COLLEGE OF BUSINESSTUNKU PUTERI INTAN SAFINAZ SCHOOL OF ACCOUNTANCYBKAT 3033 SPECIALISED TAXATIONTAX PLANNING(NAIMAH COLLECTIONS)GROUP: APREPARED FOR:DR. IDAWATI BINTI IBRAHIMPREPARED BY:NO NAME MATRIC NO1 AURYN MIANULI SEVENTH 2346362 GOOI SOO WEN 2384823 TENG PHEI YING 2387014 LIM NOA YUNG 239191DATE OF SUBMISSION:16 MAY 2018Table of Contents TOC o “1-3” h z u 1.0 Introduction PAGEREF _Toc514341026 h 12.0 Background PAGEREF _Toc514341027 h 23.
0 Objectives of the Study PAGEREF _Toc514341028 h 44.0 Literature Review PAGEREF _Toc514341029 h 54.1 Issues Related to Taxation PAGEREF _Toc514341030 h 54.1.1 Issues and Difficulties for Taxpayers PAGEREF _Toc514341031 h 54.1.
2 Tax Compliance PAGEREF _Toc514341032 h 64.1.3 Threat of Punishment on Tax Compliance PAGEREF _Toc514341033 h 64.1.4 Planned Behaviour Approach on Tax Compliance PAGEREF _Toc514341034 h 74.
2 Tax Planning PAGEREF _Toc514341035 h 84.2.1 Introduction on Tax Planning PAGEREF _Toc514341036 h 84.
2.2 Tax planning on Sole Proprietorships PAGEREF _Toc514341037 h 94.2.3 Objective of Tax Planning PAGEREF _Toc514341038 h 104.2.4 Individual Taxation PAGEREF _Toc514341039 h 114.2.4.
1 Procedures on Tax Payment PAGEREF _Toc514341040 h 220.127.116.11 Income and Allowable Expenses PAGEREF _Toc514341041 h 124.2.4.
3 Capital Allowances PAGEREF _Toc514341042 h 134.2.4.
4 Reliefs PAGEREF _Toc514341043 h 18.104.22.168 Donations and Gifts PAGEREF _Toc514341044 h 154.
2.4.6 Tax Rates PAGEREF _Toc514341045 h 22.214.171.124 Tax Rebates PAGEREF _Toc514341046 h 164.
3 Role of the Tax Agents PAGEREF _Toc514341047 h 175.0 Findings and Discussion PAGEREF _Toc514341048 h 195.1 Issues Faced by The Business PAGEREF _Toc514341049 h 195.1.1 Issue 1:Issue Regarding Inventory Management PAGEREF _Toc514341050 h 195.1.
1.1 Loss Incurred Due to Existence of Excess and Obsolete Inventory PAGEREF _Toc514341051 h 195.1.
1.2 Difficulty of Doing Physical Counts of All The Inventories at Once at The Financial Year End PAGEREF _Toc514341052 h 225.1.2 Issue 2:The Business Owner Has Inadequate Tax Knowledge PAGEREF _Toc514341053 h 245.1.
3 Issue 3:Tax Complexity Faced by The Business PAGEREF _Toc514341054 h 265.1.3 Issue 3: Tax Complexity Faced by The Business PAGEREF _Toc514341055 h 265.2 Tax Planning PAGEREF _Toc514341056 h 295.3 Roles of Tax Agents PAGEREF _Toc514341057 h 336.0 Conclusion PAGEREF _Toc514341058 h 377.0 References PAGEREF _Toc514341059 h 398.0 Appendices PAGEREF _Toc514341060 h 431.
0 IntroductionTax planning is a series of measures taken by a tax payer to manage his income sources with the objective of eliminating, minimising or deferring tax, but within the ambit of tax legislations. The purpose of tax planning is to understand that relates to personal transaction. Such transaction has to be commercially justified in order to avoid the invocation of anti-avoidance section by IRB. Reduction of tax liability and maximizing the ability to contribute to retirement plans are crucial for success. In short, tax planning is the organisation of one’s affairs to minimize the charge to taxation that have to be paid and maximize disposable income. To achieve this companies had to select between competing alternatives and avoid pitfalls based on knowledge of the tax legislation and Inland Revenue practices.
One of the major objective of tax planning is channelization of taxable income to different investment plans. It aims at the optimum utilization of resources for productive causes and relieving the assesses from tax liability. Besides, reduction of tax liability assesses can save the maximum amount of tax.
And proper tax planning brings economic stability by various techniques such as mobilizing resources for national projects or availing ways for investments which are productive in nature.Tax strategy is to pay the taxes and plan the income to minimize the tax payable, and individual have several ways to reduce their tax bill which include relief and tax rebates, a relief is a deduction from total income, reducing chargeable income, and a tax rebate is a deduction of tax payable. For companies in a tax paying position capital allowance maybe utilised to reduce the chargeable income. Companies may also consider debt financing over equity financing as interest expenses are tax deductible provided the monies borrowed are used for business purpose. For companies in a loss making or non-tax paying position Business losses can be set off against income from all sources in the current year. Any unutilised losses can be carried forward indefinitely to be utilised against income from any business source. Unabsorbed capital allowances can be carried forward indefinitely to be utilised against income from the same business source.The purpose of this subject definitely related to tax planning where the three main objectives must to achieve such as identify issues related to taxation faced by businesses, to examine the area that is heavily focused by businesses for tax planning purposes, and to discuss the role of tax agents by interviewing Naimah Collections for our references.
2.0 BackgroundNaimah Collections is an enterprises business selling baju kurung, veil, sewing services, and receive private or wholesale clothing reservation. This enterprise commenced in July 2005.
They are operation at No. 73, Pekan Changloon 2, 06010 Changlun, Kedah. They doing business in online by facebook apps reservation and offline by open the store. For employees, except the owner of Naimah they don’t hire other as their employees and do not have any family relation members work. For personal use they never withdrawal money from the business. Based on our interviewed, previous years Naimah Collections always got profit for her business which estimated annual expense less than sales and sales more than RM500,000, she did to paid the tax to the government. But current year her business turnover or annual sales not achieved amount of RM500,000 and this result led to have loss. So that’s why current year she’s not involved to pay the tax.
The losses currently, still do not make Naimah thought for joined other profit business organization. Actually condition on outfit production will get higher demand when certain special moment such as Hari Raya, new school academic year and wedding dress. Other than that because the competitor growing up so they need certain design to make customer interesting with what she is selling.The institution for collecting income tax and GST is service from Lembaga Hasil Dalam Negeri. She (owner) just known who has responsible for handle tax is tax agent for pay tax planning at Public Bank counter and tax filling purpose but she didn’t know about capital allowance, balancing allowance and balancing charge where need to deduct, adjust, and carried forward for taxation.
Naimah enterprise do not hire disable employees, so their business not get any incentive and would not have tax deduction. Income tax percentage do not recognized and she never made paying fees for renovation, repair, and maintenance. Sekolah Agama received small donation every year. EPF is 11% for herself but she not claimed tax relief for one and only child because he/she had married. She never arrange annual dinner for suppliers even less employees and no gift will given to customer but discount will be given for certain condition. Zakat canot be claimed. For general, the amount of zakat is limited to the amount of income tax in the year of assessment.
The unpaid zakat balance cannot be brought to the next year. The greater the amount of zakat paid, the less the amount of tax payable. If the amount of zakat is equal or exceeds the tax payable, then one does not have to pay the income tax. The problem coming when submitting documents for income tax through tax agent because there are many old stocks and new stocks in shop and hard for to count the stocks at the year end. Tax agent more focus on sales and expenses when doing tax planning and the business just followed what documents needed to process tax planning.
For knowledge, the tax agents play the role in educating the taxpayers on their rights and responsibilities, guiding the taxpayers when facing the problems related with tax, informing the taxpayers the relevant tax laws. The taxpayers employ the tax agents largely is because of the external factors including external opinions on tax issues are needed, availability of the updated tax information and advice for income tax planning.3.0 Objectives of the StudyOur investigation becomes the key elements of the project to help achieve these objectives were listed in order of:To identify issues related to taxation faced by businessesIssue Regarding Inventory ManagementLoss Incurred Due to Existence of Excess and Obsolete InventoryDifficulty of Doing Physical Counts of All The Inventories at Once at The Financial Year EndThe Business Owner Has Inadequate Tax KnowledgeTax Complexity Faced by The BusinessTo examine the area that is heavily focused by businesses for tax planning purposesTo discuss the role of tax agents4.
0 Literature ReviewThe purpose of literature review is to provide a background conceptual understanding related with the general issues related with taxation. Besides, literature review also provide the understanding on the tax planning which includes the introduction, tax planning on sole proprietorships, objectives on tax planning and individual taxation. Not only that, it also provide the knowledge on the role and responsibilities on tax agents.Through this review, we are able to discover issues faced by the businesses recently. Additionally, it will give the basic idea for our group members to develop a relevance question that being asked during the interview session with owner.
4.1 Issues Related to TaxationThe function of the issues related with taxation is to provide the understanding on the issues and difficulties that faced by taxpayers, tax compliance, threat of punishment and planned behavior approach on tax compliance. From the review, we able to discover several areas related with the tax issues and have the understanding related with the taxation.
4.1.1 Issues and Difficulties for TaxpayersThe owner of the business will receive all the profit which subject to taxation specific to the business and has the unlimited responsibility for all losses and debts. However, the owner often need to drive the business which make the owner has little time to care for his tax affairs. Generally, taxpayers that are subject to the business income tax had to compliance to the regulatory requirement and it is mandatory in nature. Hence, the enterprises facing difficulties includes inadequate tax knowledge, tax complexity and legal entities CITATION Pop08 l 2052 (Pope, 2008).Firstly, tax knowledge is important for taxpayers as it is influential factor to determine the compliance behaviour of the taxpayers under self-assessment system. The taxpayers that possessing the tax knowledge would lead to higher compliance rates.
