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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
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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;
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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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Strategic Thrusts For Services Development
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- Strengthening the institutional support in the
development and promotion of the identified sub-
sectors.
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Strategic Thrusts For Services Development
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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
Liberalisation of Tax Services in aGlobalised World: Issues and Challenges
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Why Liberalise?
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• Market access & expansion of export markets
• High value employment
• Movement of talent, human capital development
ENHANCED COMPETITIVENESS
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Why Liberalise?
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• In services, liberalisation involves 4
modes of delivery:
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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
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Speaker : Dr Veerinderjeet Singh
Services Liberalisation
MODES Criteria Supplier Presence
Mode 3:
Commercial presence
Service delivered within the territory
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
Service delivered within the territory
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?
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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
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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
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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
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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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