target Achieved i. 2008 Gross

Projection of Direct Taxes • IRBM• Treasury

• RM85,000 million• RM82,579 million

RM90,651 million

ii. 2008 Net Projection of Direct Taxes

• IRBM• Treasury

• RM80,000 million • RM77,579 million RM82,091 million

iii. Revenue Arrears • 20% reduction in revenue arrears for files C and CS

20% x RM7,200 million = RM1,440 million

• 30% reduction in revenue arrears for files C and CS

30% x RM5,402 million = RM1,621 million

• The actual reduction achieved for files C and CS is by RM2,869 million (39.7%) to RM4,356 million

• The actual reduction achieved for files other than C and CS is by RM40 million (0.74%) to RM5,442 million

The actual overall reduction achieved in 2008 is by RM2,829 mill ion (22.4%) to RM9,798 million

iv. Refunds • To respond to e-Filing refunds within 30 working days of receipt of the completed form

• To respond to ITRF (manual) refunds within 90 working days

of receipt of the completed form

• 558,951 cases resolved • RM8,559.69 million

v. Tax Components:Company• RM39,492.07 million RM46,902.04 million (118.76%)Petroleum• RM25,228.41 million RM24,191.04 million (95.89%)Individual• RM15,164.41 million RM14,346.52 million (94.61%)Cooperative• RM166.04 million RM204.65 million (123.25%)Stamp Duty• RM3,549.55 million RM3,501.88 million (98.66%)RPGT• - RM110.37 millionWithholding Tax• RM1,360.68 million RM1,354.11 million (99.52%)

IOFC• RM12.54 million RM16.58 million (132.22%)Other taxes*• RM26.10 million RM23.71 million (90.84%)

* Other taxes comprise compounds (Section 124 of the ITA, 1967), court fees, interest on bank balances, legal revenue and service damages.

}

}

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TaX leaRnInG PRoGRaM

No. Program Target Achievedi. SAS/e-Filing Education

Programi. 3 times a week throughout the year

ii. The target for individual taxpayers is 8% of the number of active fi les at the branch 4,589,116 individual taxpayers’ active fi les x 8%

= 367,129 persons

i. The number of briefi ngs held in 2008 is 5,637

ii. The number of attendees at the briefi ngs is 389,191

ii. Small Traders’ Support Service Program

i. 2 briefi ngs a month x 36 branches x 12 months = 864 briefi ngs a year

ii. At least 10 attendees per briefi ng x 864 briefi ngs = 8,640 persons

i. The number of briefi ngs held in 2008 is 1,347

ii. The number of attendees at the briefi ngs is 10,493

No. Program Target Achievedi. Tax Relations Offi cer

(TRO) Nil 5,761 offi cers were appointed

ii. Taxpayers’ Service Month (TSM)

Nil i. 6,340 off-site countersii. 721,833 visitorsiii. 95,394 ITRFs receivediv. 28,202 new fi le registrationsv. 84,125 ITRFs requestedvi. 332,143 e-Filing users

iii. Hasil Speech Competition

Nil 11,298 contestants

iv. One-stop Counters/ Service Counters

Nil 1,673,781 persons

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No. Program Target Achievedi. Field Audits

a) Companies

b) Non-Companies

10 cases resolved per audit offi cer per year


• 7.5 cases resolved per audit offi cer per year


In 2008, the numbers of cases audited and resolved were 13,985 and 8,459 respectively, an increase of 118% and 23% respectively from 2007

Collections through these activities declined from RM745.49 million in 2007 to RM631.58 million in 2008

The decline is because the cases audited included those that recorded losses. By conducting fi eld audits, those loss claims were reduced, resulting in tax savings of RM325.19 million for company cases and RM3 million for non-company cases

ii. Desk Audits

a) Companies

b) Non-Companies


1,500 cases resolved per audit offi cer per year


• 1,377 cases resolved per audit offi cer per year

In 2008, 1,044,480 audited cases were resolved with RM1,065.58 million collected, an increase of 284% and 60% respectively from 2007

iii. Schedular Tax Deductions (STD) Audits

314,207 active employer fi les [No. of Employer Forms (E) issued in 2007] x 15% = 47,131 fi les

27,555 (54.46% of the target) employers audited in 2008

iv. Street Survey Nil 36,438 premises were visited

TaX audITs and sTReeT suRvey PRoGRaMs

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InvesTIGaTIon PRoGRaMNo. Program Target Achieved

i. Civil Investigations • Four cases resolved per civil investigation offi cer per year

• Three cases resolved per civil investigation offi cer per year

In 2008, the targeted number of cases was not achieved because of several factors, such as the increase in the number of newly-recruited officers with no experience in investigation work

H o w e v e r, t h e a m o u n t o f additional taxes collected as a result of resolving cases under investigation recorded an increase of 9.38% from RM686.43 million in 2007 to RM750.83 million in 2008

TRaInInG PRoGRaMs No. Training Centre Courses Planned Courses Carried

outPercentage

Variancei. Accounts and Audit Training Centre 42 45 107.14ii. Legal Training Centre 14 13 92.86iii. Investigation Training Centre 14 29 207.14iv. Management Training Centre 89 72 80.90v. International Training & Tax Learning

Centre 19 21 110.53vi. ICT Training & Development Centre 21 25 119.05vii. Stamp Duty Training Centre 15 13 86.67

Total 214 218 101.87

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FUTURE PLANNING

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fuTuRe PlannInGFuture planning for the IRBM is closely linked with the effort to achieve the organizational objective of ensuring that the delivery of taxation services is good and effective. This objective also provides some focus on the effort of encouraging voluntary compliance among the public. In the future, the IRBM’s efforts will be influenced by challenging factors, such as globalization changes, the delivery of best practices to global standards, innovation through ICT development, efficient and effective governance, and the need to develop a high level of professionalism and integrity among officers.

As such, the IRBM will develop a future management plan to improve its capability of achieving the organisation’s objectives. The plan involves streamlining the IRBM’s corporate culture through the re-branding of its vision, mission, slogan, service motto, and quality policy. In line with the steps of achieving its vision and mission, the following five strategic objectives have been identified:

Objective 1To collect the amount of taxes due fairly and equitably

Objective 2To elicit public trust in the fairness and excellence of our tax administration system

Objective 3To widen the tax base

Objective 4To improve the efficiency of its systems and work procedures in accordance with current needs

Objective 5To produce human capital with competence, professionalism, integrity and dedication.

The IRBM’s objectives will be fortified by the following four core strategies. Each core strategy involves several steps, planned to achieve better efficiency in handling future challenges.

Fortifying the Organisational CapabilityIn order to fortify the capability of the IRBM, the following elements are given priority:

• Job to person match• Skill development• Career advancement• Research and development,• Research on tax shelter schemes• Talent Management

• Succession Planning• Business Continuity Plan (BCP)• A workforce of high integrity• Introduction of new taxes• e-Commerce

Operational and Service ExcellenceUnder this core strategy, the focus points are:

• To implement Integrated Information/Knowledge Management

• To improve the main processes of detection/data collection and audits

• To improve customer-oriented processes• To improve the qual i ty of value-added

services• To improve the process of gathering information

for the Data Warehouse• To strengthen the usage of HR Technology-

Enabled Tools to improve the efficiency of its service delivery system

• To manage property/assets so as to create a conducive work environment for employees and to provide convenience for customers

Widening the Tax Base/Closing the Taxation GapAs part of its effort to improve public confidence in the IRBM’s service delivery system, the following steps will be implemented:

• To increase/maintain the tax base that contributes 80% of its revenue

• To widen the tax base• To reduce tax losses• To improve existing taxes• To carry out corporate branding• To continue its tax communication and education

programmes• To carry out prosecutions and criminal

investigations• To improve compliance• To focus on Small and Medium Enterprises

(SMEs)/partnerships and sole proprietorships

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Increasing The Collection Of Direct TaxesThe implementation of this core strategy will involve the following initiatives:

• To narrow down the tax percentage gap• To increase its operational efficiency• To reduce/eliminate tax arrears

Each strategy under the IRBM's future plan will be followed by their respective implementation programs. To measure and evaluate its achievement of the objectives, the IRBM will also introduce Key Performance Indicator (KPIs) from 2009. The KPIs will focus on the main processes that are directly related to its strategic objectives. The implementation of KPIs is an ideal step towards improving its future efficiency and productivity, and they provide a basis for improving accountability and transparency to the public.

