THE coming full lockdown will have a severe impact on the majority of businesses particularly SMEs and the services sector.
Although many businesses have migrated parts of their operations into the virtual arena, it will not be “business as usual” during the full lockdown since many businesses still require interactions with people on a face-to-face basis. Equally important is the fact that businesses are keeping hardcopy records or in servers at the offices which cannot be accessed remotely.
In the event the tax authorities decide to audit or investigate businesses, taxpayers will face problems in responding within the short timeframe the tax authorities are now becoming accustomed to. It is not uncommon for the Inland Revenue Board (IRB) to request replies from taxpayers to be supplied within seven, 14 or 21 days. Usually, these requests require voluminous documentation to be provided to them as a starting point and thereafter to reply to the issues raised by the IRB.
Once the tax authorities ask questions, taxpayers will have difficulties in providing comprehensive replies together with the supporting documentation within the timeframe provided (especially during the lockdown period).
During the full lockdown, taxpayers working from home may not have access to their servers remotely or to the hardcopies of the documents or an opportunity to gather documents from third parties to substantiate and present their case.
In areas where the taxpayers need to explain the facts, the law and the circumstances which gave rise to the tax positions they have taken in the tax returns, a face-to-face meeting is an absolute necessity. However much you try during virtual calls, it is not the same as meeting the person face-to-face to present the taxpayer’s side of the case as there will be interruptions due to the connectivity problems or there will be time lag in the voice and picture transmissions. It is just not the same as presenting your case in person.
In such difficult circumstances, it will be unfair if the authorities raise assessments without giving the taxpayer the full opportunity to provide their explanation and answers on the positions taken. Where assessments have been issued prior to the current lockdown, and there is a deadline to settle the taxes hanging “over their heads”: Do businesses try and survive, or do they prioritise their activities to defend their case and settle the tax dues to the tax authorities?
Plea to the tax authorities
Businesses have to survive before taxes can be collected. The plea from taxpayers to the IRB and Finance Ministry is to exercise leniency on the imposition and collection of tax by allowing automatic extension of time for at least one month for the payment of outstanding taxes, filing of tax returns, filing of appeals, and replying on any matters raised from tax audits and investigations.
The tax authorities have indicated that their officers will be working during this period and they will have access to internet. This is welcomed. However, communication with them via emails may not always be efficient. It will be recommended if the officials can make themselves more accessible through their mobile phones. Speaking to the officers in person will be more helpful than communicating via the internet.
The latest full lockdown will be a great challenge to businesses and tax authorities. Deferring taxes and allowing extension of time will not reduce the tax collection but merely defer it. This will allow businesses to focus on how to survive the current full lockdown and keep the staff employed.
This article was contributed by Thannees Tax Consulting Services Sdn Bhd managing director SM Thanneermalai.
This article was originally published on the Sun daily.