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Liberalisation of Tax Services in a Globalised World: Issues and Challenges

Dr Veerinderjeet Singh Managing Director

TAXAND MALAYSIA Sdn Bhd

DAY 1 : Tuesday, 19 July 2011



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Business and Professional Services

Distributive Trade Services

Construction Services

Education & Training Services

Health Services

Tourism Services

ICT Services

Logistics Services

Liberalisation of Tax Services in aGlobalised World: Issues and Challenges

Speaker : Dr Veerinderjeet Singh

Services Targeted in the Third Industrial Master

Plan 2006-2020 (IMP3)



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- Enhancing the competitiveness, productivity andefficiency of the services providers;

- Developing the capacity and capabilities of the

targeted sub-sectors;


Strategic Thrusts For Services Development




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- Positioning Malaysia to be a regional centre for

selected services, namely, distribution, tourism,education, health, and identified business and

professional services;

- Creating a more conducive business environment

for investments and exports of services; and






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- Strengthening the institutional support in the

development and promotion of the identified sub-

sectors.






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• Services sector as the next engine of growth

• To meet country’s international commitment (WTO)/

regional FTAs (e.g. ASEAN Framework Agreement for services (AFAS), etc)

• Also part of NEM and SRIs/ Economic Transformation

• Inflow of foreign direct investments

• Transfer of knowledge, expertise & technologies



Why Liberalise?



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• Market access & expansion of export markets

• High value employment

• Movement of talent, human capital development

ENHANCED COMPETITIVENESS



Why Liberalise?



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• In services, liberalisation involves 4

modes of delivery:



Services Liberalisation

MODES Criteria Supplier Presence

Mode 1:

Cross-border supply

Service delivered within the territory

of the Member, from the territory of

another Member. E.g. e-trading,

pipelines for oil and gas.Service supplier not present

within the territory of the

member

Mode 2:

Consumption abroad

Service delivered outside the

territory of the Member, in theterritory of another Member, to a

service consumer of the Member.

E.g. tourism and education



88Liberalisation of Tax Services in aGlobalised World: Issues and Challenges


Services Liberalisation

MODES Criteria Supplier Presence

Mode 3:

Commercial presence


of the Member, through thecommercial presence of the supplier.

E.g. BranchesService supplier present

within the territory of the

Member Mode 4:

Presence of a natural

person


of the Member, with supplier present

as a natural person. E.g.

expatriates, foreign workers etc



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Liberalisation of Services

• Create a level playing field for locals & foreigners

• Countries may have internal requirements to be met but

these must be transparent & non-discriminatory

• Timeline: Sooner the better!

• Accounting services – full liberalisation by April 2012

• So review impediments and amend rules/regulations





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Foreigners Offering Tax Services in Malaysia

• Why? FTAs…..

• Globalisation & mobility

• What type of services – unclear

• Equity interest in local entities





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Foreigners Offering Tax Services in Malaysia

• Level playing field – is there one?

• Can Malaysians venture overseas to provide tax services?

• Mutual Recognition Agreements among professional

bodies?





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Issues

• Tax law is country specific unlike accounting / auditing

services

• Different law / standards / requirements

• Unlikely foreign tax professionals will offer compliance

services

• What about GST/VAT and Transfer Pricing services?

• What about foreign tax lawyers?





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Challenges

• More competition?

• More competitive?

• Specialised tax services - how to regulate?

• What about in-house tax personnel to be licensed?

• Practice standards?

• Enhance local legislative provisions to regulate tax

services?

Speaker : Dr Veerinderjeet SinghLiberalisation of Tax Services in aGlobalised World: Issues and Challenges



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• Protect the public against incompetent practitioners

• Well-trained ethical tax professionals = better taxpayer compliance

• Form & structure that such regulations should take?

• Accounting / legal professions regulated by autonomous

professional bodies established under legislation



Regulation of Tax Professionals



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• Tax profession regulated by the Ministry of Finance via

Section 153 of the Income Tax Act, 1967• Tax professionals need to be kept up-to-date

• Success of the self-assessment system depends on

continuing co-operation, competence and integrity of

tax professionals



Regulation of Tax Professionals



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Legislative Options

• Leave to market forces to determine competence

• Legislate and monitor compliance with the law

• Self-regulation by the profession i.e

- by an Act of Parliament

- by a professional body





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Legislative Options

• Ideal model / framework must satisfy governance

principles and have rules and regulations in place for

- quality of service e.g. entry into the

profession and maintaining entry and ethical

standards

- handling complaints and disciplining

professionals, etc.