The fi ve strategic objectives to achieve the vision and mission as set in its management plan for the future

To collect the amount of taxes due fairly and equitably1

To elicit public trust in the fairness and excellence of our tax administration system2

To widen the tax base3

To improve the efficiency of its systems and work procedures in accordance with current needs

4

To produce human capital with competence, professionalism, integrity and dedication5

Str

ate

gic Objectives

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HASIL’S DIARY

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2008 Revenue Games Malaysia-Singapore

KUANTAN (18 January 2008)

YBhg Dato' Hasmah binti Abdullah, the Chief Executive Officer of the IRBM, leading the IRBM golf team in a photo session with Mr. Lee Kim Poo, the Commissioner of the Inland Revenue Authority of Singapore (IRAS) during the 2008 Revenue Games Malaysia-Singapore.

Launching of the 2008 Taxpayers’ Service Month (TSM)

KUALA LUMPUR (4 March 2008)

An IRBM officer explaining e-Filing to YBhg Tan Sri Dr. Wan Abdul Aziz bin Wan Abdullah, the Secretary General of Treasury during the TSM Launch Ceremony at Berjaya Times Square, Kuala Lumpur.

The Petaling Jaya Branch 10th Anniversary Celebration

PETALING JAYA (8 April 2008)

YBhg Dato’ Hasmah took the time to socialize with taxpayers during the ‘A Day with the Customer’ event and launch of the Selangor Taxpayers’ Service Month (TSM) in conjunction with the Petaling Jaya Branch’s 10th Anniversary Celebration.

2008 Taxpayers’ Service Month (TSM) Counters

PANDAN INDAH (30 April 2008)

An IRBM officer assisting a taxpayer use e-Filing at the TSM counter opened at the Pandan Indah Information Processing Department.

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Launching Ceremony for the Construction of the Sandakan Branch IRBM Building

SANDAKAN (21 June 2008)

YAB Datuk Seri Panglima Musa bin Haji Aman, the Chief Minister of Sabah, delivering a speech at the Launching Ceremony for the Construction of the Sandakan Branch IRBM Building.

2008 National Hasil Speech Competition

PUTRAJAYA (5 August 2008)

Contestants of the Hasil Speech Competition and their teachers in a photo session with YB Dato’ Kong Cho Ha, the Deputy Finance Minister and YBhg Dato’ Hasmah at the end of the competition.

2009 Budget Briefing Ceremony

KUALA LUMPUR (30 August 2008)

IRBM officers taking the oath at the 2009 Budget Briefing Ceremony held at the Berjaya Times Square, Kuala Lumpur.

2008 National Day Parade

KOTA KINABALU (31 August 2008)

The Sandakan Branch IRBM contingent won second place in the 51st National Day Marching Competition at the Sabah state level.

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Open House at the IRBM Headquarters

JALAN DUTA (21 October 2008)

YBhg Tan Sri Dr. Wan Abdul Aziz, who attended as a guest of honour, being entertained by YBhg Dato’ Hasmah and Deputy Director Generals of the IRBM.

2008 Quality Day Celebration at the IRBM Headquarters

JALAN DUTA (23 October 2008)

Presentation of the MS ISO 9001:2000 Quality Certification Award by Encik Che Omar to Puan Noor Azian binti Abdul Hamid, Director of the Malaysian Tax Academy. Looking on is YBhg Dato’ Dr. Mohd Shukor bin Haji Mahfar, Deputy Director General (Operations) of the IRBM.

Environmental Quality Practices (5S) Award

SUBANG JAYA (29 October 2008)

Encik Che Omar b in A. Rahaman, Deputy Director General (Compliance), representing the IRBM’s Administration Department, receiving the Environmental Quality Practices (5S) Award from YBhg Dato’ Nik Zainiah binti Nik Abdul Rahmat, Director General of the Malaysia Productivity Corporation.

Earth Breaking Ceremony at the Malaysian Tax Academy, Sarawak

KUCHING (12 December 2008)

YAB Pehin Sri Haji Abdul Taib bin Mahmud, Chief Minister of Sarawak, accompanied by YBhg Dato’ Hasmah, visiting the exhibition area during the officiating ceremony.

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FINANCIAL STATEMENTS

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CeRTIfICaTe of The audIToR GeneRal

on The fInanCIal sTaTeMenTs of The

Inland Revenue BoaRd of MalaysIa

foR The yeaR ended 31 deCeMBeR 2008

The fi nancial statements of the Inland Revenue Board of Malaysia for the year ended 31 December 2008 have been audited by my representative. These fi nancial statements are the responsibility of the management . My responsibility is to express an opinion on these fi nancial statements based on my audit.

The audit has been carried out in accordance with the Audit Act 1957 and in conformity with approved standards on auditing. Those standards require that an audit be planned and performed to obtain reasonable assurance that the fi nancial statements are free from signifi cant errors or material misstatement. The audit includes examining on a test basis, evidence supporting the amount and adequate disclosures in the fi nancial statements. It also includes assessing the accounting principles used as well as evaluating the overall fi nancial statements presentation. I believed that the audit provides a reasonable basis for our opinion.

In my opinion, the fi nancial statements give a true and fair view of the state of fi nancial affairs of the Inland Revenue Board of Malaysia as at 31 December 2008 and of the results of its operations and its cash fl ows for the year ended based on the approved accounting standards.

( TAN SRI DATO’ SETIA HAJI AMBRIN BIN BUANG )audIToR GeneRalMalaysIa

PUTRAJAYA5 AUGUST 2009

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Inland Revenue BoaRd of MalaysIa(Established According to the INLAND REVENUE BOARD OF MALAYSIA ACT 1995)

sTaTeMenT By The ChaIRMan and one of The BoaRd MeMBeRs

We TAN SRI DR. WAN ABDUL AZIZ BIN WAN ABDULLAH and DATO’ MOHD. SALLEH BIN MAHMUD being the Chairman and one of the Board Members of the Inland Revenue BoaRd of MalaysIa do hereby state that, in the opinion of Board Members, the accompanying Balance Sheet, Income Statement, Statement Of Changes In Equity and Cash Flow Statement together with the enclosed notes to the Financial Statement, are drawn up so as to give a true and fair view of the state of affairs of the Inland Revenue BoaRd of MalaysIa as at December 31, 2008 and of their results and changes in fi nancial position for the year ended on that date.

