RM139.3 bln revenue projection from 2022 direct taxes achievable, says IRB CEO

He said the estimated revenue is projected from the gross collection of direct taxes as a whole, including corporate, petroleum, individual and other taxes, before payment of refund claims.

"The target is along the lines of the projected 5.9 per cent gross domestic product (GDP) growth as announced by the government," he said at the 47th TaxMax webinar series, themed "Building resilience for tomorrow", organised by Deloitte Tax Academy.

Mohd Nizom noted that the projected revenue from corporate income tax for 2022 is slightly more than the collection in 2019, before the COVID-19 pandemic began.

"In terms of projected revenue that the government can expect from the economy next year, we looked at several factors, part of it is actually historical data that we have collected over a period of several years, and also looking at the outlook," he added.

Meanwhile, Mohd Nizom said Malaysia's direct taxes-to-GDP ratio is on a downward trend since 2019, at 9.5 per cent, which is 1.7 points lower than the Organisation for Economic Co-operation and Development (OECD) average.

"It was on a declining trend from 2020, which stood at 8.4 per cent, and it is estimated that the ratio will be at 7.9 per cent for 2022," said Mohd Nizom.

As for the indirect taxes-to-GDP ratio, he said Malaysia only stood at 3.2 per cent and is far below the OECD average of 10.9 per cent.

"Based on these statistics, we can conclude that our tax structure is heavily reliant on direct taxes compared to indirect taxes.

"The direct and indirect taxes proportion based on OECD average is about 50-50 per cent. But in our case, it is about a 75-25 per cent ratio between direct and indirect taxes," he said.

Looking at the trends, Mohd Nizom opined that Malaysia's tax system needs to move towards the current trend of widening its tax base to involve more population such as the introduction of a consumption tax.

"People will argue, from an equitable perspective, whether it is fair to tax different income brackets at the same time, so we will have to strike a balance, but we can no longer deny the fact that the trend is heading that way.

"Not only will it widen the tax net, but we can also agree that it is a more efficient way of collecting the taxes with lesser room for leakages," he added.