On 16 April, the Inland Revenue Board (IRB) declared that 3,001 specialist doctors have underpaid their taxes by falsely declaring their income as corporate income instead of individual income.

IRB chief executive officer Datuk Sabin Samith was quoted by a local Malay daily as emphasising that these 3,001 specialist doctors had not failed to completely declare their taxes, but instead should have declared them as individual income.

"As many as 2,229 specialist doctors have stepped forward with 'voluntary pengakuan' (admission) of the tax amount and the net penalty is around RM400 million. The net amount is after taking into account the amount of the reduce assessment on corporate tax for the same income," he said.

He also said that there are many professionals detected to evade tax, but "to say it is becoming a culture may be unfair to professionals that always comply with the country's tax laws."

Grace period given for doctors to amend tax declaration

IRB had previously offered a concession period from September 2016 to 30 December 2016 for the doctors to voluntarily step forward and correct their tax declaration for the assessment years of 2014, 2015 and 2016.

The 2,229 doctors who voluntarily stepped forward during the concession period will not be registered under the IRB's Monitoring Deliberate Tax Defaulter Programme (MDTD), which lists audited taxpayers who will be given a higher penalty if they are found to have failed to comply with tax requirements again later.

The remaining 772 people who did not step forward during the concession period will be audited soon and will be registered in the MDTD list if audit findings show non-compliance.

Sabin explained that IRB decided that consultant fees received by specialist doctors from their contract of services with private specialist doctors is regarded as income from individual business, instead of an income of a private limited company or Sdn Bhd, a recent amendment.

Doctors would then enjoy a lower tax rate if they report such income as corporate tax, as they would otherwise be unable to make certain claims.

"Based on the cases handle, it is acknowledged that there are tax agents who have given the wrong advice to this group of specialist doctors on the ways to reduce the tax to be paid," he said on behalf of the doctors who have voluntarily stepped forward.

MMA disappointed with IRB for allegations

The Malaysian Medical Association (MMA) however, said it was deeply disappointed as the incident implied that tax evasion by doctors was widespread.

"We feel that a gross injustice had been done with this misreporting. We trust the director-general (and CEO) of the IRB will clarify his statement if he has been misquoted," he said, adding that doctors in general were law-abiding and are very meticulous when it came to income declaration and tax payments.

The MMA president also said that 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 IRB accepts this," he added.

Recent tax amendments have caused confusion among doctors

He explained that doctors were not very knowledgeable with tax and accounting, which has prompted many to employ accountants and tax consultants.

"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," he said.

He also said that since independence, doctors in private practice have been forming private limited companies, and have been submitting their taxes in the prescribed fashion since. IRB has also acknowledged the use of private limited companies by some doctors and have been accepting these returns.

Dr Chew also noted that in the past, company taxes had been the same as personal taxes, thus any tax savings would have been minuscule, if any.

"For the last two years, company tax had been higher than personal tax. In the recalculation, the doctors had over paid their taxes and will be getting a refund. This suggests that tax avoidance was not the primary motivation for setting up companies," he said.

Health Minister Dr S Subramaniam urged the IRB and the MMA to engage in discussion to find the best solution to the matter. MIMS

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