On behalf of the Board,

TAN SRI DR. WAN ABDUL AZIZ BIN WAN ABDULLAH CHAIRMAN 28 April 2009

Kuala Lumpur

DATO’ MOHD. SALLEH BIN MAHMUD BOARD MEMBER 28 April 2009

Kuala Lumpur

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Inland Revenue BoaRd of MalaysIa(Established According to the INLAND REVENUE BOARD OF MALAYSIA ACT 1995)

deClaRaTIon sIGned By The offICeR PRIMaRIly ResPonsIBle foR fInanCIal ManaGeMenT

I, ZAKARIA BIN A. SAMAD, the offi cer primarily responsible for the fi nancial management and accounting records of the Inland Revenue BoaRd of MalaysIa do solemnly and sincerely declare that the accompanying Balance Sheet, Income Statement, Statement Of Changes In Equity and Cash Flow Statement together with the enclosed notes to the Financial Statement, to the best of my knowledge and belief, are correct and I make this solemn declaration conscientiously believing the same to be true and by virtue of the provisions of the Statutory Declaration Act, 1960.

Subscribed and solemnly declared ) by the above named ) at Kuala Lumpur ) On the 27 April 2009 ZAKARIA BIN A. SAMAD

Before me,

COMMISSIONER FOR OATHS

ZAKARIA BIN A. SAMAD

TEOH AI SUAN COMMISSIONER FOR OATHS

INLAND REVENUE BOARD OF MALAYSIAKUALA LUMPUR

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BalanCe sheeT as aT 31 deCeMBeR 2008

Notes 2008RM

2007RM

PROPERTY, PLANT AND EQUIPMENT 3 815,435,609 553,369,700loans To eMPloyees 4 795,077 1,414,188

816,230,686 554,783,888

CuRRenT asseTs

Loans to EmployeesDeposit and PrepaymentPayment Of AdvancesOther DebtorsStock/InventoryAccrued Interest On InvestmentFixed Deposits and Short Term InvestmentCash and Bank Balances

4567

8

945,0613,701,950

17,922,441168,360

-308,175

292,575,0008,566,797

1,255,6822,958,7803,787,856

143,9491,877,414

592,767181,000,000

4,717,259

ToTal CuRRenT asseTs 324,187,784 196,333,707

CuRRenT lIaBIlITIes

Sundry CreditorsTerms LoanProvision For Audit FeeProvision For Doubtful Debts/Written OffDeposit

910

11

164,728,96348,297,421

80,000100,344

7,744,441

123,981,47226,237,500

70,40096,087

7,824,757

ToTal CuRRenT lIaBIlITIes 220,951,169 158,210,216

neT CuRRenT asseTs

103,236,615 38,123,491

ToTal neT asseTs 919,467,301 592,907,379

funded By:

Development FundTrust FundOther FundAsset Valuation ReserveAccumulated Surplus

121314

15

472,105,2902,758,992

36,000,00036,877,826

186,840,881

271,722,6792,258,752

36,000,00036,877,826

176,624,163

734,582,989 523,483,420

lonG TeRM lIaBIlITIes

Terms Loan

10 184,884,312 69,423,959

919,467,301 592,907,379

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InCoMe sTaTeMenT foR The yeaR ended 31 deCeMBeR 2008

Notes 2008RM

2007RM

Revenue 16 1,063,386,592 842,733,039

Other Operating Income 458,091 110,609Staff Cost 17 (644,942,859) (602,303,774)Depreciation Of Property, Plant and Equipment (38,310,071) (51,032,988)Other Operating Expenditure (363,921,911) (235,054,533)Surplus/(Defi cit) From Operations 16,669,842 (45,547,647)

Finance Cost (13,841,938) (6,895,349)

Income From Investment And Loans 7,388,814 7,623,234

Current Surplus/(Defi cit) 10,216,718 (44,819,762)

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sTaTeMenT of ChanGes In eQuITyfoR The yeaR ended 31 deCeMBeR 2008

Development Fund

RM

Trust Fund

RM

Other Fund

RM

Asset Valuation Reserve

RM

Surplus/ (Defi cit)

RM

Total

RMBalance as at 1 January2007 158,066,329 1,710,934 36,000,000 - 221,443,925 417,221,188

Current Surplus/(Defi cit) 113,656,350 547,818 - - (44,819,762) 69,384,406

Land Valuation - - - 8,093,696 - 8,093,696

BuildingValuation - - - 28,784,130 - 28,784,130

Balance as at 31 December2007 271,722,679 2,258,752 36,000,000 36,877,826 176,624,163 523,483,420

Current Surplus/(Defi cit) 200,382,611 500,240 - - 10,216,718 211,099,569

Land Valuation - - - - - -

BuildingValuation - - - - - -

Balance as at 31 December2008 472,105,290 2,758,992 36,000,000 36,877,826 186,840,881 734,582,989

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Cash floW sTaTeMenT foR The yeaR ended 31 deCeMBeR 2008

Notes 2008RM

2007RM

Cash floW fRoM oPeRaTInG aCTIvITIes

Received From Federal Government and Other Income 18 1,036,530,040 813,511,655

Payment To Suppliers and Staffs 19 (966,028,591) (779,903,898)

neT Cash fRoM oPeRaTInG aCTIvITIes 70,501,449 33,607,757

Cash floW fRoM InvesTInG aCTIvITIes

Purchasing Of Property, Plant and EquipmentReceived from Disposal Of Property, Plant and EquipmentIncome From Investment and Loans

(248,627,732)248,906

7,673,406

(179,730,919)154,680

7,857,360neT Cash used In InvesTInG aCTIvITIes (240,705,420) (171,718,879)

Cash floW fRoM fInanCInG aCTIvITIes

Development FundTrust FundTerms Loan ReceivedPayment Of Terms LoanLoans to EmployeesFinance Cost Paid

159,945,100516,335

176,015,000(38,494,726)

929,732(13,282,932)

102,630,000568,605

45,000,000(22,487,500)

1,235,964(6,939,210)

neT Cash fRoM fInanCInG aCTIvITIes 285,628,509 120,007,859

Net Increase In Cash 115,424,538 (18,103,263)

Cash And Cash Equivalents At The Beginning Of The Year 185,717,259 203,820,522

Cash And Cash Equivalents At The End Of The Year 301,141,797 185,717,259

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noTes To The fInanCIal sTaTeMenT foR The yeaR ended 31 deCeMBeR 2008

1. CORPORATE REVIEW

Inland Revenue Board of Malaysia (IRBM) was incorporated on 1st March 1996 under Inland Revenue Board Of Malaysia Act 1995, (Act 533).

IRBM acts as an agent to the government and providing services related to the administration, assessment, collection and enforcement on the payment of income tax, tax on income from petroleum, real property gain tax, tax on income from Labuan offshore business activity, stamp duty, estate duty and others tax.

2. SIGNIFICANT ACCOUNTING POLICIES 2.1. Basic of Accounting

The accounts of IRBM have been prepared in accordance with:

2.1.1. The historical cost; and

2.1.2. The approved accounting standards by Malaysian Accounting Standards Board (MASB) which is Private Entity Reporting Standards (PERS).

The preparation of the fi nancial statement in accordance with Private Entity Reporting Standards (PERS) required certain changes of the accounting policies. The impact on the changes of accounting policies on the existing policies are disclosed in Note 23.

2.2. Property, Plant and Equipment And Depreciation

2.2.1. Started from year 2003, property, plant and equipment that fi nanced by the Development Fund and Trust Fund were shown separately.

2.2.2. Property, plant and equipment, which cost not less than RM1,000.00 per unit, shall be

capitalised. However carpet, curtain and related items acquired irrespective the cost shall not be capitalized.

2.2.3. Property, plant and equipment are accounted at cost. Freehold Land and Work in Progress is not depreciated. Depreciation is calculated based on a straight-line method through out the estimated useful lives of the assets.