On the other hand, the taxpayers that absence of the tax knowledge will lead to non-compliance behaviour either intentionally or unintentionally. There is some example of the unintentional non-compliance which the individual taxpayers in Malaysia who committed mistakes in the tax return form as the taxpayers not really aware of their tax knowledge CITATION Loo31 l 2052 (Loo E. C.
, 2005 ). However, there is also a study show that the taxpayers have the inadequate knowledge on the technical aspects of the income tax system in Malaysia because of the complexity itself and lastly caused the high tax liability imposed on taxpayers CITATION Nat14 l 2052 (NatrahSaad, 2014). Secondly, Malaysian business tax system had becoming increasingly more complex that is because of amendments made to the existing law and new assessment systems being introduced. The sophistication in the tax law had caused the tax to become more complex which the complexity can take in many forms such as forms complexity, computational complexity, procedural complexity and low level of readability towards tax CITATION Ric01 l 2052 (Richardson, 2001).
The complexity of the tax was caused by 6 potential causes which is ambiguity, calculations, changes, details, forms and record keeping CITATION Lon87 l 2052 (Long, 1987).Lastly, the different tax treatment is applied to different legal entity. For instance, an individual taxpayer will be subject to progressive tax rates and they are eligible for personal reliefs and rebates.
On the other hand, the corporate tax payers are subject to a flat rate of 24% or dual tax rates, and not eligible for personal reliefs and rebates CITATION Pop08 l 2052 (Pope, 2008). Hence, tax is difficult to understand and hard to be applied for a taxpayer.4.1.2 Tax ComplianceTax compliance defined as the willingness of the individuals to act in accordance within both ‘letter’ and ‘spirit’ of the tax law and administration of the enforcement activity. Not only that, the other definition of tax compliance is filling all the required tax returns at the proper time and that returns accurately report the tax liability according with the tax law application when the return is filed CITATION Jam02 l 2052 (James, 2002). Tax compliance is reporting all the incomes and paying all taxes according to the applicable laws, regulation and court decisions CITATION Alm91 l 2052 (Alm J. , 1991).
However, tax compliance had to consider 3 distinct types of compliance such as payment compliance, filing compliance and reporting compliance CITATION Bro03 l 2052 (Brown, 2003). The taxpayers had to be comply with the administrative rules of lodging and paying and comply with the technical requirements of the tax laws during calculate the tax liability. According to Mottiavakandar(2004), taxpayers that submit the completed return within the deadline that set, calculate the tax liability independently and settle the tax liability without any enforcement is said to have complied with the tax laws. The taxpayers now are concerned with the accuracy and complete of the tax liability in order to prevent the penalty that will be imposed by the authorities.4.1.3 Threat of Punishment on Tax ComplianceThe threat of punishment is an effective tool to deter non-compliance attitudes of the taxpayers which including the tax audits, tax rates and tax penalties. Firstly, there are a positive relationship between the audit probability and compliance, but it is varied depending on the group of taxpayers CITATION Fis92 l 2052 (Fischer, 1992).
For instance, the audit probabilities have the strong influences on the tax compliance for sole proprietors but less influences on the salaried taxpayer CITATION Wit85 l 2052 (Witte, 1985). However, those who have the intention to evade the tax will affected by the audit probabilities CITATION Han96 l 2052 (Hanno, 1996). It indicates that the taxpayers whose have definite information about the possibilities of being audited may only abide by the tax laws.Secondly, the tax rates that higher will make the taxpayers to be less compliant. For example, when the marginal tax rate is increased, the taxpayers are prone to understate their incomes CITATION Clo83 l 2052 (Clotfelter, 1983).
However, tax rate not classify as the main factors that influenced the decision-making of the taxpayers as compared to the penalty and audit. Thirdly, there is a positive influence of the higher penalty on tax compliance. However, the impact of penalty is varying according to the group of the taxpayers. For example, the behaviour of high income self-employed individuals is positively related with the severity of criminal fraud penalties. On the other hand, civil penalties had the negative relationships with the middle income individuals and small proprietors.
CITATION Alm90 l 2052 (Alm J. B., 1990)From the researchers, the influence of the threat of punishment on tax compliance has insignificant impact on the salaried taxpayers.
It is because they had less opportunities to avoid and evade paying taxes because of the simple tax affairs. Self-employed taxpayers have the more complicated tax affairs which enable them to make use of the loopholes in the income tax rules. However, the threat of punishment will become effective if the taxpayers has the intention to avoid taxes regardless of their employment status CITATION Rai141 l 2052 (Raihana Mohdali, 2014).4.1.4 Planned Behaviour Approach on Tax ComplianceAccording to the Clotfelter C.(1983), the reduction of the tax rate does not necessarily will increase the compliance on tax because it is depending on the attitude of the taxpayers towards risk.
On the other words, lowering the tax rates didn’t influence the compliance on the rules. Further legislative actions will improve the tax compliance. Not only that, there are researchers predict the tax compliance behaviour, a taxpayer’s belief, norms, inherent character and other characteristic should be taken into account CITATION Dou06 l 2052 (Doussy, 2006).
Additionally, social psychological variables such as social norms, fairness, equity, moral and ethical concerns are the important variables in understanding the attitude of the taxpayers towards the tax system CITATION Lum10 l 2052 (Lumumba, 2010). There are many researchers are focus on the behavioural approach in order to solve the problems when the taxpayers comply with the tax. Firstly, an individual taxpayer will comply with the tax laws and requirements when the taxpayer evaluates it positively otherwise the taxpayer will act in ways to avoid paying the taxes imposed on him. Not only that, if the taxpayers have the fairness perception towards the tax system in which they will receive the public services in return for the taxes that pay by them CITATION For02 l 2052 (Forest, 2002). On the other hands, if the taxpayers feel that they are being treated poorly by the system, they will intent to not compliance with the tax rules and requirements.
Furthermore, the individual’s perception of whether the people is important to the individual would think that he should perform the particular behaviours. The more the people perceives the individual should engage in the certain ways such as paying taxes, the more likely the person intends to do so CITATION Noo12 l 2052 (Noor Suhaila Shaharuddin, 2012). In addition, the taxpayers that believes they will possess some knowledge, skill and ability in complete the tax returns successfully, submits the return within the time period, reports all the relevant information accurately without any enforcement, therefore, the person have a high perceived behavioural control and high compliance with their tax obligations CITATION Noo12 l 2052 (Noor Suhaila Shaharuddin, 2012).Not only that, the taxpayers will analyse the details need to be included and income that need to be reported in their tax return under the self-assessment system. It will increase the ability of the taxpayers to possess certain skills such as the problem-solving skills in manage the tax affairs more effectivity.
Hence, it is important that the individual has the attitude and behaviour towards compliance with the tax rules and thus, the issues of non-compliance with the tax rules will decreased CITATION Noo12 l 2052 (Noor Suhaila Shaharuddin, 2012).4.2 Tax PlanningThis section discuss the tax planning in Malaysia which includes the introduction, tax planning on sole proprietorship, objectives and individual taxation. Through the review, we are able to understand the ideas on the tax planning especially for the sole proprietorships.4.2.
1 Introduction on Tax PlanningThe self-assessment system had implemented in stages, starting with the companies to other taxpayers in 2004 such as self-employed individuals, partnerships, co-operatives and employee from the year 2001. However, the self-assessment system had been successfully implemented in 2005 and now had covers all the taxpayer. After the self-assessment system fully implemented, there are a number of significant amendment had been made such as a number of the public rulings.
The introduction of self-assessment system had involved a substantial shift of responsibility in terms of the compliance obligation on the taxpayers. The implementation of this system also makes the taxpayer to compute and pay his or her income tax. CITATION Pop08 l 2052 (Pope, 2008)According to the Inland Revenue Board of Malaysia, the income of any person that accruing in or derived in Malaysia will be imposed the income tax.
However, there are some income which is exempt from the income tax such as income derived from sources outside Malaysia and which are received in Malaysia. Tax will be imposed on the income of the resident company derived from both Malaysia and outside Malaysia that carrying on the business of banking, insurance, sea or air transport only. The scope of taxation of an individual depends on his resident status. Furthermore, the income of the non-resident person that is accrued in and derived from Malaysia will be taxed. Income is assessed on the current year bases which the income of person other than trust body, co-operative or company are assessed on a calendar year basis. CITATION Ove18 l 2052 (Overview of Malaysia Taxation, 2018)4.2.
2 Tax planning on Sole ProprietorshipsTax planning is the analysis of the financial situation or plan from a tax perspective which defined in the Investopedia. The purpose of the income tax planning is to eliminate, defer and minimize the income tax within the ambit of the law. The tax planning is an important part of a financial plan, as reducing the tax liability in order to ensure tax efficiency. According to the Business Jargons, tax planning can be understood as the activity undertaken by the assesses to reduce the tax liability by making optimum use of all permissible allowances, deductions, exemptions, rebates, reliefs, exclusions and others that are available under the statute.
Moreover, tax planning is an activity in identifying, developing and implementing the strategies in reducing the tax liability that imposed in the person. There are some strategies to mitigate the tax burden of a taxpayer which is applicability of the tax incentives within tax laws of the relevant jurisdiction involved, implementation of the tax efficient and optimum business funding structure according to the proposed scheme, maximisation the tax relief, reduction and exemption according the expenditure that incurred which subject to the conditions and ensuring in meeting the obligations as a responsible taxpayer and complied with. CITATION Lau16 l 2052 (Chin, 2016)Basically, sole proprietorships had play a significant role in the Malaysian business community because they continue to grow and contribute substantially to the development and expansion of the economy of Malaysia.
