Economy, taxation, checks and balances: Mundane issues matter

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Graphic: csj-ng.org

What the Rakyat feel on the ground will influence their perception of whether good governance and transparency exists in reality, says Citizen in Action.

We learn from television news, advertisements and social media about how great our economic achievements are in the midst of the unregulated globalised economic movements and flows. But Malaysians are also familiar with the 1MDB scandal and how it has affected our nation’s good name.

In recent times, Malaysians experienced another event: the prime minister offering assistance to the economy of a superpower, the United States to improve its infrastructure and to buy Boeing planes using public funds.

Some people (note: the upper class) are happy about the nation’s economic performance but the majority of Malaysians (both the middle and lower classes) are annoyed with the double standards in the distribution of the nation’s resources.

The rakyat are suffering from economic hardship and the lacklustre performance of the economy. One of the main hardships comes in the form of the GST.

Stories of the Rakyat

The flow of economic structures and their performance are complex matters for ordinary people to comprehend – more so when economic matters intertwine with issues of political legitimacy, fairness, equality, corruption, mismanagement, and distribution.

So let us, the ordinary hard-working rakyat, focus on micro issues, issues that are really felt from the ground, to comprehend what exactly is happening to our welfare through what we are familiar with: our income and taxation.

Reading the news and listening to stories of many experiences has led me to believe that there is a some discontent with the Inland Revenue Board (LHDN) for its heavy-handed exercises in extracting higher tax contributions from individuals (and corporates) who are hardly wealthy.

Below are a few examples.

In 2014, a bank employee was asked by the LHDN to pay her undeclared taxes. She appealed but only a partial amount of her penalty was waived.

Some years ago, a freelance writer was asked by the LHDN about his claim for a tax deduction on medical expenditure for his bedridden father. He had deducted the cost of a ripple mattress (several hundred ringgit) as part of the medical equipment for parents (which taxpayers are allowed to deduct from taxable income).

But the LHDN refused to accept that a ripple mattress qualified as medical equipment for parents despite the freelance writer’s argument that such a mattress was to prevent his father from getting bed sores. The income tax officer insisted that only items like wheelchairs were eligible for deduction (although this narrow interpretation may have since changed).

In October 2017, a 77-year-old retired carpenter was brought to court on charges that he had failed to pay taxes 20 years ago (1993 to 1999)! He received a letter from the LHDN dated 27 January 2017. As a result of his inability, his lack of knowledge, in handling the matter, an arrest warrant was issued by the LHDN.

He then obtained legal assistance from a MP to deal with the case. The court’s decision was that the retired carpenter had to pay RM50 per month until his debt of RM2,438 was cleared (see report here).

Another more detailed example arose from a teacher’s encounter with the LHDN in 2017. He was penalised for an inadvertent omission in filling up his income tax return for 2012.

The teacher admitted the omission of the income amount and made an appeal to waive the penalty. He said he had unknowingly keyed-in an incorrect figure in the wrong column due to the confusing interface design of the taxation form, which was altered in 2009. The error was purely unintentional, and he had no intention to evade taxes.

The taxation officer contacted and informed the teacher that his appeal most likely would not be successful on the grounds that he had exceeded the period of “voluntary disclosure”. (For details on “Voluntary Disclosure”, please check the LHDN website.)

The teacher appealed again and argued that the “voluntary disclosure” clause was not people-friendly because taxpayers would not realise that there had been an error in the first place until they are informed by the LHDN in writing or through a call. The teacher had only been contacted by the tax officer in 2017 for documents on several occasions, but was informed that these were for auditing purposes. No mention was made of the error made in the 2012 income declaration.

After the second appeal, the LHDN gave a partial waiver of the penalty but the teacher refused to accept the decision. At the time of writing, the LHDN has requested the teacher to lodge an appeal, and there would be a special commission to hear the case.

Good governance and public responsiveness: Mundane issues matter

Such mundane, everyday-life taxation issues may seem irrelevant to issues related to national/global economic growth and income distribution. They may seem too insignificant to be raised and may not even influence public sentiment.

But it is precisely these micro cases that matter most to the rakyat. These sorts of mundane issues will illustrate if there is really proper governance, transparency, and management of public funds that can be felt by the Rakyat, and so these cases must not be taken lightly.

One wonders whether the government (through the LHDN, in this case) is performing efficient work, whether it functions as an efficient mechanism for public goods or simply acting as a body to collect money from the rakyat to achieve KPI points.

The process that ordinary taxpayers go through, especially in making an appeal, is not easy; it incurs costs such as getting advice from tax specialists. If they hire a tax specialist to present their case, the costs would be even higher. Taxpayers like the retired carpenter who have no knowledge or know-how of the appeals mechanism have reason to be concerned.

Taxpayers work hard to earn an honest income to have a better life. The purpose of taxation purpose to guarantee that taxes are used to provide better infrastructure and public facilities to the taxpayers in return. In the cases mentioned above, we need to celebrate the taxpayers’ courage in lodging an appeal and arguing with the LHDN.

Their acts are a form of public mechanism, serving as checks and balances on governmental efficiency, public responsiveness, transparency and management of public funds. They illustrate whether citizens are empowered to exercise their basic human rights as guaranteed under Federal Constitution.

The rakyat choose parties to form the government to distribute resources fairly, to provide a system of checks and balances on governmental institutions, to assure transparency in the distribution of wealth and to uphold the basic rights and welfare of the rakyat.

The Rakyat may not have the authority to decide public policy and make laws, but they have a responsibility to safeguard public goods to ensure these are fairly shared equally. They have the power to cast their votes to choose representative of their liking to form a government.

In this critical period, ahead of the general election, it is of utmost importance that we elect into power parties that can provide a system of checks and balances on responsible and transparent management of national wealth.

Act now to ensure that a system of checks and balances on the distribution of public funding is put in place. Act now to assert your voices in the public domain. Act now to ensure we are not silenced.

Citizen in Action is the pseudonym of a regular Aliran reader.

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