Inland Revenue Board of Malaysia

ANNUAL REPORT 2000

INLAND REVENUE BOARD OF MALAYSIA

57 PLEDGE

We, the officers of the Inland Revenue Board, pledge that we will,

• focus our energy and efforts to achieve the objectives of our organization; • collect taxes according to the laws of the country; • instill public trust in the fairness and excellence of our tax administration; • encourage the public to pay the correct amount of taxes voluntarily.

And are determined to

• carry out our duties with efficiency, quality and effectiveness; • provide fast and friendly service; • uphold the values of trustworthiness, honesty, full responsibility and a positive outlook; • forever strive to improve the image of the Inland Revenue Board.

58 ANNUAL REPORT 2000 ANNUAL REPORT 2000

59 CORPORATE CULTURE

VISION

• IRB is recognized as the foremost tax administration in the region and the best government agency in the country; • Creation of a just, transparent and respectable tax management system; • IRB management is always sensitive to the welfare of its employees, provides career advancement opportunities for each employee and recognizes individual excellence; • Officers and staff members of IRB are committed towards achieving excellence in work and efficiency in service to clients; • The public has a high degree of confidence in the fairness of the country’s tax system.

MISSION

The IRB is committed towards collecting taxes with fairness, efficiency and integrity, at a justifiable cost while providing excellent service to its clients.

This mission will be achieved by:-

• Developing a skilled, efficient workforce and striving constantly to enhance the level of professionalism to face challenges in an ever-changing environment; • Upgrading tax administration while simplifying tax laws; • Offering friendly, fair and consistent service all the time; • Nurturing public consciousness towards producing responsible taxpayers; • Encourage voluntary tax compliance.

OPERATIONAL OBJECTIVES

• To collect taxes without imposing excessive burden on the public while incurring minimal cost to the government; • To instill public trust in the fairness and excellence of the present tax system; • To encourage the public to voluntarily pay their taxes.

QUALITY POLICY

We are committed to providing service of quality professionally to our clients. We shall ensure that our officers and staff work towards excellence. Based on these principles and guided by the Pledge of the Inland Revenue Board, we shall make quality service our way of life.

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61 62 ANNUAL REPORT 2000 ANNUAL REPORT 2000

CORPORATE INFORMATION

ESTABLISHMENT & FUNCTIONS

ESTABLISHMENT March 1, 1996

Inland Revenue Board Malaysia was formed under the Inland Revenue Board of Malaysia Act 1995 (ACT 533).

FUNCTIONS SECTION 10 “…to act as agent of the Government and to provide services in ACT 533 administering, assessing, collecting and enforcing payment of income tax, real property gains tax, estate duty, stamp duties and such other taxes as may be agreed between the Government and the Board;

to advise the Government on matters relating to taxation and to liaise with the appropriate ministries and statutory bodies on such matters;

to participate in or outside Malaysia in respect of matters relating to taxation; and

to perform such other functions as are conferred on the Board by any other written law.”

SECTION 10A “Notwithstanding section 10, the Board may act as a collection agent ACT 533 for and on behalf of any body for the recovery of loans due for repayment to that body under any written law.”

BOARD Aishah binti Abdul Manaf Administrative Director SECRETARIAT Marina binti Abd Aziz Special Officer to the 2000 Chief Executive

OFFICIAL 16th. Floor, Block 11, Government Office Complex, Jalan Duta, ADDRESS 50600 Kuala Lumpur.

BOARD MEMBERS’ The Inland Revenue Board has held 7 meetings during 2000. MEETINGS

AGENCY The Government of Malaysia officially signed an Agency Agreement AGREEMENT with the Inland Revenue on December 31, 1998.

63 MEMBERS OF THE BOARD

TAN SRI DR. SAMSUDIN BIN HITAM P.S.M., D.P.M.T., D.P.M.P., J.S.M., K.M.N., A.M.N. Secretary General of Treasury Ministry of Finance, Malaysia.

