PETALING JAYA: Malaysia needs to strengthen its legal-institutional framework to eliminate tax avoidance and evasion, and curb the outflow of much-needed capital to tax havens.
Saying this, the Consumer Association of Penang (CAP) pointed out that the European Union has placed Malaysia in its “grey list” of non-cooperative jurisdictions for tax purposes after the Pandora Papers revelations.
“We call on the government to set up a Royal Commission of Inquiry (RCI) to investigate the outflow of financial assets from Malaysia to secret accounts in tax havens and make recommendations,” its president Mohideen Abdul Kader said in a statement.
He urged the government to work with other nations to put in place:
a) Automatic exchange of financial information across borders
b) Public disclosure of the ultimate human beneficiaries of companies, trusts and foundations
c) Country-by-country reporting for multinational corporations
d) Unitary tax with formula apportionment to prevent tax avoidance
e) A system to identify, contain and reduce transfer-mispricing by companies artificially inflating their costs and deflating profits through intra-company transactions.
Mohideen said CAP welcomes the assurance given Prime Minister Datuk Seri Ismail Sabri Yaakob that the government will not interfere with the investigations by enforcement agencies into the secret accounts in tax havens operated by Malaysians, as revealed in the Pandora Papers.
“We also reiterate our call made eight months ago that the government set up a Royal Commission of Inquiry (RCI) to investigate the outflow of financial assets from Malaysia to secret accounts in tax havens, which has adverse impacts on our economy,” he said.
“Therefore, the Cabinet must take the decision to set up the RCI. Investigation by agencies is not enough to address the issue. The RCI must identify the weaknesses in our laws and institutions which enable illicit money outflows and make recommendations to strengthen our legal-institutional framework to tackle the problem.”
With the revelation by the Pandora Papers of Malaysians hiding their money in secret accounts in tax havens, it is imperative that the RCI be set up without any delay, he added.