Internal Revenue Board takes fresh steps to ease the burden on taxpayers who've overpaid,
Among them is a system called the Calculator Program of Deduction for Scheduled Tax Payments (PCB) which was implemented in 2009 for salaried workers.
It enables their employers to make more accurate deductions for income tax payments.
Individual tax payers with business incomes will also be allowed to submit applications for reduction of total estimated income tax for the year of assessment.
Companies are also allowed to set the income tax estimate for the year of assessment but not less than 85% of that for the previous year.
Apart from that, the company is also allowed to amend the income tax estimate twice, in the sixth and ninth month of the assessment year to be more accurate in their income tax.
The Tax Imputation System has also been replaced with the Single-tier Tax System since 2008.
Under the Single-tier Tax System, a company’s income tax is the final tax and dividends distributed to shareholders are exempted from tax, and so, income tax refunds do not arise anymore.
Prime Minister-cum-Finance Minister Najib Tun Razak disclosed this in reply to Tawau MP, Chua Soon Bui who wanted to know the total amount of tax overpaid by individuals and companies since 2000.
Taxes based on estimates
Putting forth the question during the last Parliament sitting, Chua also asked if such a situation happened every year.
The MP also wanted to know how the Finance Ministry was reducing the burden on the individuals and companies.
Najib, in his reply, explained that the conditions causing taxes overpayment each year were multiple.
He said for individuals with salaried incomes, overpaid taxes occurred when the individuals made tax exemptions claims which were not considered in determining the tax instalments paid by the employers under the Deduction for Scheduled Tax (PCB).
Amongst tax exemptions not considered under the PCB are purchases of book and computer, insurance and parents’ medication approved under the Income Tax Act 1967.
Another reason was that the total amount of taxes paid on business incomes was based on estimates made at the beginning of the year which were higher and the companies did not make any review to reduce the tax estimates in line with the actual amounts of taxes required to be paid.
The implementation of the Tax Imputation System till 2007 and the provision of transitional treatment under that system till Dec 31, 2013 enables holders of shares to make claims of refunds on income tax already paid by the companies.
This is because the income tax paid by holders of shares is less than the company income tax rate.