The sole proprietorships are generally uncomplicated, and it represent seventy percent of the businesses that registered under Companies Commission Malaysia (SSM). CITATION Cho18 l 2052 (Fatt, 2018)The individual or corporate taxpayers that subject to income tax and it is governed by the Income Tax Act 1967. The taxpayers are required by law to file an annual tax return correctly and in full, to keep the sufficient records and documentations and observe the other tax-related requirements. For the businesses that are subject to the indirect tax required to comply with all the applicable provisions under the respective Acts. Additionally, the businesses also required to comply with the state and local government taxes other than the taxes imposed by the federal government such as the direct and indirect taxes. CITATION Pop08 l 2052 (Pope, 2008)Generally, the individual taxpayers need to understand the applicability of the tax rules, requirement and provision. For example, a married couple can reduce the tax liability by choosing the husband’s and wife’s income separately which is the separate assessments.
This will help them to enjoy more personal relief rather than choosing the joint assessment. CITATION Lau16 l 2052 (Chin, 2016)4.2.3 Objective of Tax PlanningBasically, the objective of tax planning is to minimise the tax liability. However, the tax planning cannot be considered as offending the concept of the taxation laws and it is not subjected to the reprehension of reducing the revenue inflow to the government coffers as long as the tax planning is compliance with the laws and requirements. CITATION Tax14 l 2052 (Tax planning & Management, 2014)There are some objectives of the tax planning which are:Reduction in tax liabilityThe reduction in tax liability may help the earner to remain enough surplus out of profits of it for his personal and social needs and future investment in his business.
The tax payer had to plan his tax affairs in the proper way and avail the deduction, exemptions, allowances, and reliefs. Minimisation of litigationThe tax payers strive for least tax while tax administrators attempt to extract the maximum. This will lead to prolonged litigation sometimes.
When the taxpayer want to pay the tax, he will attempt to reduce his tax liability by finding the loophole in the Act whereas the tax administrator disagree with the demand of tax payer in demanding the deduction, exemption, allowances or relief, hence it results in litigation. The chances of the litigation can be minimised by a good tax planning which is based on the clear words of the statute and compliance with the provisions of the taxation laws.Productive investmentThe fiscal discipline can be built through the proper tax planning in the functioning of a tax payer and reduces the transfer of money to government for waste and misuse sometimes from the person who has earned the money by hard labour. The amount that can be saved can use it to enhance the capacity of the tax payer for expansion and growth.Healthy growth of economyThe growth of the peoples is very important for the growth of the nation’s economy. Savings through proper tax planning will boost the economy growth whereas savings through tax evasion will generate the black money. Reduction in costIncidence of tax will form a part of production cost. The reduction of tax by tax planning will lead to the reduction of overall cost and results in more investment and profit.
Employment generationBasically, the amount that can be saved through the tax planning will invested in commencement of new business or expansion of the business. This lead to the creation of new employment in the society. Not only that, the employment opportunities for expertise such as services of chartered accountants, lawyers and financial advisers because taxation laws are very complicated, and they cannot plan their affair efficiency without experts.4.
2.4 Individual TaxationThe function of this section is to discuss the knowledge on the individual taxation which important for the purpose on tax planning. This section had cover the procedures on tax payment, income and allowable expenses, capital allowances, reliefs, donation and gifts, tax rates and tax rebates.126.96.36.199 Procedures on Tax PaymentThe individual resident who carrying on business are liable to tax, the deadline for filling the tax return will be 30 June of the following year.
For example, year 2018, the balance of the tax payment would be due on 30 June 2019.According to the website of Inland Revenue Board of Malaysia, the procedure in paying taxes is to register as the taxpayer first and subsequently get a copy of Income Tax Return Form from the branch of Inland Revenue Board of Malaysia and complete the form B for sole proprietor. The tax payers have to prepare statement of accounts and other related statements. Taxpayers may hire the tax agents to help them to prepare the business accounts. Then, the taxpayers have to compute the tax liability and subsequently check and sign duly on the completed Income Tax Return Forms as well as submit by the due date. Next, the taxpayers need to keep the business records such as profit or loss statement, balance sheet, purchase records, sales records, stock receipts, bill and bank statements as well as the supporting documents for deductions, reliefs and rebate for a period of 7 years.4.2.
4.2 Income and Allowable ExpensesAccording to the website of Inland Revenue Board of Malaysia, the income of the taxpayers is imposed with the tax and it is come from business or profession, employment, dividends, interest, discounts, rent, royalties, premiums, pensions, annuities, others. The gross income from business includes cash receipts from sale of goods or from services provided, all debts incurred from sale of goods and services provided, receipts in kind, recovery of bad debts, insurance compensation received for business loss and withdrawal of business stock or stock taken for personal use. However, the gross income need to adjust for the business expenses such as, allowable business expenses, allowable specific expenses, double deduction expenses allowable under Income Tax Act 1967 and export allowances.
Allowable business expenses are the expenses incurred in the production of income whereas non-allowable business expenses are the personal expense, purchase of personal assets and initial expense. Not only that, there are some specific expense that allowable for deduction such as expenditure incurred in providing equipment for disabled employee (OKU), expenditure incurred in respect of publication in national language, donation to libraries, expenditure incurred in providing services, public amenities and contribution to a charity or community project, expenditure incurred in providing and maintenance of a child care centre for the benefit of employees, expenditure incurred in establishing and managing a musical or cultural group and expenditure incurred in sponsoring any art or cultural event. 188.8.131.52 Capital AllowancesThe capital allowance is also given a deduction in place of depreciation expenses incurred during purchase the business assets.
Capital allowances only can be claimed when the owner is operating a business, asset used in the business and owner of the asset. The rate of capital allowances is as below:TYPES OF ALLOWANCES TYPES OF ASSESTS RATE (%) Initial Allowance All types of assets 20 % Annual Allowance Motor Vehicles and Heavy Machinery 20 % Plant and Machinery 14 % Office Equipment, Furniture and Fittings 10 % Computer 40 % 184.108.40.206 ReliefsIn addition, the taxpayers also allow to claim the personal relief for the year assessment 2017 which summarize as follow:No. Individual Relief Types Amount (RM) 1 Self and Dependent 9,000 2 Medical expenses for parentsOR ParentLimited 1,500 for only one motherLimited 1,500 for only one father 5,000 (Limited)OR3000 (Limited)3 Basic supporting equipment for disabled self, spouse, child or parent 6,000 (Limited) 4 Disabled Individual 6,000 5 Education Fees (Self)(i) Other than a degree at Masters or Doctorate level-for acquiring law, accounting, Islamic financing, technical, vocational, industrial, scientific or technological skills or qualifications; (ii) Degree at Masters or Doctorate level-for acquiring any skills or qualification 7,000 (Limited) 6 Medical expenses for serious diseases for self, spouse or child 6,000 (Limited) 7 Complete medical examination for self, spouse, child 500 (Limited)8 Lifestyle:(i) Purchase of books journals, magazines, printed newspaper and other similar publications (except banned reading materials) for self, spouse or child;(ii) Purchase of a personal computer, smartphone or tablet for self, spouse or child;(iii) Purchase of sports equipment for any sports activity as defined under the Sports Development Act 1997 (excluding motorized two-wheel bicycles) and gym memberships for self, spouse or child; and(iv) Payment of monthly bill for internet subscription 2,500 (Limited)9 Purchase of breastfeeding equipment 1,000 (Limited)10 Net saving in SSPN’s scheme (total deposit in year 2017 MINUS total withdrawal in year 2017) 6,000 (Limited)11 Child care fees to a Child Care Centre or a Kindergarten 1000 (Limited)12 Husband/Wife/Alimony Payments 4,000 (Limited)13 Disable Wife/Husband 3,50014 Ordinary Child relief 2,000 15 Each unmarried child of 18 years and above who is receiving full-time education (“A-Level”, certificate, matriculation or preparatory courses). 2,000 16 Each unmarried child of 18 years and above that:(i) receiving further education in Malaysia in respect of an award of diploma or higher (excluding matriculation/preparatory courses).
(ii) receiving further education outside Malaysia in respect of an award of degree or its equivalent (including Master or Doctorate).(iii) the instruction and educational establishment shall be approved by the relevant government authority. 8,00017 Disabled child 6,000 Additional exemption of RM8,000 disable child age 18 years old and above, not married and pursuing diplomas or above qualification in Malaysia @ bachelor’s degree or above outside Malaysia in program and in Higher Education Institute that is accredited by related Government authorities 18 Life insurance and EPF INCLUDING not through salary deduction 6,000 (Limited)19 Deferred Annuity and Private Retirement Scheme (PRS) – with effect from year assessment 2012 until year assessment 2021 3,000 (Limited)20 Insurance premium for education or medical benefit INCLUDING not through salary deduction 3,000 (Limited)21 Contribution to the Social Security Organization (SOCSO) 250 (Limited) 220.127.116.11 Donations and GiftsThere is also some allowable expense for aggregate income which stated below:No Contribution 1 Gift of money to the Government, State Government or Local Authorities.2 Gift of money to Approved Institutions or Organisations.(Amount is limited to 7% of aggregate income)3 Gift of money or cost of contribution in kind for any Approved Sports Activity or Sports Body.
(Amount is limited to 7% of aggregate income)4 Gift of money or cost of contribution in kind for any Approved Project of National Interest Approved by Ministry of Finance.(Amount is limited to 7% of aggregate income)5 Gift of artefacts, manuscripts or paintings.6 Gift of money for provision of Library Facilities or to Libraries.7 Gift of money or contribution in kind for the provision of facilities in Public Places for the benefit of disabled persons. 8 Gift of money or medical equipment to any healthcare facility approved by the Ministry of Health.9 Gift of paintings to the National Art Gallery or any State Art Gallery.4.2.