Rates of depreciation per year are as follows:-

Land – Leasehold Period of lease Building 2% Offi ce Equipment 20% Vehicle 20% Computer 33.33%

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2. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) 2.2. Property, Plant and Equipment And Depreciation (Continued)

2.2.4. Residual values and useful lives of assets are reviewed, and adjusted if appropriate, at each Balance Sheet date. At each Balance Sheet date, assets have to assess whether there is any indication of impairment. Revaluation on properties is made once every fi ve (5) years, to assess for any indication of impairment. If such indications exist, an analysis is performed to assess whether the carrying amount of the asset is fully recoverable. A write down is made if the carrying amount exceeds the recoverable amount as stated in 2.3.

2.2.5. The depreciation rate on purchase of completed building of which the cost of land and building could not be specifi cally identifi ed at the acquisition stage will follow the depreciation rate of building which is at 2% per year.

2.3. Impairment of Assets

Assets that are subject to amortisation are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. An Impairment Loss is recognised for the amount by which the carrying amount of the asset exceeds its recoverable amount. The recoverable amount is the higher of an asset’s fair value less costs to sell and value in use. An Impairment Loss is charged to the Income Statement. In respect of other assets, any subsequent increase in recoverable amount is recognised in the Income Statement unless it reverses an impairment loss on a revalued asset in which case it is taken to revaluation surplus.

2.4. Stock/Inventory

Stock/Inventory are stated at cost.

2.5. Revenue Recognition

2.5.1. Investment

Interest income from saving in Conventional Banking Scheme is recognised on the accrual basis while profi t from Al-Mudharabah Scheme is recognised as an income when the profi t is actually received.

2.5.2. Profi t from Insurance Syarikat Takaful Protection Scheme

Profi t from Insurance Syarikat Takaful Protection Scheme is recognised as an income when the profi t is actually received.

2.5.3. Rental Of Offi ce Space

Income from rental of offi ce space is recognised on the accrual basis.

2.5.4. Profi t on Disposal of Property, Plant and Equipment

Profi t on disposal of property, plant and equipment is recognised as an income when the profi t is actually received.

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2. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

2.6. Recognition of Received From Federal Government

2.6.1. Development Fund

Development fund provided by Federal Government for the purpose of fi nancing the cost of development project is recognised as an income in the Income Statement (Development Fund) in the year it is incurred. The fund is used for capital expenditure will be recognised as a deferred income and only depreciation value of the asset for the year will be charged in Income Statement.

2.6.2. Conveyance Loan Fund

Conveyance Loan Grant received or provision transferred from Received From Federal Government for the purpose of fi nancing the conveyance loan will be credited to the Conveyance Loan Fund.

2.6.3. Computer Loan Fund

Computer Loan Grant received or provision transferred from Received From Federal Government for the purpose of fi nancing the computer loan will be credited to the Computer Loan Fund.

2.6.4. Trust Fund

Trust Fund Grant received or provision transferred from Received From Federal Government for the purpose of fi nancing the activities held by Malaysian Tax Academy will be credited to the Trust Fund.

Trust fund is recognised as an income in the Income Statement (Trust Fund) in the year it is incurred. The fund is used for capital expenditure will be recognised as a deffered income and only depreciation value of the asset for the year will be charged to Income Statement.

2.6.5. Investment Fund

Investment Grant received or provision transferred from Received From Federal Government for investment purpose will be credited to the Investment Fund.

2.7. Loans To Employees

Loans to employees are stated at cost. An estimate is made for doubtful debts based on review of all outstanding amounts at year-end. Bad debt are written off in the period in which they are identifi ed.

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2. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) 2.8. Terms Loan

Terms loan are stated at cost.

2.9. Debtors

Debtors are stated at cost.

2.10. Creditors

Creditors are stated at cost which is the fair value of the consideration to be paid in the future for goods and services received.

2.11. Foreign Currency Transaction

Income Statement items in foreign currency are stated based on the transaction date exchange rate. The exchange difference is recognise in Income Statement.

2.12. Cash And Cash Equivalents

Cash and cash equivalents in the Cash Flow Statement have been prepared based on the Direct Method. Cash and cash equivalents comprised of short term investments, fi xed deposits and cash.

2.13. Financial Risk Management Policies

The fi nancial risk management policy is to be ascertain that IRBM has suffi cient fi nancial sources for operations by the related risk management purposes. IRBM carried out the operations based on policies that have been approved by the Government and IRBM itself.

The major fi nancial risks faced by IRBM and the policies related to principal operating activities are as follows:

2.13.1. Interest Rate Risk

IRBM borrows from Pensions Trust Fund Council at a fi xed rate to prevent the increase of interest rate and hence reducing the interest rate risk.

2.13.2. Credit Risk

Credit risk is being controlled by a credit approval procedure, limits and observation. Internal examination on the credit will be done if the risk are material.

2.13.3. Liquidation and Cash Flow Risk

Cautious management of liquidity risk involve in maintaining cash and suffi cient fund by credit facilities. Because of the dynamic basic operation, IRBM planned to maintain its fi nancial fl exibility by maintaining existing credit facilities.

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2. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

2.14. Provision For Employee Benefi ts/Staff Retirement Benefi ts 2.14.1. Short Retirement Benefi ts

Salaries, allowances and bonuses are recognised as expenses in the Income Statement in the year the employees rendered their services to IRBM.

2.14.2. Defi ned Contribution Plans

IRBM make a contribution to Employees Provident Fund for the staff under the IRBM Salary Scheme and to Government Pension Fund for those in the pension scheme. The contribution are recognised as an expense in the Income Statement in the year the employees rendered their services to IRBM. IRBM also make a contribution to Social Security Organisation. Such contribution are recognised as an expense in the Income Statement in the year the employees rendered their services to IRBM.

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3. PROPERTY, PLANT AND EQUIPMENT PROPERTY, PLANT AND EQUIPMENT- TOTAL

Land Building WorkIn-Progress

MotorVehicles

Furniture& Fittings

Computer Total

RM RM RM RM RM RM RMCostAs At 1 January 2008 54,261,955 294,805,091 163,109,488 34,867,292 56,812,566 268,630,330 872,486,722

Additions 19,260,000 - 283,556,260 783,989 2,821,963 6,101,010 312,523,222Adjustments/Disposals 19,260,000 - (26,492,000) (1,599,522) (1,132,381) (29,400,266) (39,364,169)Revaluation/Impairment Loss - - - - - - -As At 31 December 2008 92,781,955 294,805,091 420,173,748 34,051,759 58,502,148 245,331,074 1,145,645,775

Accumulated DepreciationAs At 1 January 2008 994,903 27,008,576 - 14,401,013 40,700,771 236,011,759 319,117,022

Current Year Charge 454,490 5,948,854 - 5,262,214 5,741,319 20,903,194 38,310,071Adjustments/Disposals - - - (1,662,647) (1,155,293) (24,398,987) (27,216,927)Revaluation/Impairment Loss - - - - - - -As At 31 December 2008 1,449,393 32,957,430 - 18,000,580 45,286,797 232,515,966 330,210,166

Net Book ValueAs At 31 December 2008 91,332,562 261,847,661 420,173,748 16,051,179 13,215,351 12,815,108 815,435,609

CostAs At 1 January 2007 41,265,442 221,020,962 9,174,952 22,702,463 52,733,612 274,656,526 621,553,957

Additions 4,413,999 45,000,000 150,197,644 13,102,610 4,166,209 2,655,535 219,535,997Adjustments/Disposals 488,817 - 3,736,892 (937,781) (87,255) (8,681,731) (5,481,058)Revaluation/Impairment Loss 8,093,697 28,784,129 - - - - 36,877,826As At 31 December 2007 54,261,955 294,805,091 163,109,488 34,867,292 56,812,566 268,630,330 872,486,722

