KUALA LUMPUR: The government will take the soft approach in tackling the shadow economy which is 20% of Gross Domestic Product (GDP), according to Finance Minister Lim Guan Eng.
He said the shadow economy in developed countries is 5% of GDP and in developing nations it is 12%.
“Ours is very high. When there is lack of trust, no belief in rule of law that is why illegal and illicit activities happen. We must restore trust in our institutions,“ Lim told the media after visiting the Inland Revenue Board customer open day event.
“We need to rebuild faith and trust in rule of law, government and economy,” he added.
More than 1,000 people attended the event and it will be held every Wednesday moving forwards.
Lim said by taking the soft approach, the government hopes those in the shadow economy will legitimise their economic activities.
“This is not going to see results overnight, it will take some time but we have to do it,” Lim said.
He pointed out that corruption, smuggling and all unreported income form part of the shadow economy.
On tax collection, Lim said the government intends to collect RM155 billion this year, a 5% increase from last year, which was RM145 billion.
He said the government always sets a higher target, for last year it was RM147 billion but it only collected RM145 billion which was 8% higher than 2018 which stood at RM137 billion.
He said the increase in last year’s collection shows that the economy is growing strong.