4.6 Tax RatesThe tax rate for the year 2016/2017 are as follow:Chargeable Income Calculations (RM) Rate % Tax(RM)0 – 5,000 On the First 2,500 0 05,001 – 20,000 On the First 5,000 Next 15,000 1 015020,001 – 35,000 On the First 20,000Next 15,000 5 15075035,001 – 50,000 On the First 35,000 Next 15,000 10 9001,50050,001 – 70,000 On the First 50,000 Next 20,000 16 2,4003,20070,001 – 100,000 On the First 70,000 Next 30,000 21 5,6006,300100,001 – 250,000 On the First 100,000 Next 150,000 24 11,90036,000250,001 – 400,000 On the First 250,000 Next 150,000 24.5 47,90036,750400,001 – 600,000 On the First 400,000 Next 200,000 25 84,65050,000 600,001 – 1,000,000 On the First 600,000 Next 400,000 26 134,650104,00Exceeding 1,000,000 On the First 1,000,000 Next ringgit 28 238,650.
7 Tax RebatesThe resident individual with the chargeable income less than RM35,000 are eligible to claim the income tax rebates:No. Tax Rebate Year Of Assessment 2009 Onwards (RM)a Separate AssessmentWifeHusband -400400b Combined AssessmentWifeHusband -400400Total 800b Assessment Where Husband Or Wife Does Not Has Any Total IncomeWifeHusband -400400Total 800Other tax rebates as stated below:No. Tax Rebate (RM)a Zakat/Fitrah Subject to the maximum of tax chargedb Fees/Levy on Foreign Workers (deleted from yearassessment 2011) Subject to the maximum of tax charged4.3 Role of the Tax AgentsBasically, the reason of ignorance of the tax laws is because of the inability of the tax payers to understand the complex nature of tax laws. CITATION Ram03 l 2052 (Ramasamy, 2003) Hence, Inland Revenue Board of Malaysia had issues the public rulings and guidelines to assists the taxpayers in compliance and application of the tax laws. Inland Revenue Board of Malaysia had issues the Private Rulings or Advance Ruling that will apply to a specific taxpayer. Many taxpayers didn’t bother about the book keeping and tax documentation requirements.
CITATION Pop08 l 2052 (Pope, 2008) According to Pope, they had highlight a growing list of the Public Ruling which caused the increment of the sophistication of tax. Generally, there is lack of the a to assist the sole proprietor in keeping and maintain the proper accounts and records which may cause problems during submission of income tax return (Form B) by 30 June each year in respect of the income of the previous year. In addition, it is also mandatory for accounting records to be kept for seven years in case a tax audit is carried out by the authority CITATION Cho18 l 2052 (Fatt, 2018). If there is a difference between the tax estimate and income tax liability exceeds for 30% of the percent margin of error, a ten percent of the penalty will be imposed on the amount that exceed CITATION Kha14 l 2052(Khadijah MohdIsa, 2014).The predominant services that provided by the accounting firm to the business are book-keeping and taxation CITATION Han91 l 2052 (Hanefah, 1991). Hence, there is lack of proper records which caused the businesses failed to comply with the business taxation requirement.
There is a study implies that the issues relating with the book-keeping and documentation for tax purpose are still exist. It can be proved by the salary earner also facing the difficulties with the simple tax situation, and particularly self-employed business persons which is the small enterprise had to seek for the external advice. Additional record keeping requirement that introduced is also one of the problem facing by the enterprises because it has too much details in the tax law and ambiguity without the advice from the expertise. CITATION Loo18 l 2052 (Loo E. C., 2018).
Therefore, tax agents play an important role to assist the taxpayers in meeting their tax obligation and tax compliances. The tax agents play the role in educating the taxpayers on their rights and responsibilities, guiding the taxpayers when facing the problems related with tax, informing the taxpayers the relevant tax laws. According to the researchers, the taxpayers seek the assistance of the tax agents is because of they will having the tax return prepared correctly, paying the least tax required, avoiding serious penalties and reducing the chances of being audited. CITATION Hit92 l 2052 (Hite, 1992)From the researchers, the taxpayers employ the tax agents largely is because of the external factors including external opinions on tax issues are needed, availability of the updated tax information and advice for income tax planning is required rather than just because of the internal factors which included the technical knowledge is not available internally, expensive in employing the tax agents and income tax matter are too complicated and comprehensive. Tax agents is necessary to equip the taxpayers with the advanced tax knowledge especially in the income tax planning.
CITATION Kha14 l 2052 (Khadijah MohdIsa, 2014)Furthermore, businesses will face the additional costs in their tax liability which is the costs to comply with the tax requirements. There are 3 main components including monetary costs, time costs and psychological costs to the tax payables. Monetary costs are the costs that spend on the tax professionals and the expense that related with the taxation guides, books, communication and other incidental costs.
The time costs are mainly on the record keeping for the tax purposes, complete the tax return and prepare the details to the tax expertise and times spent dealing with the tax authorities. Psychological costs are the costs such as the anxiety of handling the complex tax matters. The increment of collection rate, reduction of cost in collecting taxes, increasing voluntary compliance had make the tax professional become the important role in providing the services to the taxpayers in compliance with the tax laws. Consequently, the compliance costs are expected to be paid in the high amount. However, there are factors that influence the relative level of compliance cost, particularly the complexity of the tax laws and frequency of tax changes.
(Pope, 2008)The way to minimize the problems will generally increases the tax compliance costs by outsourcing to tax professionals. However, a number of taxes imposed on the business increasing the complexity of the tax and compliance costs. It can be solved by a minimum number of broader base taxes with the minimal exemptions and reliefs. CITATION Pop08 l 2052 (Pope, 2008)5.0 Findings and DiscussionThe discussion is set to achieve the objectives of this project. The discussion will start issues faced by the business, followed by the tax planning and roles of tax agents. Through the discussion, we are able to understand the issues related with taxation, tax planning and tax agents by giving some recommendations to the owner.5.
1 Issues Faced by The Business5.1.1 Issue 1:Issue Regarding Inventory Management5.1.1.
1 Loss Incurred Due to Existence of Excess and Obsolete InventoryAccording to the interview with the owner of Naimah Collections, the issue faced by the business is the existence of excess and obsolete inventory. The business has accumulated too many excess and obsolete inventory, and it leads to incurring loss for the business. Due to the accumulated inventories holding on hand, there is no capital flow within the business as all of the capital have been used to purchase the clothing. Thus, Naimah Collections had incurred loss in the business because of this issue. Since the business is a boutique which is selling baju kurung, so it is different with other companies which are providing services, because for those who are providing services, they do not have to concern about problem regarding inventory. Besides, they also don’t have to concern about evaluating inventory for damaged or obsolete items, what method should be used for inventory valuation, counting and differentiating old inventory and new inventory, existence of excess and obsolete inventory and other inventory related matters. For business like Naimah Collections will need to purchase new clothing as their inventories. However, not all the inventories purchased by the business will all be sold out.
As the economy is getting worse nowadays, the purchasing power of most of the consumers is decreasing, especially when the Goods and Services Tax (GST) started to implement in Malaysia. Most of the people in the society use most of their monthly salaries for food consumption while the remaining is for paying utilities, insurance, children’s education fees, transportation fees, health and other expenditures which are necessary. After deducting all their expenditures, there is actually not much left for buying clothing, or even zero balance left since it is not a necessity for every month. Thus, according to the owner, the business had stored a lot of old inventories, accumulating from few years ago until now.The number of inventories left also affects how much the business should charge for their clothing, which will affect their business retail margin and profit directly as well. The business has excess inventories, thus sometimes the owner will conduct a sale or give discount to the customers to help clearing out the excess inventories stored. Lowering the price on their product for the sale reduces their retail margin and profit, but at the same time, it also helps them make money back on products that otherwise were not selling.
Even if the business breaks even on their products with a zero percent retail margin, it is still better than the products sitting in storage, costing the money and valuable inventory space. CITATION Chr1 l 1033 (Newton, n.d.) However, sometimes the owner will sell the product at a very low price, which is lower than the bought in price in order to clear the excess inventories stored in the business. Therefore, this resulted in loss in the business of Naimah Collections.
However, the owner thinks that she needs to do so in order to get some cash on hand to sustain the business. Inventory is normally valued for tax purposes at cost or the lower of cost or market value. The end-of-the-year inventory should be reviewed to detect obsolete or damaged itemsregardless of which of these inventory valuation methods is used. CITATION Yea11 l 1033 (Year End Tax Planning for Businesses, 2011) Obsolete inventory is inventory that a company still has on hand after it should have been sold.
When the inventory cannot be sold in the markets, it declines significantly in value and could be deemed useless to the company. So, in order to recognize the fall in value, obsolete inventory must be written down or written off in the financial statements in accordance with Generally Accepted Accounting Principles (GAAP). A write-down occurs if the market value of the inventory falls below the cost reported on the financial statements while a write-off involves completely taking the inventory off the books when it is identified to have no value and, thus, cannot be sold.
CITATION Obs l 1033 (Obsolete Inventory) However, Naimah Collections is selling baju kurung, so the probability to write off the inventories is low as those clothing might be obsolete but they will still have values even though the values might be a lot lower compared to the original price, and they are still able to be sold. Even though the products might be obsolete a little bit, some customers are still willing to buy if the products are selling at a very low and reasonable price. Thus, the business has incurred loss because of the obsolete inventories which are not able to sell at markup price, instead, those obsolete inventories are charged at discounted price, price at zero percent retail margin, or even price at negative retail margin. This is because the owner wants to make money back on products that otherwise were not selling in order to hold some cash on hand for other business purposes.
RECOMMENDATIONSAfter analyzing the issue, we have come out with some recommendations to the business to solve this issue. Our first recommendation is to have good inventory management. The business has to forecast or plan stock replenishment properly so that the existence of excess inventory and obsolete inventory can be avoided. The business needs to first optimize the planning, demand forecasting and replenishment processes. CITATION Dan14 l 1033 (Fritsch, 2014)Here are a few things to look at when projecting the future sales, which are trends in the market, last year’s sales during the same week, this year’s growth rate, seasonality and the overall economy, upcoming promotions and planned ad spend.