Accumulated DepreciationAs At 1 January 2007 2,937,556 19,848,989 - 12,789,193 35,420,832 206,791,568 277,788,138

Current Year Charge 254,937 5,245,420 - 3,307,312 5,512,449 36,996,293 51,316,411Adjustments/Disposals (2,197,590) - - (1,695,492) (232,510) (7,776,102) (11,901,694)Revaluation/Impairment Loss - 1,914,167 - - - - 1,914,167As At 31 December 2007 994,903 27,008,576 - 14,401,013 40,700,771 236,011,759 319,117,022


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3. PROPERTY, PLANT AND EQUIPMENT (CONTINUED) 3.1. PROPERTY, PLANT AND EQUIPMENT - OPERATION FUND


MotorVehicles

Furniture& Fittings

Computer Total

RM RM RM RM RM RM RMCostAs At 1 January 2008 22,985,243 238,314,808 43,166,836 34,867,292 44,736,043 81,181,143 465,251,365

Additions 19,260,000 - 89,375,271 783,989 2,821,963 6,101,010 118,342,233Adjustments/Disposals 19,260,000 - (19,260,000) (1,599,522) (852,572) (7,337,323) (9,789,417)Revaluation/Impairment Loss - - - - - - -As At 31 December 2008 61,505,243 238,314,808 113,282,107 34,051,759 46,705,434 79,944,830 573,804,181

Accumulated DepreciationAs At 1 January 2008 353,191 23,841,106 - 14,401,013 33,459,725 72,343,486 144,398,521

Current Year Charge 76,373 4,884,866 - 5,262,214 4,312,661 6,316,757 20,852,871Adjustments/Disposals - - - (1,662,647) (892,315) (2,335,970) (4,890,932)Revaluation/Impairment Loss - - - - - - -As At 31 December 2008 429,564 28,725,972 - 18,000,580 36,880,071 76,324,273 160,360,460


CostAs At 1 January 2007 17,628,822 167,153,490 - 22,702,463 40,672,819 80,176,457 328,334,051

Additions 4,413,999 45,000,000 39,232,987 13,102,610 4,150,479 2,655,535 108,555,610Adjustments/Disposals 488,817 - 3,933,849 (937,781) (87,255) (1,650,849) 1,746,781Revaluation/Impairment Loss 453,605 26,161,318 - - - - 26,614,923As At 31 December 2007 22,985,243 238,314,808 43,166,836 34,867,292 44,736,043 81,181,143 465,251,365

Accumulated DepreciationAs At 1 January 2007 1,093,710 18,058,869 - 12,789,193 29,640,634 63,321,549 124,903,955

Current Year Charge 133,073 4,168,070 - 3,307,312 4,051,464 9,769,492 21,429,411Adjustments/Disposals (873,592) - - (1,695,492) (232,373) (747,555) (3,549,012)Revaluation/Impairment Loss - 1,614,167 - - - - 1,614,167As At 31 December 2007 353,191 23,841,106 - 14,401,013 33,459,725 72,343,486 144,398,521


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3. PROPERTY, PLANT AND EQUIPMENT (CONTINUED) 3.2. PROPERTY, PLANT AND EQUIPMENT - DEVELOPMENT FUND


MotorVehicles

Furniture& Fittings

Computer Total

RM RM RM RM RM RM RMCostAs At 1 January 2008 31,276,712 56,490,283 119,942,652 - 11,920,872 187,408,406 407,038,925

Additions - - 194,180,989 - - - 194,180,989Adjustments/Disposals - - (7,232,000) - (279,809) (22,062,943) (29,574,752)Revaluation/Impairment Loss - - - - - - -As At 31 December 2008 31,276,712 56,490,283 306,891,641 - 11,641,063 165,345,463 571,645,162

Accumulated DepreciationAs At 1 January 2008 641,712 3,167,470 - - 7,118,066 163,633,098 174,560,346

Current Year Charge 378,117 1,063,988 - - 1,418,153 14,580,847 17,441,105Adjustments/Disposals - - - - (262,978) (22,063,017) (22,325,995)Revaluation/Impairment Loss - - - - - - -As At 31 December 2008 1,019,829 4,231,458 - - 8,273,241 156,150,928 169,675,456

Net Book ValueAs At 31 December 2008 30,256,883 52,258,825 306,891,641 - 3,367,822 9,194,535 401,969,706

CostAs At 1 January 2007 23,636,620 53,867,472 9,174,952 - 11,920,872 194,439,288 293,039,204

Additions - - 110,964,657 - - - 110,964,657Adjustments/Disposals - - (196,957) - - (7,030,882) (7,227,839)Revaluation/Impairment Loss 7,640,092 2,622,811 - - - - 10,262,903As At 31 December 2007 31,276,712 56,490,283 119,942,652 - 11,920,872 187,408,406 407,038,925

Accumulated DepreciationAs At 1 January 2007 1,843,846 1,790,120 - - 5,669,542 143,443,307 152,746,815

Current Year Charge 121,864 1,077,350 - - 1,448,661 27,218,338 29,866,213Adjustments/Disposals (1,323,998) - - - (137) (7,028,547) (8,352,682)Revaluation/Impairment Loss - 300,000 - - - - 300,000As At 31 December 2007 641,712 3,167,470 - - 7,118,066 163,633,098 174,560,346

Net Book ValueAs At 31 December 2007 30,635,000 53,322,813 119,942,652 - 4,802,806 23,775,308 232,478,579

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3. PROPERTY, PLANT AND EQUIPMENT (CONTINUED) 3.3. PROPERTY, PLANT AND EQUIPMENT- TRUST FUND


MotorVehicles

Furniture& Fittings

Computer Total

RM RM RM RM RM RM RMCostAs At 1 January 2008 - - - - 155,651 40,781 196,432

Additions - - - - - - -Adjustments/Disposals - - - - - - -Revaluation/Impairment Loss - - - - - - -As At 31 December 2008 - - - - 155,651 40,781 196,432

Accumulated DepreciationAs At 1 January 2008 - - - - 122,980 35,175 158,155

Current Year Charge - - - - 10,505 5,590 16,095Adjustments/Disposals - - - - - - -Revaluation/Impairment Loss - - - - - - -As At 31 December 2008 - - - - 133,485 40,765 174,250

Net Book ValueAs At 31 December 2008 - - - - 22,166 16 22,182

CostAs At 1 January 2007 - - - - 139,921 40,781 180,702

Additions - - - - 15,730 - 15,730Adjustments/Disposals - - - - - - -Revaluation/Impairment Loss - - - - - - -As At 31 December 2007 - - - - 155,651 40,781 196,432

Accumulated DepreciationAs At 1 January 2007 - - - - 110,656 26,712 137,368

Current Year Charge - - - - 12,324 8,463 20,787Adjustments/Disposals - - - - - - -Revaluation/Impairment Loss - - - - - - -As At 31 December 2007 - - - - 122,980 35,175 158,155

Net Book ValueAs At 31 December 2007 - - - - 32,671 5,606 38,277

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4. LOANS TO EMPLOYEES

Conveyance loanRM

Computer loanRM

Education loanRM

Total

RMBalance As At 1 January 2007 3,329,303 576,531 - 3,905,834

Loans to Employees 187,400 568,700 - 756,1003,516,703 1,145,231 - 4,661,934

Less: Repayment Of Loans by Staff 1,554,291 437,773 - 1,992,064Balance As At 31 December 2007 1,962,412 707,458 - 2,669,870

Loans to Employees 166,870 409,817 53,686 630,3732,129,282 1,117,275 53,686 3,300,243