Tan Sri Dr. Samsudin bin Hitam joined the civil service as an Administrative and Diplomatic Officer in 1970. He was promoted to Director/Deputy Director General in the Economic Planning Unit of the Prime Minister’s Department. He is currently the Chairman/Member of the Board of various agencies, amongst others are The Central Bank, Majlis Kumpulan Wang Amanah Pencen and Ministry of Finance Incorporated Companies such as Bintulu Port Sdn. Bhd., Malaysian Airline System, Putrajaya Holdings, Multimedia Development Corporation Sdn. Bhd, Petronas, Syarikat Harta dan Tanah and Khazanah Nasional Bhd. Tan Sri Dr. Samsudin bin Hitam succeeds Tan Sri Othman bin Mohd. Rijal as Chairman of IRB on June 4, 2000.

TAN SRI SAMSUDIN BIN OSMAN P.M.N., S.I.M.P., D.P.M.S., P.G.D.K., J.S.M., P.M.P., A.M.N. Director General of Public Services Public Service Department, Malaysia.

Holds a Master’s Degree in public administration. He has served as an Administrative and Diplomatic Officer in the Public Service Department since 1969. He has held senior positions such as Secretary General in the Ministry of Home Affairs and the Ministry of Domestic Trade and Consumer Affairs and also as Secretary to Sabah Federation.

DATO’ ZAITUN ZAWIYAH BINTI PUTEH D.P.M.P., K.M.N. Head of Advisory and International Division Attorney General’s Department, Malaysia.

She is a lawyer by profession, graduated from the Lincoln’s Inn in 1972 and has served the public service since 1973. She has spent most of her career as a legal advisor in the judicial and legal service. Amongst her important senior legal posts held were Commissioner for Law Revision, Parliamentary Legislator and Head of Civil Division in the Attorney General’s Department.

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DATUK SITI HADZAR BINTI MOHD. ISMAIL P.J.N., J.S.M., K.M.N. Deputy Secretary General of Treasury (Policy) Ministry of Finance, Malaysia.

She holds a Master’s Degree in analytical and development economics. She has served the public service as an Administrative and Diplomatic Officer since 1971, later promoted to several senior posts in the Economic Planning Unit. In addition to her senior posts in the public service, she sits on the board of directors of a number of agencies such as the Securities Commission, Employees’ Provident Fund, Malaysian International Shipping Corporation Berhad and Kontena Nasional Berhad.

SITI MASLAMAH BINTI OSMAN J.S.M., K.M.N. Accountant General Malaysia Accountant General’s Department, Malaysia.

She is a Chartered Accountant and a member of the Chartered Institute of Management Accountants, United Kingdom. She has served the public service since 1972. Amongst the many government departments and agencies she had served are the Telecommunications Department, Bank Simpanan Nasional and Accountant General’s Department. She is also a member of the board of several agencies such as Universiti Kebangsaan Malaysia, Kumpulan Wang Simpanan Guru, Yayasan Laporan Kewangan, Lembaga Piawaian Perakaunan Malaysia and Sistem Transit Aliran Ringan.

DR. MOHAMED ARIFF BIN ABDUL KAREEM Executive Director Malaysian Institute of Economic Research (MIER).

He completed his Ph.D program at the University of Lancaster, United Kingdom. He is a specialist in International Economics and most of his works deal with international trade, foreign direct investment and regional economic integration. Dr. Mohamed Ariff has served as consultant to many international organisations including World Bank (Washingtan DC), UNIDO (Vienna), OECD Development Centre (Paris), Commonwealth Secretariat (London), UNCTAD (Geneva), UNCRD (Nagoya), ESCAP (Bangkok) and Islamic Development Bank (Jeddah). He is also a board member in the National Productivity Centre (NPC) and the Social Security Organisation (Socso).

DATIN DR. UMI KALSUM BINTI MOHD. NOH K.M.N Private Consultant

She has a Ph.D in Public Finance from the University of Malaya. She was a senior government servant in the Ministry of Finance from 1974 to 1993, before retiring from the Public Service to join the Renong Group of Companies, handling project management and construction. Dr. Umi Kalsum was then appointed as Managing Director/Executive Director of Kinta Kellas Public Ltd and currently as Executive Chairperson of Dimensi Tuah Sdn. Bhd. She is also a director for EON Bank Group and Kosijaya Didatic Sdn. Bhd.