By having good inventory management not only helps the business saves their money, it also improves cash flow in other ways. We have to remember that the inventory is product that we have likely already paid for with cash, and we are going to sell it for cash, but while it’s sitting in our warehouse it is definitively not cash. Therefore, it’s important to factor inventory into our cash flow management. It affects both sales which is by dictating how much we can sell, and expenses which is by dictating what we have to buy. Both of these things factor heavily into how much cash we have on hand. Better inventory management leads to better cash flow management. CITATION Cas17 l 1033 (Campbell, 2017) Thus, loss incurring in business can be avoided.Moreover, if we identify excess stock, which is stock we have too much of on hand compared to our forecasted demand, the business is recommended to try to accelerate sales by thinking some useful marketing and selling strategies before it becomes obsolete and also to sell off the excess and obsolete stocks as many as possible without the needs of decreasing the selling price, at least do not have to sell at negative retail margin.
One of the marketing and selling strategies is to sell online. The reason why the business needs to do so is because of the location of the business. Naimah Collections is located in Changlun, which is just a small town, where demand for baju kurung is quite low compared to a big city in Malaysia like Penang, Kuala Lumpur and Johor.
The business is recommended to open an online boutique store. It is unnecessary to wait until the stocks become obsolete, then only start to think about selling them at discounted price in order to clear the stocks on hand and get back some cash. Selling the clothing can be done at once through two methods, which are selling online and selling at the shop itself. It would be more effective and efficient because through online, the clothing will be exposed to so many people out there, where the business no longer restricts to Changlun area only. Since the business is located in Changlun, the price of the clothing sold is much cheaper compared to business located in big city, so the price of clothing sold by Naimah Collections through online would be an advantage to the business.
This can help the business to stay competitive in the market and to ensure sustainable business growth. Therefore, this online strategy not only helps the business to solve the existence of excess and obsolete inventories problem, but also helps the business to increase its profit. Therefore, without the existence of excess and obsolete inventory and with the help of marketing and selling strategies to boost the business’s sales can actually avoid incurring loss in the business.
2 Difficulty of Doing Physical Counts of All The Inventories at Once at The Financial Year EndAccording to the interview with the owner of Naimah Collections, the issue faced by the business is the difficulty of doing physical counts of all the inventories at once at the financial year end as it is necessary for accounting and filing income tax purpose. Cost of goods sold is a deduction from income and the higher the value on your cost of goods sold, the lower the taxable income. Cost of goods sold is calculated as beginning inventory plus purchases then deduct ending inventory. If your ending inventory is overstated, your cost of goods sold will be understated and you will pay more in income taxes. It can be more likely that your inventory will be overstated instead of understated due to things such as damaged goods, goods discarded due to obsolescence, or goods donated. Taking a physical inventory on a regular basis is a good chance that it will work to your advantage when paying income taxes. There are a few things that can affect the business inventory to be inaccurate, which are withdrawing inventory for personal use, withdrawing inventory for donations, sending the customer the wrong quantity, discrepancies in quantity received and quantity ordered, damaged or obsolete inventory discarded, inventory issued as free samples and erroneous adjustments based on inaccurate cycle counts.
CITATION Why15 l 1033 (Why It’s Important to Perform a Year-End Physical Inventory, 2015)As a business owner, doing physical counts of inventory is probably not on the list of favourite things to do. A tedious task like taking count of store merchandise or inventory can take hours, and if worst comes to worst, for some merchants, it might be required to close the store temporarily just to do physical count of inventory. Many businesses do this at their year-end because it ties in with accounting and filing income tax including Naimah Collections as well.
Regular reconciliation is very important. However, in most cases, people will be relying on software and reports from their warehouses or storerooms to know how many products they have stock and held on hand now. But, it is important to make sure that the facts match up, which is that the number of inventories in the storeroom must be the same as what have been recorded in the book. Naimah Collections does not use any software in the business and the owner only does physical counts of all the inventories once a year at the end of the reporting period, and that is why it is hard for Naimah Collections to count the inventories held at the year end. Even if the owner of the business does find a discrepancy between the actual inventories and the recorded inventories in the book, it can be difficult to pinpoint the issue when they are looking back at an entire year. Naimah Collections does face this kind of issue every time when doing a year-end physical inventory.
RECOMMENDATIONSAfter analyzing the issue, we have come out with some recommendations to Naimah Collections to solve this issue. The first recommendation is that instead of doing a full physical inventory, the business can use cycle counting to audit their inventory. Cycle counts contrast with traditional physical inventory in that a full physical inventory may stop operation at a facility while all items are counted at one time. It’s the process of partially counting merchandise on a continuous basis so the owner can monitor stock levels without interrupting store hours. Rather than a full count at year-end, cycle counting spreads reconciliation throughout the year. Each day, each week, or each month, a different product is checked on a rotating schedule. There are different methods of determining which items to count when, but, generally speaking, items of higher value will be counted more frequently.
CITATION Cas17 l 1033 (Campbell, 2017)Moreover, Naimah Collections is recommended to label and arrange the inventories according to their respective categories or characteristics, depending on the business itself. It is easier for the owner of the business to track and find the inventories, especially when doing physical counts of all the inventories at the end of the reporting period. When the inventories are all tidied up, it will definitely ease the after process. The business is also recommended to label the boxes and shelves. We do not want the business to go into the task of counting inventories blind.
If we are doing a physical count of our inventories, we have to be sure to mark the boxes or shelves in our stockroom if the products in them are not visible. When the time comes to count inventory, it is necessary to have everything in a marked location. Those loose boxes and stray pallets without a home are often the problems that come back to haunt us while we are trying to reconcile. Even if we must make new, temporary locations for the duration of the count, it is also necessary to put everything in a well-marked and defined place and leave it there. While we are at the storeroom or warehouse, we will need to make sure everything is located at where it should be. When we walk around the store or stockroom, we need to keep an eye out for inventories that are not in their original proper place.
Besides, we also need to be alert that whether someone mislabel a box of merchandise. Lastly, before we begin counting the inventories, we need to be sure to correct all these issues so that the counting process can be done smoothly and efficiently. CITATION Fra17 l 1033 (Nicasio, 2017) This is because the inventories counted will affect the cost of goods sold and the it will directly affect the taxable income as well.
Furthermore, the third recommendation is to use inventory scanners or other types of stock counting technologies such as inventory management software and scanner app. Traditionally, physical inventory counts are done with a pen and paper. The owner of the business would use a physical inventory count sheet to tally up the products or inventories and reconcile the data in the recorded book.
Even if this method can get the job done, but it is highly inefficient as it requires double entry. Not to mention, since physically counting inventory is already a manual task as it is, the last thing we need to do is manually tally and record data. For inventory management software, there is one useful software named Vend.
Vend’s Inventory Counts enables the business to take count of the stock as painlessly as possible. There are some features like simultaneous stocktakes which allow the use of multiple devices to count stock faster, and Vend’s quick scan mode function enables the business to count inventory by using the barcode scanner or by looking up stock keeping unit. For scanner app, it can digitize the counting process with Scanner, which is a free mobile app that makes counting inventory a breeze. Scanner lets us do full and partial inventory counts by using our iPhone, iPad, or iPod Touch. We can just scan our product barcodes using our device’s camera, and the app will automatically save and record all the necessary product information.
CITATION Fra17 l 1033 (Nicasio, 2017) So, by having all these assistances, we believe that Naimah Collections can improve on this issue as it is important to count the inventories accurately.5.1.2 Issue 2:The Business Owner Has Inadequate Tax KnowledgeAccording to the interview with the owner of Naimah Collections, the second issue that we have found is that the business owner has inadequate tax knowledge.
The owner is not that kind of person who does not know anything about taxation at all. She does know the basic tax knowledge, but it is still insufficient. Although a general knowledge of the taxation system was displayed by most of the taxpayers including the owner of Naimah Collections, specific tax knowledge was still limited.
Tax knowledge is an essential element in a voluntary compliance tax system, particularly in determining an accurate tax liability. The absence of tax knowledge may lead to noncompliance behaviour among tax payers, either intentionally or unintentionally. CITATION Eli l 1033 (Cher, n.d.
) Besides, if she wants to know whether the tax agent that she has hired is doing tax planning work well or not, she must have solid and deep knowledge in taxation, such as what expenses are tax allowable or allowable for double tax deduction and the types of tax reliefs can help her to reduce her chargeable income, and thus her taxes. The challenge for small businesses like Naimah Collections in complying with tax laws is their inability to differentiate deductible and non-deductible expenses. Without adequate tax knowledge, the owner cannot have a well tax planning in order to save a significant amount of taxes and she also cannot know whether the tax agent has helped her to claim everything that can be claimed in order to reduce the income tax that she is going to pay.Moreover, from the interview, we can know that the owner of Naimah Collections does not equip with adequate taxation knowledge because when we ask her whether she knows about capital allowance and balancing charge, she has no idea on these and how they will affect the chargeable income and taxes. Apart from that, we also asked about how many percentage does her business pay for income tax, and she answered that she does not know that. Although she knows that she can claim for child relief, medical expenses, purchase of a personal computer, purchase of books, journals, magazines and publications and so on, but specific tax knowledge is still limited.
The taxation knowledge equipped by the owner of Naimah Collections is never enough. It is very important to have taxation knowledge whether as an individual or a business entity. The taxation knowledge includes tax laws which functions as a guide mainly to minimize the chargeable income. It is actually an obligatory thing to update owner itself as an individual taxpayer or as a business entity with the latest tax laws. By having sufficient taxation knowledge, the business owner can know the items that can be claimed for tax reliefs and exemptions given by the government and can compute the tax rates accurately based on the tax rate schedule. Due to inadequate taxation knowledge, the owner has to employ tax professionals to represent her business for several of reasons. The reasons include a desire to lodge accurate returns mainly due to their lack of tax knowledge based on the complexity of the current tax law, a desire to minimize the tax they are required to pay, their fear of making a mistake and being penalized, or just having a lack of time to complete their own return.