Less: Repayment Of Loans by Staff 1,168,260 391,845 - 1,560,105Balance As At 31 December 2008 961,022 725,430 53,686 1,740,138

Loans To Employees Shown In The:2008 2007RM RM

Non Current Asset 795,077 1,414,188Current Asset (Total Repayment For Conveyence Loan, Computer Loan And Education Loan Within 12 Months) 945,061 1,255,682

1,740,138 2,669,870

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5. DEPOSIT AND PREPAYMENT

6. PAYMENT OF ADVANCES

2008RM

2007RM

Water Deposit 5,360 5,360Electricity Deposit 251,500 259,000Prepayment of Health Insurance Premium 3,383,814 2,013,606Sundry Prepaid 61,276 680,814

3,701,950 2,958,780

Emolument RM

AdvancesStaffRM

Misc.RM

TotalRM

Balance As At 1 January 2007 6,628 286,425 9,020,589 9,313,642

Advances 7,514 533,325 5,591,638 6,132,47714,142 819,750 14,612,227 15,446,119

Less: Repayment of Advances 12,998 766,506 1,487,705 2,267,209 Adjustment - - 9,391,054 9,391,054

12,998 766,506 10,878,759 11,658,263Balance As At 31 December 2007 1,144 53,244 3,733,468 3,787,856

Advances 8,746 299,285 16,712,756 17,020,7879,890 352,529 20,446,224 20,808,643

Less: Repayment of Advances 5,504 351,029 1,545,669 1,902,202 Adjustment - - 984,000 984,000

5,504 351,029 2,529,669 2,886,202Balance As At 31 December 2008 4,386 1,500 17,916,555 17,922,441

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7. OTHER DEBTORS

8. FIXED DEPOSITS AND SHORT TERM INVESTMENT

9. SUNDRY CREDITORS

2008RM

2007RM

Emolument Debtors 8,532 21,403Trade Debtors 159,828 122,546 168,360 143,949

2008RM

2007RM

Supply And Services 63,447,649 26,423,737Accrued Interest On Terms Loan 913,541 354,535Outstanding Bonus 99,854,874 87,539,621Employees Provident Fund - 9,191,024Social Security Organisation 512,899 472,555

164,728,963 123,981,472

2008RM

2007RM

Licensed Banks 292,575,000 181,000,000

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10. TERMS LOANS

IRBM had received loans from Retirement Fund Incorporated formely known as Pensions Trust Fund. The details of loan IRBM with Retirement Fund Incorporated are as follows:

year loan

Amount

RM

Administration fee

% / Year

Repayment Period

year

Building/Land

2008 103,800,000 6(Fixed Rate)

8 Menara C, PJ Trade Centre, Mutiara Damansara.

2008 140,000,000 6.5(Fixed Rate)

8 Pusat Latihan Malaysia Timur, Kuching.

2007 45,000,000 6.5 (Fixed Rate)

5 Wisma Ting Pek Khiing, Kuching, Sarawak.

2006 48,000,000 6.5 (Fixed Rate)

8 Menara Jati, Johor Bahru, Johor.

2001 89,900,000 7 (Reducing Balance)

8 Antap Plaza, Ipoh, Perak, Wisma Mercu Wawasan Tawau, Sabah, Wisma Hasil, Miri, Sarawak and SOCSO Building, Kota Bharu, Kelantan and also a piece of land at Lot 2, Jalan 14/2, Seksyen 4, Bandar Baru Bangi, Selangor.

2008RM

2007RM

Repayment Of Terms Loans - Within 1 year - 1 to 5 years - After 5 years

65,728,961226,019,314 47,172,556

33,096,369 93,623,348

-

338,920,831 126,719,717Less: Service Cost On Terms Loans 105,739,098 31,058,258Current Value Of The Terms Loans 233,181,733 95,661,459

Terms Loan Shown As:

Current Liabilities (Total Repayment Of Terms Loans Within 12 Months)

2008RM

48,297,421

2007RM

26,237,500Long Term Liabilities 184,884,312 69,423,959

233,181,733 95,661,459

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11. DEPOSITS

12. DEVELOPMENT FUNDDevelopment Fund is the fund which provided by Federal Government to fi nance the development project.

2008RM

2007RM

Special Deposits 4,752,247 3,936,372Retention Money 2,916,858 3,858,068Guaranteed Money 74,336 30,317Other Deposit 1,000 -

7,744,441 7,824,757

2008RM

2007RM

Balance As At 1 January 271,722,679 158,066,329

Received Cash From Federal Government 162,990,000 102,630,000

Received Non Cash From Federal Government 63,895,327 39,868,565498,608,006 300,564,894

Less: Amortisation of Development Grant: - Cash Expenditure - Depreciation/Impairment Loss Of Property, Plant and Equipment Adjustment

3,044,900

17,441,1056,016,711

-

30,166,213(1,323,998)

26,502,716 28,842,215Balance As At 31 December 472,105,290 271,722,679

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13. TRUST FUND

14. OTHER FUND

Trust Fund consist of Malaysian Tax Academy Trust Fund and International Courses Trust Fund. Malaysian Tax Academy Trust Fund has been set up to account for all revenue and expenses related to the welfare of courses participants, training activities, research and publications of the Malaysian Tax Academy.

International Courses Trust Fund represents the balance of allocation for the international courses which managed by Malaysian Tax Academy and with incorporation of Economic Planning Unit, Prime Minister Department under Malaysian Technical Coorporation Programme.

2008 2007Malaysian

Tax Academy

International Courses

Total Malaysian Tax

Academy

International Courses

Total

RM RM RM RM RM RMRevenueReceived From Government - 705,095 705,095 - 703,252 703,252

Internal Revenue 354,122 17 354,139 394,914 144,512 539,426

354,122 705,112 1,059,234 394,914 847,764 1,242,678

Less: Expenditure Cash Expenditure Depreciation Of Property, Plant and Equipment

8,955

16,095

533,944

-

542,899

16,095

95,018

20,787

579,055

-

674,073

20,787

25,050 533,944 558,994 115,805 579,055 694,860

Current Surplus/(Defi cit) 329,072 171,168 500,240 279,109 268,709 547,818

Accumulated Surplus/(Defi cit) From Previous Year 1,332,234 926,518 2,258,752 1,053,125 657,809 1,710,934

Accumulated Surplus/(Defi cit) Carried Forward 1,661,306 1,097,686 2,758,992 1,332,234 926,518 2,258,752

2008RM

2007RM

Conveyance Loan Fund 15,000,000 15,000,000Computer Loan Fund 3,000,000 3,000,000Investment Fund 18,000,000 18,000,000

36,000,000 36,000,000

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15. ACCUMULATED SURPLUS

16. REVENUEIRBM main revenue received from Federal Government being a return on services as an agent to government. The revenue also comprise of income from the following resources:

2008RM

2007RM

Revenue 1,036,324,882 813,195,964

Other Operating Income 458,091 110,609

Operating Expenditure (999,260,260) (836,684,234)

Depreciation Of Property, Plant and Equipment (20,852,871) (22,169,986)

Surplus/(Defi cit) From Operations 16,669,842 (45,547,647)

Finance Cost (13,841,938) (6,895,349)

Income From Investment And Loans 7,388,814 7,623,234

Current Surplus/(Defi cit) 10,216,718 (44,819,762)

Accumulated Surplus/(Defi cit) From Previous Year 176,624,163 221,443,925

Accumulated Surplus/(Defi cit) Carried Forward 186,840,881 176,624,163

2008RM

2007RM

Received From Federal Government 1,034,920,690 811,979,600Amortisation Of Development Grant 26,502,716 28,842,215Amortisation Of Trust Fund 558,994 694,860Rental 951,983 959,206Sales Of Others Printing Goods 157,183 205,418Service and Service Payments 34,114 10,352Profi t Of Insurance Protection Scheme From Takaful Company 17,834 2,905Penalties 11,828 10,592Other Income 231,250 27,891

1,063,386,592 842,733,039

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In year 2008, the staff cost increased due to salary increment within 6% to 8% according to staff performance and increased of yearly incentive to the staff in line with the increment of the staff salary.