65 EXECUTIVE MANAGEMENT

Dato’ Zainol Abidin bin Abd. Rashid* Chief Executive/Director General Inland Revenue Board

Dato’ Haji Abu Hassan bin Md. Akhir Deputy Director General Management and Support

Nujumudin bin Mydin Deputy Director General Technical and Legal

Lim Heng How Deputy Director General Compliance and Prevention

* Appointed to the present post on August 1, 2000 66 ANNUAL REPORT 2000 ANNUAL REPORT 2000

SENIOR MANAGEMENT

Sitting From Left: Ab. Rahim bin Abdullah (Director of National Tax Academy) Hasmah binti Abdullah (Head of Technical Division) Mohd Saian bin Hj. Ridzuan (Head of Operations Division)

Standing From Left: Dr. Siti Mariam binti Che Ayub (Head of Corporate Planning and Research Division) Mohd. Ibrahim Merican bin Mohd Ismail Merican (Chief Accountant [Charging]) Md. Ghazali bin Md. Yusop (Manager of Information Technology Division) Aishah binti Abdul Manaf (Director of Administrative Division) Wan Noorsiah binti Wan Abdullah (Head of Investigation and Intelligence Division) Lim Gaik Hwa (Head of Internal Audit and Quality Division) Che Omar bin Abdul Rahaman (Head of Tax Audit Division) Mohd. Zaid bin Ismail (Head of International and IOFC Division) Salmah binti Kasim (Head of Legal Division)

67 ORGANISATION STRUCTURE

Chief Executive / Director General Inland Revenue Board

Deputy Director General Deputy Director General Deputy Director General Technical and Legal Management and Support Compliance and Prevention

Investigations and Technical Administrative Operations Internal Audit Intelligence Division Division Division and Quality Division Division

Legal Information Tax Audit Division Technology Division Division

International and Finance IOFC Division Division

Corporate Planning and National Tax Research Academy Division

14 Investigation 35 Assessment 3 Collection and Intelligence Branches Branches Centres

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CHAIRMAN’S MESSAGE

t is with pleasure that I acknowledge the achievement of the Inland Revenue Board (IRB) in discharging its responsibilities as proven by the tax collection, which exceeded the revised I target set by the Government. The attainment is indeed encouraging. It is my hope that the IRB will continue to improve in its performance and collection of direct taxes so as to attain an optimum level. In order to achieve this aspiration, the IRB will use all its capabilities and available resources to:

n improve the services provided to taxpayers to facilitate and assist them in discharging their responsibilities as taxpayers. n enhance the efficiency and effectiveness in management and work processes with the use of information technology. n modernize and improve the competency level of officers through training and retraining to meet the changing trends and work processes under the Current Year Assessment (CYA) and Self-Assessment System (SAS) which took root this year.

The implementation of the CYA and the SAS in stages beginning this year is among the Government’s moves in modernizing and streamlining the direct taxes administration and to enable tax collection to be done more efficiently reflecting the current economic performance. It is IRB’s bounden duty to improve the level of voluntary compliance to the tax laws amongst taxpayers, which is the prerequisite to the success of the SAS. This would mean that the IRB must intensify the taxpayer education programs, awareness and compliance levels through information dissemination, street surveys and tax audits.

I wish to take this opportunity to record my appreciation to all IRB personnel on their efforts and contribution and hope they will work even harder towards achieving greater heights in years to come.

Tan Sri Dr. Samsudin bin Hitam Chairman of the Board

69 CHIEF EXECUTIVE’S REVIEW

he year 2000 has been a most meaningful and challenging year for me upon my appointment as the Chief Executive/ Director General. It is a great honour to assume this post despite the Tdifficult challenges ahead. Firstly, is the challenge to maintain the good performance of the Board as can be seen from the revenue collected, that makes up more than 45 percent of the Federal Government’s annual revenue. In the year being reviewed, IRB has netted a collection of RM29.17 billion, which is an increase of 7.8 percent as compared to 1999. This has been in line with the national economic growth, which attained 7.5 percent.