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Tax Services

• What does it encompass?

• Direct / indirect taxes

• But where are the domestic regulatory requirements?

- Section 153 Income Tax Act 1967 if representing others

on income tax matters before the Inland Revenue Board

Speaker : Dr Veerinderjeet SinghLiberalisation of Tax Services in aGlobalised World: Issues and Challenges



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Tax Services

- indirect taxes – none other than customs agent

who clear goods

- GST – proposed for tax agent to be licensed

including a firm / company

- other tax services??





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Licensing

• Who is to be licensed?

- individuals

- why not firms / companies?

- must every staff in a firm be licensed?

• Need to be cohesive and robust in entry requirements





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Licensing

• A tax practitioner should be a member of a recognised

professional body i.e. a body which has, inter alia , the

following characteristics:

- robust membership criteria

- professional examinations

- CPD requirements

- robust disciplinary procedures





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Licensing -- Current Framework

• Section 153, ITA 1967

• Section 22, Accountants Act 1967Inconsistency since 1967??

Amend section 22, Accountants Act to address anomaly

Advocates excluded from Section 153 but core subjects

required to pass in order to be a member of the Bar doesnot include taxation law- so why excluded?





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Licensing – Current Framework

• Current Section 153 guidelines – to be revamped and

made more robust

- Residence

- Qualifications

- CPD requirements

- Malaysian Tax experience/knowledge is essential

- Professional qualifying examination





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Weaknesses

• Concern that current framework does not meet basic

principles of independence / governance• Application forms should not be requiring list of clients, etc

• No definition of ―tax services‖ – must be comprehensive





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Weaknesses

• Should it not cover in-house advisers?

• Competence assessment – determining parameters for

acceptable academic entry levels should be shared byprofessional & regulatory bodies assist the

profession to maintain high standards

• Interviews should be by a Selection Board that reflects all

stakeholders

• Code of ethics – to update / enhance and to be balanced

• Look at Australia’s Tax Practitioners Board





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Capacity Building To Face Competition

• Do we need this?

• Any development programe / incentives needed to cope

with competition?





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Outcome Required

• Quality tax professionals

• Robust tax profession

• Transparency and clear separation of power





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Likely Scenario Under Globalisation &Liberalisation

• Mergers among smaller firms / practitioners

• Linkages / networks – referral of work

– specialised skills set

• Grasp foreign tax legislation and operate in

developing nations

• Modify Malaysian tax legislation and set up regulatory

body for tax services





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Disclaimer

1. These presentation materials contain general information only based on our

understanding of the tax position under current tax legislation and the related practice

thereof, all of which are subject to change, possibly on a retrospective basis. We are

not obligated to update the presentation slides for any future changes.

2. Independent professional advice should be obtained on any tax matters as the

consequences / implications may differ depending on the facts and circumstances of

each case.

3. No part of the presentation materials may be disclosed to third parties or copied,

reproduced or transmitted by any means, extracted, quoted or included in any other

document or communication without our prior consent.





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www.taxand.comQuality Tax Advice, Globally

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ABOUT TAXAND

TAXAND is a global organisation of leading tax advisors from independent member firms in nearly

50 countries. Our tax professionals—more than 300 tax partners and 2,000 tax advisors—grasp

both the fine points of tax and the broader strategic implications, helping you mitigate risk, manage

your tax burden and drive the performance of your business.

We're passionate about tax. We collaborate and share knowledge, capitalising on our collective

expertise to provide you with high quality, tailored advice that helps relieve the pressures

associated with making complex tax decisions.

We're also independent—ensuring that you adhere both to best practice and to tax law and that

we remain free from time-consuming audit-based conflict checks. This, coupled with the compact

structure of our member firms, enables us to deliver practical advice, responsively.

TAXAND is a global organisation of tax advisory member firms. Each member firm is a separate

and independent legal entity responsible for delivering client services.

© Copyright Taxand Economic Interest Grouping 2011.

Registered office: 1B Heienhaff, L-1736 Senningerberg – RCS Luxembourg C68





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Thank You TAXAND MALAYSIA SDN BHD

Suite 13A.05 Level 13AWisma Goldhill, 67 Jalan Raja Chulan

50200 Kuala Lumpur

Tel: +603 - 2032 2799Fax: +603 - 2032 3799

W: www.taxand.com.my E: [email protected]

Speaker : Dr Veerinderjeet SinghLiberalisation of Tax Services in a

http://www.taxand.com.my/

mailto:[email protected]


http://www.taxand.com.my/


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