KUALA LUMPUR (June 14): The proposed investment arm within Malaysia’s Inland Revenue Board (IRB) raises questions on the feasibility and broader implications of the government tax collection agency becoming a steward of taxpayers’ money.
The Edge Malaysia business and investment weekly (Edge Weekly) reported in its latest June 16 -22 issue that the proposal could expose government revenue to stock market and property cycle fluctuation.
According to the Edge Weekly, which quoted tax experts and opposition politicians, an economic downturn will result in lower tax revenue and affect investments of taxpayer’s money. If more funds were to be diverted to long-term investments, it will translate into less income for the government.
“The IRB is a tax collection agency tasked with raising revenue for the government and such taxes collected are then channelled into the consolidated fund, from which the government requests allocation of funds for its operational and development expenditure.
“I don’t see why the IRB should now also be tasked with investing such funds via an investment panel,” Veerinderjeet Singh, chairman of Taxand Malaysia Sdn Bhd, was quoted as saying.
According to the Edge Weekly, a bill will be tabled in Parliament this week to amend the Inland Revenue Board of Malaysia Act 1995, allowing Prime Minister Datuk Seri Najib Razak, who is also finance minister, to establish an investment panel within the IRB.
If the bill is passed, it will allow the panel to invest taxpayers’ money in stocks, initial public offerings, bonds, debts and property assets.
As the government already has existing investment arms like Khazanah Nasional Bhd and the Employees Provident Fund (EPF) to manage public funds, the Edge Weekly also questioned the need to set up another investment entity under the IRB.
Veerinderjeet said the focus of the IRB was to maximise tax revenue collection for the government, not invest it.
“There are already numerous other bodies, such as Khazanah and the EPF that are capable of investing state funds; they have a track record and the expertise. More importantly, these funds are also transparent and accountable to their stakeholders.
“If the government really wants to increase the investment of its funds, why not increase the allocation to bodies like Khazanah?,” Veerinderjeet was quoted as saying.
Opposition politicians have also voiced their concerns on the IRB’s investment arm. The Edge Weekly quoted Kelana Jaya MP Wong Chen as saying the IRB fund could be similar to 1MDB, which has an appalling track record in terms of transparency.
Wong, in a written statement, argued that the bill “will essentially transform the IRB into a quasi-investment body like 1MDB under his (finance minister) personal control. This initiative by the finance minister is highly unusual, weakens democracy and lacks transparency and accountability.”
“This (the proposed bill) is an attempt to divert the investment of taxpayers’ money by the finance minister under the cover of the IRB. This action will weaken our already battered democracy as it removes and hides the rakyat’s tax money from parliamentary scrutiny and accountability,” Wong said.
For a better understanding on the IRB investment arm’s feasibility and broader implications, kindly pick up and read the latest issue of the Edge Weekly.
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