KUALA LUMPUR: The implementation of the electronic invoicing system (e-invoicing) will help grow tax revenue contribution to between 14 and 15 per cent of gross domestic product (GDP) and provide certainty for businesses.
The increase in revenue will come from enhanced compliance and surfacing of some grey economy transactions which will help grow the tax base.
Deloitte Malaysia indirect tax leader Tan Eng Yew said e-invoicing allows the government to collate and analyse detailed information on economic transactions by businesses.
"This can help improve tax compliance and address the grey economy. In the longer term, this also lays the foundation for a broader revamp of indirect taxes," he said.
Currently tax revenue makes up between 11 and 12 per cent of GDP.
"The expansion of the tax base allows for sustainability and also for future economic growth and development. "
"The burden of paying taxes is therefore spread out to a bigger range of taxpayers."
"Malaysia's tax collection is about 11-12 per cent of GDP. The idea is to bring it up to 14-15 per cent and an e-invoice system is supposed to help to a large extent," Harvey & Associates managing partner Harvindar Singh said.
The government agreed to implement mandatory e-invoice on Aug 1, 2024 for taxpayers with annual income or sales of more than RM100 million.
As for taxpayers that fall under other categories, the implementation will be in phases and completed by July 1, 2025.
Harvey & Associates' managing partner Harvindar Singh said e-invoicing will enable the Inland Revenue Board (IRB) to get real-time information on taxes.
"It provides certainty to businesses because under the current system, the IRB would need to go back five years, and in year five, the taxpayers may be imposed with a huge tax bill for transactions that took place in year one, so there is no certainty," he told Business Times.
Prime Minister Datuk Seri Anwar Ibrahim also announced that the tax identification number will be expanded to support the implementation of e-invoice.
"This can widen the taxpayers base following voluntary tax compliance which would reduce revenue leakages," he said in his 2024 Budget speech.
The initial implementation was supposed to be on June 1, 2024, which raised concerns among taxpayers due to the short time frame.