Performance of Collection and Assessment of Taxes On the whole, direct taxes recorded an increase from RM27 billion in 1999 to RM29 billion in the year 2000. Tax collection has increased in tandem with the recovery of the economy, which continues to be resilient. The Malaysian economy Percentage of Direct Taxes to Federal Government Revenue consolidated in the year 2000 after recovering from the economic crisis that 48.16% 46.71%47.71% 45.93% 45.01% 45.67% began to contract in 1997. As in previous 40.90% 41.00% 38.90% 39.20% years the company income tax component remains the largest contributor, as it comprised 47.93 percent of the total collections. RM Million 29,978 25,806 30,476 29,167 15,406 22,675 17,197 20,122 27,047 13,199 In the Budget for the Year 1999, the

1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 Government announced the decision to

Percentage to waive tax on income earned in the year Direct Taxes Federal Government (RM million) Revenue 1999 (year of assessment 2000 on a preceding year basis) except for

Main Components of Direct Taxes dividend income, so as not to burden taxpayers in the transition from the 60% Preceding Year Basis to the Current Year 50%

40% Basis. This resulted in taxpayers having

30% to pay tax for income earned in the 20% current year, except in the case of 10% petroleum income tax. This move 0 ensures that the government’s cash flow

RPGT from direct tax collection reflects the Petroleum Individuals Companies current economic performance. Apart Stamp Duty 1998 1999 2000 from continuing the core programs relating to assessment, collection and 70 ANNUAL REPORT 2000 ANNUAL REPORT 2000

enforcement activities, the IRB reinforced activities in Management Cost relation to expanding the tax base via street surveys, improving voluntary tax compliance via customer service 1.14% 1.11% 1.02% activities, tax audits and ensuring the effectiveness of 0.94% enforcement measures through investigations and 0.81% intelligence work. 0.72% 0.70%

Management and Administration The total administrative expenditure of IRB for the year 2000 has increased by 4.14 percent as compared to the previous year. The bulk of the expenditure comprises payment of remuneration, staff medical benefits, office 322,466,435 280,678,002 145,176,977 309,618,272 194,513,691 309,468,081 space rental, printing, travelling and transport expenditure. 140,629,481 IRB has continued its austerity drive by prioritizing its core 1994 1995 1996 1997 1998 1999 2000 business relating to increasing tax collections. Throughout Management Percentage of managemaet the year 2000, much emphasis was placed on the cost cost to direct taxes implementation of the Self-Assessment System, improving customer service and enhancing efficiency of administration of tax laws. On the whole, management performance has been very encouraging as seen from the ratio of tax collection and administrative cost figures, which has dropped from 1.14 percent in 1999 to 1.11 percent.

Customer Service Efforts to improve facilities and taxpayer convenience are given priority. The IRB has a range of services consisting of enquiry counters, payment counters, payment through Bank Bumiputra Commerce Berhad and other specific services to taxpayers and tax agents such as advisory services, seminars and briefings. In the process of implementing the Self-Assessment System, IRB has been conducting courses and training programs to create better awareness to the laws governing this new system. Amongst others, IRB has conducted several seminars, talks and briefings for taxpayers and tax agents concerning the use of the new Tax Return Form (Form C) for companies.

In our efforts to bridge the gap with taxpayers, the 3M slogan “Mesra, Membantu, Memuaskan” representing “Friendly, Helpful and Satisfaction” themes was introduced as IRB’s commitment to provide efficient, effective and professional service to taxpayers and the public in line with the policy on “Quality”, i.e to continuously provide quality service to customers.

In order to provide taxpayers the convenience to manage their payment of taxes, the IRB has decentralized collection activity and has opened 8 collection units in assessment branches throughout the country. To date 11 collection units have been opened apart from the main collection branches in Jalan Duta, Kuching and Kota Kinabalu. In our effort to enhance payment through banks, IRB plans to extend this service and is currently negotiating with several other banks.

71 Information and Communication Technology (ICT) In line with the development in information and communication technology on 1 November 2000, IRB implemented the Integration of Assessment and Collection System (INTACT) to expedite the tax assessment and collection processes. Whereas for Sabah and Sarawak the system will be introduced in April 2001. This system is devised to integrate assessment, collection, withholding taxes and real property gains tax, which were previously processed independently. As a result, preparing assessments, accounting for payments, data entries, data migration and information gathering of taxpayers is centralized and this will enable assessment and payment details to be retrieved on-line. IRB is also in the process of introducing Return filing electronically by e-filling and e-filing modes.