17. STAFF COST

18. RECEIVED FROM GOVERNMENT AND OTHER INCOME RECEIVED

Staff costs consist of: 2008RM

2007RM

Salary 387,520,044 367,656,615Fixed Allowance 44,428,671 35,729,257Statutory Contribution 91,723,236 86,702,819Overtime Allowance 6,577,571 6,618,262Other Financial Benefi t 114,693,337 105,596,821

644,942,859 602,303,774

2008RM

2007RM

Total Revenue (Note 16) 1,063,386,592 842,733,039Other Operating Income 458,091 110,609Amortisation Of Development Grant (26,502,716) (28,842,215)Amortisation Of Trust Grant (558,994) (694,860)Non Cash Received (163) -Gain/(Loss) On Disposal Of Fixed Asset (215,488) (88,530)Trade Debtors (37,282) 293,612

1,036,530,040 813,511,655

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19. PAYMENT TO CREDITORS AND STAFFS

20. CAPITAL COMMITMENT

2008RM

2007RM

Staff Cost (Note 17) 644,942,859 602,303,774Other Operating Expenditure 363,921,911 235,054,533Development and Trust Fund Cash Expenditure (3,587,799) (674,073)Provision For Audit Fee (9,600) (6,400)Sundry Creditors (40,188,485) (58,055,223)Deposit 80,316 (38,126)Deposit and Prepayment 743,170 816,760Advance Payment 14,134,585 (1,300,077)Emolument Debtors (12,871) 21,403Stock/Inventory (1,877,414) 1,877,414Provision For Doubtful Debts/Written Off (4,257) (96,087)Non Cash Expenditure (12,113,824) -

966,028,591 779,903,898

2008RM

2007RM

Approved and contracted 376,259,551 71,500,895

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21. FINANCIAL INSTRUMENT

21.1. Interest Rate Risk

Interest rate risk is where fi nancial instrument will vary due to the changes of market interest rate and the average effective interest rate is based on the fi nancial asset and fi nancial liability as follows:

21.2. Credit Risk

Maximum credit risk involving with fi nancial assets identifi ed as the brought value as stated in the balance sheet.

IRBM does not have any specifi c deal towards the credit risk with any other parties.

21.3. Fair Value

The brought value for all the fi nancial asset and fi nancial liabilities of IRBM on the Balance Sheet date is estimated at the fair value.


Total Brought value

Within 1 Year 1 To 5 Years After 5 Years Effective Interest Rate

RM’000 RM’000 RM’000 RM’000 %2008Financial Asset

Loans To Employees 1,740 945 795 - 4Fixed Deposit and Short Term Investment 292,575 292,575 - - 3.3 - 3.4Cash and Bank Balances 8,567 8,567 - - -

Financial LiabilityTerms Loans 233,182 48,297 115,450 69,435 6.0 - 7

2007Financial Asset

Loans To Employees 2,670 1,256 1,414 - 4Fixed Deposit and Short Term Investment 181,000 181,000 - - 3.5 - 3.8Cash and Bank Balances 4,717 4,717 - - -

Financial LiabilityTerms Loans 95,661 26,237 69,424 - 6.5 - 7

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23. CHANGES IN ACCOUNTING POLICIES

MASB 15 - Property, Plant and Equipment and MASB 23 - Impairment Of Assets did have impact on carrying amount property consists of land and building.

The total amount to be recognised as impairment loss is included in the Income Statement with a corresponding adjustment to equity over the remaining vesting period. The fi nancial impact arising from the change in this accounting policy is as follows:

24. CHANGES IN ACCOUNTING ESTIMATES

In the current year, IRBM recalculate depreciation expenses on leasehold land based on actual period of lease. Reclassifi cation amount recognised in Income Statement as follows:

25. COMPARATIVE FIGURES

The comparative fi gures have been reclassifi ed to suit with current year presentation of Financial Statement.

26. GENERAL INFORMATION

At the end of the fi nancial year IRBM has 9,490 staffs (2007: 9,012 staffs).

According to the section 127(3)(b) of Income Tax Act 1967, IRBM is exempted from tax in the year of assessment 1997 until subsequent years of assessment. This exemption does not include dividend income.


22. INCOME TAX

2008RM

2007RM

Increase In Carrying Amount Property Consists of Land and Building - 34,963,660Recognise in Income Statement - 1,914,166Increase In Asset Revaluation Reserve - (36,877,826)

- -

2008RM

2007RM

Current Depreciation of Plant - 254,937Less: Recalculation Depreciation Expenses - (2,197,590)Current Depreciation of Plant After Recalculation - (1,942,653)

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APPENDICES

109

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2004RM Million

2005RM Million

2006RM Million

2007RM Million

2008RM Million

Federal Government’s Revenue 99,397 106,304 123,546 139,885 161,558Gross Collections 48,634 56,855 65,738 74,703 90,651Net Collections 43,784 53,578 61,396 69,309 82,091Government'sRevised Estimates 46,424 48,345 62,637 70,117 77,579

sTaTIsTICs

FEDERAL GOVERNMENT’S REVENUE, DIRECT TAXES AND GOVERNMENT'S RevIsed esTIMaTes

TaX ColleCTIons By CaTeGoRy

TaX audITs

InvesTIGaTIons

2004RM Million

2005RM Million

2006RM Million

2007RM Million

2008RM Million

Company 24,558.30 28,050.05 30,415.40 37,574.55 46,902.04Individual 9,470.66 10,222.92 10,409.65 11,592.18 14,346.52Petroleum 10,716.60 14,676.45 20,673.78 20,453.02 24,191.04Stamp Duty 2,377.40 2,485.24 2,533.67 3,394.91 3,501.88Real Property Gains Tax (RPGT) 152.62 216.44 223.76 277.43 110.37Cooperative 48.98 59.37 176.24 188.99 204.65Labuan Offshore Business Activity Tax (IOFC) 15.51 15.03 11.68 12.87 16.58Withholding Tax 1,292.28 1,099.14 1,275.50 1,189.44 1,354.11Other Taxes 1.36 21.92 18.62 19.82 23.71Total 48,633.71 56,854.56 65,738.28 74,703.21 90,650.90

* Other taxes: Estate Duty and Business Registration Fees.

2004 2005 2006 2007 2008

No. of Cases Resolved 4,657 7,204 6,741 279,175 1,052,939Taxes and Penalties (RM’000) 429.31 635.40 692.68 1,410.57 1,697.16

2004 2005 2006 2007 2008

No. of Cases 794 719 1,388 755 648Taxes and Penalties (RM’000) 620.26 762.97 903.23 686.43 750.83

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sTaMP duTy

ConTRaCTual noTes

Instrument Duty PayableRelating to the sale of any share, stocks or marketables securities in companies incorporated in Malaysia or elsewhere

RM 1 for every RM1,000 or a part thereof of the value of any shares, stocks or marketable securities

leases oR lease aGReeMenTs foR IMMovaBle PRoPeRTIes and foR SERVICES, FACILITIES AND OTHER MATTERS RELATING TO THE LEASE

Instrument

Duty Payable Lease is for period of

Not more than one year

More than one yearbut less thanthree years

More than threeyears or for anyindefi nite period

Average rental and otherconsideration amounts computed for one year (without fi nes/ premiums)

• Not exceeding RM2,400

• For every RM250 or part thereof over RM2,400

Nil

RM1.00

Nil

RM2.00

Nil

RM4.00

Consideration in a lump sum or in premiums(without rental)

The same rate of duty as that for property conveyance

Consideration in a lump sum or in premiums or other forms (with rental reserved)

• The same rate of duty as that for property conveyances• The same rate of duty as that for average rental considerations and others

CONVEYANCES, ASSIGNMENTS OR TRANSFERS

Instrument Duty PayableProperty Conveyance For every RM100 or part thereof of the monetary

value of the consideration amount or the market value of the property, whichever is higher:

• RM1 on the fi rst RM100,000

• RM2 on any amount over RM100,000 but not exceeding RM500,000

• RM3 on any amount over RM500,000

Stocks, shares or marketable securities, computed on the price or value on the date of transfer, whichever is higher.