CITATION Eli l 1033 (Cher, n.d.) The reasons above are the reason why Naimah Collections wants to employ a tax agent. Hence, it is appropriate for a business to employ a tax agent to handle everything related to taxation. However, as a smart consumer, it is better for the business owner to equip with adequate taxation knowledge because the owner can know whether the tax agent has done a professional job by helping the business to claim whatever that can be claimed or not in order to reduce the business tax payment. Therefore, the business is suggested not to rely too much on tax agent.RECOMMENDATIONAfter analyzing the issue, we recommended the owner of Naimah Collections to equip with adequate and sufficient taxation knowledge instead of relying everything on tax agent.
It is important and necessary for every individual and business entity to equip with taxation knowledge because it might have big impact when paying for income tax. Self-employed individuals like the owner of Naimah Collections should try as much as possible to acquire reasonable level of tax knowledge as it applies to their businesses. Acquiring tax knowledge has many advantages and it only has advantages but no disadvantages. It would save Naimah Collections from hiring consultants or tax agent to compute taxes for the business and thereby saving huge tax consultancy cost. Therefore, the owner of Naimah Collections should always seek to advance her taxation knowledge as when owning a business, it is important to know all about taxes. It is imperative to learn about taxes as tax laws are constantly changing, so it is important to stay in the most recent knowledge of the taxes to avoid being affected in a negative way by them.5.
1.3 Issue 3:Tax Complexity Faced by The Business5.1.3 Issue 3: Tax Complexity Faced by The BusinessAccording to the interview with the owner of Naimah Collections, the third issue faced by the business is regarding the complexity of taxation. Due to the increased sophistication in the tax laws arise the complexity of tax to the owner. Tax complexity can take many forms such as computational complexity, forms complexity, compliance complexity, rule complexity, procedural complexity and the low level of readability (Saad, 2014). Three dimensions of tax complexity encountered by taxpayers were tax computations, record keeping and tax ambiguity.
The first two complexity dimensions were faced largely by smaller companies as well as Naimah Collections. First, the owner of Naimah Collections had experience difficulty in preparing tax computations. In many instances, taxpayers are capable of preparing their financial reports based on the accounting standard, but not able to prepare tax computations based on the tax laws. A likely reason for non-compliance is that taxpayers finding tax computation difficult to prepare as it requires considerable understanding of the tax rules and exceptions to the rules. The difficulty in understanding tax rules may also discourage the owner from acquiring the relevant tax knowledge and result in a continuous non-compliance reporting cycle.
Second, the owner also has difficulty in maintaining records and documents. Although supporting documents are not required when submitting income tax return forms, taxpayers are required to keep in safe custody sufficient records and documentation for seven years. However, many taxpayers are not able to produce supporting documents during an audit for several reasons such as business practice and missing documents CITATION Kha15 l 17417 (Isa, 2014).Since 2001, self-assessment system (SAS) has been gradually implemented by the Inland Revenue Board of Malaysia (IRB) and full implemented in 2005 on the individual taxpayers CITATION Cho11 l 17417 (Khin, 2011). Under the SAS, individual who has income accruing in or derived from Malaysia are required to disclose taxable income honestly, compute tax payable correctly, file tax return form and pay tax on a timely manner. Due to the limit of tax knowledge by the owner of Naimah Collections, this particular implementation has become a tax complexity into her business.The self-assessment system (SAS) has been widely practiced around the globe.
Under this system, one issue that has been highlighted is the non-compliance behaviour. This unresolved issue could be probably due to the feature of SAS itself; that is the shift of responsibilities to compute tax payable from the tax authorities to taxpayers CITATION Placeholder1 l 17417 (Saad, 2014). In order to discharge these responsibilities, the owner is expected to be well-versed with the existing tax laws and provisions. Therefore, the form of complexity that faced by Naimah Collections is mainly the compliance complexity. It arises from the tax computation and tax planning behaviour of business and individual taxpayers. Complexity of the nation’s income tax system also significantly influences taxpayers’ perceptions of tax compliance in the business.To fulfil the compliance obligations and complying the tax regulations, the owner has used the professional advisers to undertake some tasks. In this matter, the tax compliance costs will be incurred by the business.
Tax compliance costs are those costs which incurred by taxpayers, or third parties such as businesses, in meeting the requirements laid upon them in complying with a given structure and level of tax CITATION Chr08 l 17417 (Evans, 2008). Complexing tax rules imply the necessity of interpretations and the possibility of making mistakes, which may either result in too high or too low tax payments when compared to those enhancing the ‘equal’ distribution. Hence, complex rules might provide tax planning opportunities for certain well-informed taxpayers CITATION Seb14 l 17417 (Vaillancourt, 2014). Tax compliance costs result from different activities like the collection of receipts, tax accounting, the preparation of tax return, and tax planning. Therefore, the owner of Naimah Collections has paid for a high compliance costs in using the tax agents to help her in this complexity of taxation matters. This is because the owner appeared to have inadequate knowledge in the SAS system, tax regulations, tax laws and other matter related to tax. Taxpayer also has lack of knowledge on the technical aspects of the income tax system. This issue was even critical among the self-employed participants who are expected to deal with onerous tax matters, such as PAYE, GST, Kiwis aver etc. In dealing with these tax affairs, they may have to incur more compliance costs. The income tax system was also perceived as inherently complex. The huge amount of paperwork to be completed in complying with their tax obligations further escalated the problem CITATION Placeholder1 l 17417 (Saad, 2014).RECOMMENDATIONSAfter analyzing the issue which is the complex of tax to the business, we have come out with some recommendations to Naimah Collections to solve this issue. The owner should improve her knowledge in the SAS system. The owner could attend a short course regarding this knowledge meanwhile not affect the operation of the business. In the era of SAS, it is imperative for all individuals (taxpayers and future taxpayers) to be formally exposed to tax education, so as to enable them to understand the mechanism of SAS and to equip them with some basic tax knowledge CITATION Cho11 l 17417 (Khin, 2011). The SAS places a heavy responsibly on the business to comprehend the new system and to comply with the tax administration aspects as to the computations, payment of taxes, and record keepings. It is suggested that the IRBM to impose penalty discretionary, to take into account of the educational background, financial position, the amount of tax understated, the frequency of tax defaults of the petty traders (Khin, 2011). Tax compliance could be utilised by tax authorities to develop appropriate strategies to improve compliance. Since changing attitude requires time and persistence, tax authorities may need to emphasize long term and continuous strategies, such as incorporating tax education in the country’s high school curriculum; and conducting continuous public campaigns and seminars for their taxpayers to improve their compliance behaviour (Saad, 2012).To reduce the compliance costs paid by the business, taxpayers must have sufficient tax knowledge in order to assess their tax liability correctly and to file tax return forms on time. To be tax compliant, taxpayers need to be capable with knowledge of tax. At minimum, individual taxpayers need to possess some basic knowledge of personal taxation, with respect to the taxability of income, deductibility of expenses, entitlements, reliefs, rebates and exemptions. For those who operate a business, they must have some basic understanding of taxability of income from business and non-business source and the deductibility of expenditure. (Khin, 2011) It is important to get a sense of which taxpayers are affected by which degrees of complexity. The Pay As You Earn (PAYE) system is very complex because it has to cope with the full complexity of the vast range of individual circumstances that can conceivably arise. Yet the vast majority of PAYE taxpayers have very simple affairs and, if it is easy to identify which parts of the system apply to them, may be largely unaffected by this complexity. CITATION Dav14 l 17417 (Ulph, 2014)In short, the owner should adapt herself as well as the business to the steps and the updates on the tax systems, tax regulations and tax laws in Malaysia. As a taxpayer, the owner should have the acceptance to the new changes and standby to the various possible shortcoming to the matters related to tax in order to sustain her business in this fast changing economic.5.2 Tax PlanningThe issue faced by the business that related to our second objective is high tax liability to be paid. According to the interview with the owner of Naimah Collections, currently the business is facing loss. Since Naimah Collections is a sole proprietor, so the business loss is added to other deductions and deducted from all the income of the owner for the year. The total income of the owner is able to cover all the business loss, so the owner of Naimah Collections still need to pay tax. However, before the business is facing loss, Naimah Collections also have gain revenue into her business. At that time, the tax liability that paid by the owner is high. So, in order not to face government penalties, Naimah Collections should pay a full and relatively high amount of taxes owed to IRB.Tax liability is the amount of taxation that a business or an individual incurs based on current tax laws CITATION Placeholder3 l 17417 (Tax Liability, n.d.). The main taxable event that Naimah Collections is involving is the earning income. Naimah Collections is register as an enterprise under Companies Commission of Malaysia (CCM) and the income is only taxed once because the owner and business are considered the same tax entity. The main reason that Naimah Collections pay a high tax liability is the business does not take full advantage of tax exemption and deduction available under the law. Tax exempt refers to income earnings or transactions that are free and either reduce or entirely eliminate our obligation to pay tax. Taxpayers in Malaysia are not taxed on our total income, as certain portions of our income are tax exempted. Based on the income tax filed in Malaysia, taxpayers are entitled for certain tax exemptions that can reduce our overall chargeable income. When a taxpayer earns wages or sells an asset for a gain, that individual is creating a tax liability. While a tax deduction is a reduction in tax obligation from a taxpayer’s gross income, a tax-exempt item is excluded from any tax calculations. CITATION Tax2 l 17417 (Tax Exempt, n.d.)Tax deductions can be the result of a variety of events that the taxpayer experiences over the course of the year. Tax deductions are removed under the taxable income, also known as the adjusted gross income, therefore lowers the taxpayer’s overall tax liability. Different regions have different tax codes that allow taxpayers to deduct a variety of expenses from taxable income. Tax codes vary at the federal and state level. Tax code standards are set annually by the