By Dr John Chew
We refer to media statements in the press by the director-geneal of the Inland Revenue Board (LHDN) which appear to imply that specialist doctors in private practice have been systematically and maliciously defrauding the government of tax revenue by wrongly declaring their income under their private limited companies, rather than in their individual names.
We would like to emphasise the following points:
1) The formation of a private limited company by doctors was and is entirely legal. No law restricts or prevents doctors from forming such companies. The LHDN accepts this.
2) Doctors are generally not very knowledgeable about tax, accounting and such matters. Therefore, we employ accountants, tax consultants, etc. It is generally these professionals who approach their doctor clients and advise them to form companies to facilitate tax planning. To ignore the advice of a professional that I have hired to counsel me would be foolish.
3) Since independence, doctors in private practice have been forming private limited companies. They have been submitting their taxes in the prescribed fashion since then, and the LHDN (and its predecessor, the Income Tax Department) has been accepting these returns. Many doctors have been thoroughly audited over the years. The LHDN has always been aware of the use, by some doctors, of the private limited company.
4) In the past, company taxes have been the same as personal taxes. Thus, the tax savings would have been minuscule if any. In fact, for the last two years, company tax has been higher than personal tax. In the re-calculation, the doctors had overpaid their taxes and will be getting a refund. This suggests that tax avoidance was not the primary motivation for setting up companies.
5) Recently, the LHDN decided that some private specialists, having signed contracts to supply services to hospitals in their private capacities, should not pay that money into their company accounts, but instead declare it as personal income. Since this was a significant and systemic change, the Malaysian Medical Association (MMA) engaged with the LHDN for clarification. We came to what we believed was a satisfactory resolution.
In view of this, we the MMA are deeply disappointed by the news article in Mingguan Malaysia, which seems to imply that tax evasion by doctors is widespread.
We believe the situation is quite the opposite — doctors in general are extremely law-abiding, and we have been meticulous about declaring our income and paying all taxes owed.
We feel that a gross injustice had been done with this misreporting. We trust the director-general of LHDN will clarify his statement if he has been misquoted.
RM400 million paid by specialists doctor is a lot of money. This money must go back to improve government hospitals.
Dr John Chew is president of the Malaysian Medical Association.
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