RM3 for every RM1,000 or part thereof

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sTaMP duTy RaTes on InsTRuMenTs

Type of Instrument Duty PayableAfi davits, Statutory or Written Declarations on Oath or Pledge

RM10

Agreements or Memorandums of AgreementUnsealed agreements or memorandums of agreement

RM10

Articles of Association of a Company RM100Insurance Policies RM10Powers or Letters of Attorney RM10Promissory Notes

• Executed in favour of a bank, merchant bank or company

• Others

RM10

RM10

Charges or Mortgages (including those executed according to 'Syariah' law), Bonds, Convenants, Debentures(non-marketable securities)

Being the principal or primary security (except under certain circumstances) in respect of:

a. Loans to small and medium enterprises (SMEs)

• For an amount not exceeding RM250,000 of the aggregate loan

• For every additional RM1,000 not exceeding RM1,000,000

• For every additional RM1,000 or part thereof

b. Foreign currency loans or fi nancing under `syariah’ laws in currencies other than ringgit

c. Other cases

RM0.50 for every RM1,000 or part thereof

RM2.50 for every RM1,000 or part thereof

RM 5.00

RM5 for every RM1,000 (or part thereof) up to a maximum total duty payable of RM500

RM5 for every RM1,000 or a part thereof

sTaMP duTy

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TaX RaTes

INDIVIDUAL INCOME TAX RATES (EFFECTIVE FROM YEAR OF ASSESSMENT 2002)

Taxable Income RM Rate (%) Tax (RM)On the fi rst On the next

2,5002,500

01

0 25

On the fi rst On the next

5,0005,000 3

25150


10,00010,000 3

175300


20,00015,000 7

4751,050


35,00015,000 13

1,5251,950


50,00020,000 19

3,4753,800


70,00030,000 24

7,2757,200


100,00050,000 27

14,47513,500


150,000100,000 27

27,97527,000


250,000250,000 28

54,975

• Effective from year of assessment 2002, income tax rate for non-resident individual – 28%.• Company income tax rate – 26%.• Petroleum income tax rate – 38%.

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Type of Income Tax RateRoyalties 10%Services by public entertainer 15%Interest 15%Special classes of income – technical fee, installation fee and rental for moveable properties under section 4A of the ITA, 1967

10%

• Contract payment (service portion) to contractors• Contract payment (service portion) for employees’ tax

10% } Eff. from 21.9.2002 3% } Eff. from 21.9.2002

Category of Disposal Tax RateDisposal within two years of an asset’s acquisition 30%Disposal in the third year of an asset’s acquisition 20%Disposal in the fourth year of an asset’s acquisition 15%Disposal in the fi fth year of an asset’s acquisition 5%Disposal in the sixth year of an asset’s acquisition or thereafter Nil

Note: For disposals by companies, the tax rate on the disposal in the fi fth year of an asset’s acquisition or thereafter is 5%.

REAL PROPERTY GAINS TAX RATES DISPOSAL BY NON-COMPANIES (DISPOSAL BEFORE 01 APRIL 2007)

Category of Disposal Tax RateDisposal within fi ve years of an asset’s acquisition 30%Disposal in the sixth year of an asset’s acquisition or thereafter 5%

Note: With effect from 1 April 2007, Real Property Gains Tax will no longer be imposed on profi ts earned from the disposal of real estate.

DISPOSER IS A NON-CITIZEN INDIVIDUAL AND NON-PERMANENT RESIDENT (DISPOSAL BEFORE 01 APRIL 2007)

WITHHOLDING TAX RATE FOR NON-RESIDENTS

TaX RaTes

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CooPeRaTIve InCoMe TaX RaTes(EFFECTIVE FROM YEAR OF ASSESSMENT 2002)

Taxable Income RM Rate (%) Tax (RM)On the fi rst On the next

20,00010,000

03

0300


30,00010,000 6

300600


40,00010,000 9

900900


50,00025,000 12

1,8003,000


75,00025,000 16

4,8004,000


100,00050,000 20

8,80010,000


150,000100,000 23

18,80023,000


250,000250,000 26

41,80065,000


500,000500,000 28

106,800

With effect from year of assessment 2008, the income tax rates for resident companies in Malaysia with paid-up ordinary share capitals of not more than RM2.5 million at the beginning of a basis period for the assessment year are as follows:

Taxable Income RM Income Tax RatesFor every ringgit on the fi rst 500,000 20%For every ringgit exceeding 500,000 26%

TaX RaTes

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STATUS OF DOUBLE TAXATION AGREEMENTS (DTAs) as aT 31 deCeMBeR 2008

DTAs IN EFFECT1 Albania 32 Mongolia2 Argentina (Limited Agreement) 33 Morocco3 Australia 34 Myanmar4 Austria 35 Namibia5 Bahrain 36 Netherlands6 Bangladesh 37 New Zealand7 Belgium 38 Norway8 Canada 39 Pakistan9 Chile 40 Papua New Guinea

10 China 41 Philippines11 Croatia 42 Poland12 Czech Republic 43 Romania13 Denmark 44 Russia14 Egypt 45 Saudi Arabia 15 Fiji 46 Seychelles16 Finland 47 Singapore17 France 48 South Africa18 Germany 49 South Korea19 Hungary 50 Spain20 India 51 Sri Lanka21 Indonesia 52 Sudan22 Ireland 53 Sweden23 Italy 54 Switzerland24 Japan 55 Syria25 Jordan 56 Thailand26 Kuwait 57 Turkey27 Kyrgyz Republic 58 United Arab Emirates28 Lebanon 59 United Kingdom29 Luxembourg 60 United States (Limited Agreement)30 Malta 61 Uzbekistan31 Mauritius 62 Vietnam

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DTAs GAZETTED1 Bosnia and Herzegovina 4 Kazakhstan2 Indonesia (Protocol) 5 Venezuela3 Iran 6 Zimbabwe

DTA NEGOTIATIONS COMPLETED (NOT SIGNED)1 Belgium (Protocol) 5 Senegal2 Brunei 6 Republic of Slovak3 German (New Agreement) 7 Yemen4 Oman

DTAs UNDER NEGOTIATION1 Brazil 9 Portugal2 Canada (New Agreement) 10 Russia (New Agreement)3 Cyprus 11 San Marino4 Finland (New Agreement) 12 South Korea (New Agreement)5 India (New Agreement) 13 Tunisia6 Laos 14 Uruguay7 Mexico 15 Ukraine8 Norway (New Agreement)

DTA NEGOTIATIONS COMPLETED (SIGNED)1 Qatar 2 Turkmenistan

STATUS OF DOUBLE TAXATION AGREEMENTS (DTAs) as aT 31 deCeMBeR 2008

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