taxation authorities in both the federal and state governments. Tax deductions set by government authorities are often used to entice taxpayers to participate in community service programs for the betterment of society CITATION Placeholder4 l 17417 (Tax Deduction, n.d.). Since the owner have not aware of eligible federal and state tax deductions, so the owner has miss out a lot of benefit through both tax deduction and service-oriented activities annually.There are some examples of tax deduction in Malaysia which are cut-off income, dependents, spousal support, donations and gifts, education, purchase of various print material, and lifestyle tax relief. One of the most popular forms of tax relief among the examples are comes for those with a dependent or someone who relies solely on the taxpayer for basic monetary needs. The most common examples of this are parents raising small children or minors, provided they are the taxpayer’s biological or legally adopted children, or taxpayers who are supporting elderly parents. The owner of Naimah Collections is already not eligible for this exemption. This is because her only son has been married and her parents have been passed away. Therefore, the main tax relief that claim by the owner is the individual relief but then it is still have a lot of other relief eligible to her.Zakat is a compulsory payment for all Muslim around the world, hence, the zakat is applicable only to Muslim taxpayers. It is a compulsory payment for charity and can be calculated via the Muslim taxpayer’s acquired wealth or income. The zakat tax rebate allows Muslims does not be required to pay two overlapping compulsory payments each year. CITATION iMo171 l 17417 (iMoney, 2017) However, based on the conversation with the owner during the interview, we have found that does not claim the zakat rebate in every year of assessment although the owner has make the zakat payments to zakat institutions.RECOMMENDATIONSAfter analyzing the issue which is high tax liability to be paid, we have come out recommendation to Naimah Collections to solve this issue. First, Naimah Collections is encouraged to merge her business with the making profit company in order to utilize her business loss. A tax loss carry-forward can be benefit to Naimah Collections when merging, the business losses can be offset against the profits of the firm it has merged with.Besides, the business should aware of the eligible tax exemptions and tax deductions and claim all of them which are permissible under the Income Tax Law. Section 10 of the Income Tax Act contain a list of most such exemptions and deductions. This list has to be optimized depending on the business facts and circumstances. Naimah Collection can practice the legal tax exemption method in Malaysia, for example, cut-off Income. The owner should maintain her own salary within the government’s mandated minimum, chances are that she may only need to pay the bare minimum in income taxes. Starting in 2013, the Malaysian government determined that any annual income falling below the cut-off of RM 34,000 after EPF deductions (about RM2,800 per month or less) shall not be taxable. However, this figure may change over time.CITATION Com17 l 17417 (CompareHero.My, 2017)Other tax exemptions are eligible to the owner are leave passage, travelling allowances, medical and dental benefit. Leave passage can be divided into two categories which are local and overseas, it refers to vacation time paid for by the employer. Taxpayer are entitled for tax exemption not exceeding three times in a year for leave passage within Malaysia, and one leave passage outside Malaysia not exceeding RM3,000. If the vehicle used is not under ownership of the company, travelling allowances of up to RM6,000 for petrol and tolls are granted a tax exemption. This refers to the claims made by employees who are using their personal vehicle for official duties. Starting from Year of Assessment 2008 (tax filed in 2009), medical benefits provided by the employer that is exempted from tax and has been expanded to include maternity expenses and traditional medicine like ayurvedic and acupuncture without limit. CITATION iMo17 l 17417 (iMoney.my, 2017)Naimah Collections is not really aware of the updated information regarding tax. All the matters regarding tax issues will settle by the tax agent. It has caused the tax liability paid by the business is high. For example, the new announcement in the 2017 budget, government has added a lifestyle tax relief to the list, which now includes smartphones, tablets and monthly internet subscription bills. Lifestyle tax now are also including the previous laptop, books, stationary and sports equipment tax relief. For income tax Malaysia, tax reliefs can help reduce your chargeable income, and thus your taxes. CITATION iMo17 l 17417 (iMoney.my, 2017) Besides, as a Muslim, the owner has to make two compulsory payments levied on the same source of income every year, namely income tax and zakat. Therefore, the zakat rebate is given to relieve a Muslim from the burden of “double taxation” on the same income. CITATION The12 l 17417 (The Star Online, 2012) Yet, the rebate does not claim by the business cause the tax liability of the business is relatively high. If planned properly, the owner can save a significant amount of taxes.The owner does not have the knowledge of tax return. Tax return is the amount you have overpaid your taxes on and this commonly occurs when the taxpayer is subjected to Monthly Tax Deduction (MTD). The monthly deduction does exclude the additional tax reliefs, such as purchase of approved items like books or personal computer, or unplanned expenses like medical expenses for serious illness. The owner actually can claim back the additional taxes that have overpaid in the form of tax return and tax refund. CITATION iMo17 l 17417 (iMoney.my, 2017) The owner can use the income tax e-Filling to file her tax and provide the bank account details correctly in order to get the refund credited directly into bank accounts of the owner within 30 days after the declaration is made. Any taxpayers who do not receive their refund from LHDN within the 30 days will be compensated starting from Year of Assessment 2013. If the terms and conditions are met for the late refund, the taxpayers will be given 2% compensation. The payment method will be replaced with a new voucher system, known as tax refund voucher system (BBBC) for those who do not provide bank account details to LHDN and was receiving tax refund in the form of cheques. Only CIMB and CIMB Islamic branches in the country received the voucher for tax refund. CITATION iMo17 l 17417 (iMoney.my, 2017)The business requires the permissive tax planning in order to make plans which are permissible under different provisions of the law, such as planning of earning income covered by Sec.10, especially by Sec.10(1), planning of taking advantage of different incentives and deductions, planning for availing different tax concessions etc. Tax Planning involves planning in order to advantage the taxpayers with all the exemptions, deductions and rebates provided in the Act.5.3 Roles of Tax AgentsThe issue faced by the business that related to our third objective is that the tax agent did not give comprehensive tax planning to Naimah Collections. The reason why all the businesses need to hire a tax agent for tax planning is because they need assistance and professional advice from tax agent. It is the responsibility of the taxpayers to compute their tax liability. In order to compute the amount of tax liability of the business, it is necessary for taxpayers to understand and interpret the laws that are applicable to their own situation. Moreover, taxpayers are required to observe further tax requirements such as estimating income tax payable and paying monthly instalments, keeping sufficient records and documents, implementing the Monthly Tax Deduction (MTD) Scheme, and furnishing certain returns on behalf of their employees. Finally, taxpayers are required to provide reasonable assistance and facilities to the Inland Revenue Board (IRB) officers during a tax audit. Hence, in complying with the above tax obligations, many taxpayers have to rely on tax agents CITATION Kha14 l 2052 (Khadijah MohdIsa, 2014). The owner of Naimah Collections did hire a tax agent to help the business to handle the tax compliance activities, but the tax agent failed to carry out his responsibility as a professional one. The tax agent did not give a comprehensive tax planning to the owner of the business. The tax agent did not really look into the owner and the business itself regarding tax deduction, double tax deduction, tax relief and so on. For instance, there is actually still a lot of legal expenses which can be deducted from the income of the business, but the tax agent did not tell the owner. The tax planning given by the tax agent is not comprehensive enough and it is lack of a lot of important details about some other qualified deductible expenses which the tax agent should have included them in the tax planning, items under double tax deduction and tax relief. Tax planning is the process of forecasting one’s tax liability and formulating ways to reduce it, however, the tax agent employed by Naimah Collections only achieved forecasting its tax liability but did not achieve formulating ways to reduce the payment of income tax. Apart from that, too many people simply assume that they don’t qualify for tax credits or don’t have enough deductions to itemize. They may be passing up significant savings especially with tax credits that subtract directly from their tax bill. It is important to remember that some deductions are “above-the-line,” meaning that we can take them whether or not we itemize other deductions CITATION Pla18 l 1033 (Planning, Top 12 Mistakes to Avoid In Tax, 2018).The roles of tax agents in tax compliance activities can be categorized into internal factors and external factors. Internal factors suggest the reasons taxpayers employ tax agents are because technical knowledge is not available internally, income tax matters are too complicated, and it is more cost effective for taxpayers to employ tax agents than to manage the tax matters themselves. The owner of Naimah Collections hires tax agent because she herself is lack of those tax compliance, technical knowledge and other tax matters as well. Whereas, external factors suggest the reasons taxpayers employ tax agents are because external opinions on tax issues are needed, updates on tax information are easily available, and advice for income tax planning is required CITATION Kha14 l 2052 (Khadijah MohdIsa, 2014). At the same time, the owner of Naimah Collections hires tax agent due to updates on tax information is easily available and the business requires advice for income tax planning from the professional. The roles of tax agents are so important to the extent where it will give big impact to the business regarding income tax payment. The tax agents play an important role in tax compliance as tax agents are expected to assist taxpayers meeting their tax obligations, and make sure the tax agents help those taxpayers to pay for the least income tax. As there are always new laws and changing allowances regarding taxation, so regular reviews are important. That’s why the businesses need tax agents. The tax agents are expected to equip with latest changes and knowledge regarding taxation, and that is why all the businesses employ tax agents. But, there is different story about the tax agent in Naimah Collections. The tax agent hired by Naimah Collections is either lack of those tax knowledge or he is lazy. The tax agent did not carry out his responsibility well by not giving a comprehensive tax planning to Naimah Collections. Initially Naimah Collections can pay lesser income tax but because of the tax agent, Naimah Collections is required to pay more income tax for the past few years.RECOMMENDATIONSAfter analyzing the issue which is tax agent did not give comprehensive tax planning, we have come out with some recommendations to Naimah Collections to solve this issue. The first recommendation is that the owner is imperative to aware of the tax rules applicable to her business so