IRB and US to formalise FATCA by year end

KUALA LUMPUR: The Inland Revenue Board of Malaysia (IRB) expects to formalise the Inter Governmental Agreement (IGA) with the US on the Foreign Accounts Tax Compliance Act (FATCA) by year-end and implement the Act by September next year.
"FATCA is an act introduced by the US to monitor their citizens who have overseas income…IRB as a competent authority, together with Bank Negara Malaysia, (hopes to finalise the agreement by year-end) because by September 2015 Malaysia will enforce the Act fully," IRB CEO Tan Sri Dr. Mohd Shukor Mahfar told reporters at the opening ceremony of the National Tax Conference 2014 yesterday.
An agreement needs to be formalised with the US as failure to do so will result in a withholding tax of 30% on certain type of payments.
"FATCA was enacted by the US in March 2000 to target tax non-compliance by US citizens with foreign accounts, and with the main objective to monitor and curb tax evasion activities that existed. Malaysia will formalise the IGA with the US by the end of this year, where IRB will be appointed as one of the competent authorities in the IGA along with other developed countries," he added.
Shukor also said that IRB is seeking autonomy in its human resource governance and financial management. With the autonomy, the review and approval of proposed changes in human capital and finance will be done by IRB board members instead of central agencies such as the Finance Ministry (MOF) and Civil Service Department (JPA).
"These changes will provide flexibility for IRB to manage its human resource and financial planning based on best practices, current and future needs and in line with financial capability," he said.
Finance Minister II Datuk Seri Ahmad Husni Mohamad Hanadzlah, who officiated the event yesterday, said the autonomy will be tabled at the coming Parliament session (Oct-Dec 2014) and implemented next year.
"In terms of management of their finance, they (IRB) will do it. We will be paying them a fee, a small percentage of total collection…assuming it is 1% or 1.5% of total collection, if they collect more, they will get more. That will be an incentive for them.
"In terms of staffing, it is better to let them do it because they know what they want, how many numbers they want and by doing it themselves they will be able to get the people qualified as per their requirement," he told reporters.
On tax collection, Husni said IRB collected nearly RM110 billion in 2011, RM125 billion in 2012 and RM129 billion in 2013. The target for 2014 is RM140 billion, an increase of 8.5% from last year.
Shukor said it is on track to achieving the target and the latest figure is still above last year's collection.
"According to economic trends, the second half is usually better than the first half. If the trend continues till year end, I'm confident we can achieve the target, as long as economic growth is not affected and there is good gross domestic product growth," he said.
On the Goods and Services Tax (GST) focus group meetings, Husni said not many issues have been raised except certain quarters requesting that the procedures be simplified.
"We've taken that into account. What we see now, in terms of registration, it's almost 10,000 within this short period of time. When we announced officially for the registration, it was nearly Hari Raya, then it was the holidays…we received 9,000, almost 10,000 in terms of the registration. The progress is on target," he said.