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Time to revamp tax assessment appeal process

07 June 2021

TAXPAYERS have the right to appeal against assessments and tax must be paid within the 30 days of the issuance of the assessment, otherwise there will be an automatic penalty of 10% added to the tax payable. Whether or not the Inland Revenue Board (IRB) is correct in issuing the assessment and despite the matter proceeding to appeal to the Special Commissioners of Income Tax (SCIT), IRB’s collection department will start their collection procedures independently of the appeal process.

In simple terms, the tax must be paid while the appeal process is being invoked by the taxpayer.

In majority of the cases, taxpayers have to engage tax agents or lawyers to fight their case and the cost can be substantial. This is due to the appeal procedures to SCIT are lopsided against taxpayers since the process is legalistic and the SCIT are all persons with legal backgrounds. Therefore, the requirements are legalistic and requires knowledge of the tax rules, the laws of evidence and specific protocols to be followed in preparing documents for submission to the IRB counsel and the SCIT.

The whole process does not encourage taxpayers to appeal unless the amount involved is substantial. Generally, smaller taxpayers and individuals do not appeal to the SCIT or proceed with the appeal largely due to the cumbersome procedures and the cost involved.

Although it appears on the surface that justice is available for the aggrieved party, in practice, due to the costs, procedural protocols and the time involved, taxpayers end up effectively giving up their rights to appeal, and by default the IRB collects the taxes.

What is the role of SCIT?

The role of the SCIT is to hear from parties and decide on the point of law and question of fact. Case laws (Khoo Ewe Aik Realty Sdn Bhd) have established that the courts would not disturb findings of fact by the SCIT unless it considers the evidence contradicts the determination of the SCIT.

Appeals beyond the SCIT to the higher courts is normally confined to questions of the law.

Layman taxpayer’s perspective

The main role of SCIT is to establish the question of fact and this should be made easy for any taxpayer to take his case to the SCIT and present it himself. Only if that is possible, the true meaning providing justice to the taxpayers will be effective. After all, facts can be presented more effectively by taxpayers rather than intermediaries such as tax agents and lawyers since the taxpayer is the one who has undertaken the transaction.

Change needed

SCIT under the law must comprise of persons with judicial or legal experience (ie experience as an advocate, a member of the judicial or legal service or a holder of an office to which the Judges Remuneration Act 1971, applies).

This arrangement practically confines the eligible persons to sit on the SCIT to be legally trained people. It’s time for the government to revamp the SCIT and bring in non-legal people such as experienced businessmen, accountants and tax practitioners into the SCIT.

To guide the non-legal people on the points of law, the chairman of the SCIT should have a legal background and his role is to advise the non-legal personnel on the points of law.

The procedural protocols to submit the documents to the SCIT should be simplified such that an ordinary person can appeal without assistance from tax agents or lawyers.

No taxpayer should be denied his fundamental right to appeal because of the cost or the procedural difficulties.

Its time for the government to review the composition of the SCIT and the protocols associated with the appeals.

This article was contributed by Thannees Tax Consulting Services Sdn Bhd managing director SM Thanneermalai.

This article was originally published on the Sun daily.

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