that these can be factored into her business plans CITATION The10 l 17417 (Cheng, 2010). A lot of businesses are carried out by partnerships or sole traders, and these are the ones that need tax advisors and tax knowledge. Naimah Collections should structure her business transactions in such a way that the incidences of taxes are mitigated in a lawful way. Tax planning of the business is largely overlooked and left to tax agent. The owner of Naimah Collections need to have the knowledges regarding tax planning so that she able to detect the errors and mistakes made by tax agents when doing tax planning into her business. Apart from this, the owner may make the decision regarding tax planning on her own interests and opinions so that will not only follow the direction of the tax agent. Nowadays, many SMEs in Malaysia do not have, or cannot afford, regular access to tax experts and may only have contact with a tax agent around the time of submission of the annual tax return. To be effective, tax planning needs to be done in advance. If the owner has a good knowledge of the tax system, she can save a lot of money in the business CITATION The10 l 17417 (Cheng, 2010).The second recommendation is Naimah Collections is encouraged to hire a competence and professional tax agent. Tax agent as defined in Section 153 of ITA 1967, that is a professional accountant authorized by or under any written law to be an auditor of companies, any other professional accountant approved by the Minister of Finance, or any other person approved by the Minister on the recommendation of the Director General of Inland Revenue. Anyone who charges a fee to prepare income tax returns has to be a registered tax agent no matter the person has accounting qualification can override this requirement. The owner should hire a tax agent that are someone with good character, keep up to date, and have professional indemnity insurance registered by the government. The hired tax agent also has to have completed relevant courses in tax law, have at least 12 months’ supervised experience preparing income tax returns, and lodge a variety of tax returns each year. The key is to find a good one CITATION Noe17 l 17417 (Whittaker, 2017). In the case of Naimah Collections, the tax agent for the business do not ask a lot of questions or encourage the owner to ask questions. This may be a sign that the particular tax agent does not have enough confidence in their knowledge or ability to answer what comes out of a discussion. Besides, Naimah Collections should do the survey and hire a licensed tax agent that doing all their responsibilities and comply with the code of ethics for tax agents. In discharging his duties, a tax agent shall always adhere to integrity, competency and professional advice. In term of integrity, an agent shall be well-mannered, honest, sincere and truthful in his work and always give full co-operation when dealing with the IRB. In handling the case of his client, he shall furnish only information which, to the best of his knowledge and belief, is correct. The owner shall make sure the tax agent that hire refrain from using information acquired in the course of his work for his own advantage or that of his family. Such information is classified material and shall not be disclosed to any other party without specific authority CITATION COD l 17417 (CODE OF ETHICS FOR TAX AGENTS).He shall always strive for professional competency and exhibit a high degree of skill in discharging his duties. The hired tax agent must know thoroughly with the tax laws/practices and constantly ensure that his technical knowledge is up-to-date. In addition, he is also expected to keep abreast with the requirements of the IRB, which may be announced from time to time. The tax agent shall always have regard to the prevailing tax laws in giving professional advice to his clients. He shall impress upon his clients the various obligations and duties as taxpayers under the tax laws and educate the clients on the importance of maintaining proper records of all transactions especially in business cases. He shall also advise his clients of the importance of keeping to the instalment plans for payment of tax as well as the necessity to make sufficient provisions for payment of to avoid late payment penalties CITATION COD l 17417 (CODE OF ETHICS FOR TAX AGENTS).Based on the IRB Tax Audit Framework, the tax agent is prohibited from giving wrong advice to taxpayers and collaborating with taxpayers to avoid paying the correct amount of taxes, delay the work of a tax audit or acting irresponsibly towards his entrusted duties, and offering any form of gifts to the audit officers. A proper tax planning should be given by the tax agent to the business in order to minimize tax liabilities to ensure all available allowances, deductions, exclusions and exemptions are working together in the most tax-efficient manner to reduce the total tax bill as well as to make sure the filing goes smoothly. Naimah Collections is encouraged to seek the expert advice as a wise investment in minimizing tax ; protecting her wealth.6.0 ConclusionAs a conclusion, our project faced some issued based on Naimah Collections. First, issues faced by the business regarding inventory management where they got loss cause the business has accumulated too many excess and obsolete inventory, and it leads to incurring loss for the business. Due to the accumulated inventories holding on hand, there is no capital flow within the business as all of the capital have been used to purchase the clothing. Come out with recommendation if we identify excess stock, which is stock we have too much of on hand compared to our forecasted demand, the business is recommended to try to accelerate sales by thinking some useful marketing and selling strategies before it becomes obsolete and also to sell off the excess and obsolete stocks as many as possible without the needs of decreasing the selling price, at least do not have to sell at negative retail margin. Other than that, Naimah Collections does not use any software in the business and the owner only does physical counts of all the inventories once a year at the end of the reporting period, and that is why it is hard for Naimah Collections to count the inventories held at the year end. Recommendation the business can use cycle counting to audit their inventory. Under issues faced by the business, the owner has inadequate tax knowledge, example she has no idea about chargeable income, balancing charge, and capital allowance. So, we have recommend to her should try as much as possible to acquire reasonable level of tax knowledge as it applies to their business. Third issue still under faced by business is tax complexity. Why? To a tax accountant, tax complexity refers to the time he/she needs to expend in order to prepare an income tax return or to provide tax advice which may include tax planning or assistance with tax objections or appeals. The solution Naimah Collections should improve her knowledge in the SAS system by attend short course which not affect the operation. Second big issue is tax planning. Since Naimah Collections is an enterprise, so the income is only taxed once because the owner and business are considered the same tax entity. She pay a high tax liability is the business does not take full advantage of tax exemption and deduction available under the law. Tax deductions are removed under the taxable income, also known as the adjusted gross income, therefore lowers the taxpayer’s overall tax liability. Example zakat is a compulsory payment for all Muslim and applicable only to Muslim taxpayers. We have think recommendation may probably match with this issue where the business should aware of the eligible tax exemptions and tax deductions and claim all of them which are permissible under the Income Tax Law under Section 10 of ITA. The last main issue regarding roles of tax agents which the tax agent did not give comprehensive tax planning to Naimah Collections. The reason why this business hire tax agents to make sure the owner known to compute tax liability. But, the tax agent failed to carry out his responsibility to help understand and interpret some tax requirements. Some solutions were come out. First, imperative to aware of the tax rules applicable to her business so that these can be factored into her business plans. Second with encouraged to hire a competence and professional tax agent. Third, Naimah Collections should do the survey and hire a licensed tax agent that doing all their responsibilities and comply with the code of ethics for tax agents. Fourth, constantly ensure that his technical knowledge is up-to-date expected to keep abreast with the requirements of the IRB. For overall we can conclude that Naimah Collection Boutique did not have good skills, proper knowledge, and involving self in a maximum way to discover the tax planning.7.0 References BIBLIOGRAPHY Alm, J. (1991). A perspective on the Experimental Analysis of Taxpayer Reporting. The Accounting Review 66 (3, 577 – 593.Alm, J. B. (1990). Tax structure and tax compliance. The Review of Economics and Statistics, 72(4), 603-613.Bossart, M. (2016, July 28). What is Tax Liability? Retrieved from Patriot Software: https://www.patriotsoftware.com/accounting/training/blog/tax-liability/Brown, R. a. (2003). 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EnterpriseDo you have any other business/branch other than this?No.When is the date of commencement of your business?July 2005What is your business address?No. 73, Pekan Changlun 2, 06010 Changlun, Kedah.How many staffs do you have in your business?Currently my business does not have any staff expect myself only.Do you have any family members work in your company?No.Is there any withdrawal of money for personal use?No.Is your annual sales/turnover more than RM500,000?No.Are your estimated annual expenses less than RM500,000?Yes. The expenses are more than the sales.KNOWLEDGE Do you know who is responsible for collecting income tax and GST?Lembaga Hasil Dalam Negeri.Do you know about capital allowance, balancing allowance and balancing charge?No.Do you know what tax agent does?Yes. (But the owner does not know specifically.)INCOME TAXDo you hire tax agent for your company’s tax planning & tax filing? Yes.Do you pay for tax planning?Yes.Do you hire any disabled employee?No.How many percentage of income tax do you pay for your business?Don’t know.Does your business have any renovation, repair and maintenance fees?No.Does your business make donation to any approved institution?Only donate small amount to Sekolah Agama.How much is the percentage of EPF contribution of yourself and your employees?11%How many childrens do you have? 1 child. Do you claim for child relief?No. Already married.Does your company organize annual dinner for employees, suppliers or any other person related with your business?No.Is there any prizes or gifts given to employees and customers?No.Does your business give discount to the customers?Yes.Is zakat more than tax liability?No. (The owner mentioned zakat cannot be claimed.)Do your company buy any insurance? If yes, what kind of insurance?No.How do you pay tax? (Pay through internet or counter at the bank?)Pay at the counter in Public Bank.Do you have any problem or issue in doing tax/tax planning?Tax agent does everything for me.Do you have any problem in submitting any document for income tax purpose to your tax agent?There are many old stocks and new stocks in my shop. It’s hard for me to count my stocks at the year end.Which area do the tax agent focus the most when doing tax planning?Sales and expenses.Do you get any suggestion on tax planning from your tax agent?I only submit any documents needed as requested by tax agent.Do you have any suggestion to solve the problem?No.LETTER OF CONSENTSPECIALISED TAXATION PROJECT SEMESTER A172I have read the information regarding this research project and agree to participate in this study. NAIMAH COLLECTIONS (Printed Name)012-4029356(Phone Number)(Signature)31 MARCH 2018(Date)I also agree for the interview to be recorded for academic purposes only.NAIMAH COLLECTIONS(Printed Name)012-4029356(Phone Number) _________________________(Signature)31 MARCH 2018(Date) II. PICTURES