KUALA LUMPUR: A growing conversation has emerged around the importance of rewarding compliance in Malaysia's evolving tax ecosystem following the 2025 Budget.
The discussion highlights the shift from punitive measures to positive reinforcement, emphasising how rewarding businesses for timely compliance can build long-term trust, said Link4 chief executive officer Robin Sands.
As part of the approach, tax incentives have been introduced to encourage the implementation of e-Invoicing, Sands added.
Businesses can now benefit from accelerated capital allowance on expenses for information and communication technology (ICT) equipment, computer software packages, and consulting fees, claimable within two years from 2024 to 2025.
"The proposed tax incentives that enable businesses to claim up to 60 per cent on ICT investments within just two years, signal the government's commitment to e-Invoicing. This will significantly empower businesses to not only comply with the e-Invoicing mandate but also experience solid business benefits."
Such an approach not only encourages consistent participation but also helps create a more cooperative and transparent relationship between the government and the private sector, particularly as new systems like e-Invoicing are introduced, Sands said.
Link4 chief information officer Sam Hassan said it is encouraging to see the government accelerating the adoption of e-Invoicing by offering tax incentives to reduce costs for businesses.
"Previously, many companies opted for manual, basic, and interim solutions rather than fully integrating e-Invoicing into their ERP systems due to cost concerns.
"With these incentives, more businesses now have the opportunity to fully integrate e-Invoicing into their ERP systems, ensuring compliance while also seeing significant operational and business benefits," he added.
Link4 said with the phased implementation of e-Invoicing, effective from August 1, 2024, the government has taken an opportunity to promote compliance through incentives rather than penalties.
By leveraging advancements in big data, the Inland Revenue Board (IRB) can monitor taxpayer behaviour more closely, identifying businesses that consistently meet their obligations.
Coupling this with the new e-Invoicing system could encourage more accurate reporting and voluntary disclosures, easing the overall burden on compliant businesses.
International examples demonstrate the success of this approach. Singapore incentivise businesses by offering tax rebates for timely filings, creating a more cooperative tax environment.
In Italy, early adopters of e-Invoicing benefit from faster VAT refunds, which boost cash flow and operational efficiency.
"These examples show how governments can promote compliance through positive reinforcement while minimising administrative burdens on businesses.
"Rewarding compliance, rather than simply penalising non-compliance, can cultivate a culture of trust among taxpayers. By reducing penalties for early filers, the government can motivate businesses to embrace systems like e-Invoicing more proactively," Sands said.
The government has provided a six-month grace period for businesses that have not yet implemented e-Invoicing, allowing companies to transition smoothly without facing immediate penalties.