In enhancing IRB’s management efficiency and effectiveness, the use of ICT is intensified through internet application systems and intranet (Office Automation). The use of both these systems is not only expected to reduce paperwork but is also expected to improve internal communication of branches, divisions and units which will help to promote better interaction among IRB staff.

Human Resource In order to fulfill the human resource needs under the restructuring of IRB and implementation of the Self-Assessment System, 455 new posts of Executive Assessment Officers have been requested. This new intake of finance related qualified personnel such as accounting and tax is expected to further improve the administrative machinery in the future. As a continuous effort to enhance professionalism amongst IRB officers, education programs, training and retraining in the audit, accounting and revenue law aspects have been carried out throughout the year to improve the skill levels and knowledge of officers.

Year 2001 Prospect With the prospect of continued economic growth, revenue collection for 2001 is expected to increase following the prospect of all sectors achieving positive growth. In view of the encouraging economic indicators as envisaged in the 2000/2001 Economic Report, tax collection is expected to surpass the RM33.8 billion figure. In relation to this target, IRB will continue its planning and execute existing programs in line with the policies set by the Ministry of Finance.

Appreciation The Management of IRB wishes to record its appreciation to the Board Members for their support and worthy advice throughout the year. I also wish to record my appreciation to the staff of IRB in their genuine effort and contributions in attaining this remarkable performance year after year. It is my fervent hope that the loyalty, dedication and commitment will continue in the forth-coming years. Lastly, I take this opportunity to thank all taxpayers especially the conscientious ones who diligently and voluntarily comply with tax laws.

Dato’ Zainol Abidin bin Abd. Rashid Chief Executive / Director General of Inland Revenue

72 ANNUAL REPORT 2000 ANNUAL REPORT 2000

OPERATIONAL PERFORMANCE

ASSESSMENT

Income Tax Returns Issued

2000* 2,984,988

1999 2,879,501 1998 2,969,146

1997 2,629,933

1996 2,628,000

1995 2,451,896

1994 2,363,711

1993 2,249,318

1992 2,103,042

1991 1,962,749

Income Tax Returns Received Income Tax Returns Assessed 968 326 2,080,787 982 2,198,130 126 2,151,297 2,013, 2,000, 715 2,098,697 1,866, 352 1,828, 1,794, 1,849,738 1,769,981 1,834,395 685 1,721,076 1,645, 1,642,428 1,614,373 1,590,650 1,528, 1,500,677 1,424,296

1991 1998 1999 1992 1993 1996 1997 1994 1995 2000* 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000*

* Note: The activities of issuing, receiving and assessing of Income Tax Returns relate to income of 1999 (the year for which income tax is waived).

73 COLLECTION

Assessment Raised and Income Tax Collected

1999 2000

ASSESSMENT Number of assessments 1,849,738 1,913,064

Amount assessed RM28,079,640,802 RM11,122,685,752

COLLECTION Tax collected RM25,194,816,412 RM27,119,237,275

Add collection of withholding tax on interest and royalty payments :- On non residents (S109) RM333,023,938 RM335,610,087 On special classes of income (S109B) RM433,212,836 RM455,346,625 On residents (S109C) RM24,857,544 RM18,177,599 Compounds (S124) RM9,409,957 RM11,116,505

TOTAL COLLECTION OF INCOME TAX RM25,995,320,687 RM27,939,488,091

Less repayment RM1,500,609,113 RM2,181,015,217

NET COLLECTION OF INCOME TAX RM24,494,711,574 RM25,758,472,874

Collection of Direct Taxes Compared to Reviewed Estimate

35,000 30,016 29,600 29,808

30,000 26,910 24,853 25,000 21,985 18,533

20,000 17,781 14,097

15,000 12,311 RM million 10,000 5,000 29,978 25,806 15,406 30,476 29,167 22,675 17,197 20,122 0 13,199 27,047 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000

Revenue collection Reviewed estimate (RM million) (RM million) Components of Direct Taxes for Year 2000

Individual 24.14% Petroleum 20.61% Stamp duty 6.13%

RPGT 0.85% Cooperatives 0.30% Companies 47.93% Miscellaneous 0.04%

74 ANNUAL REPORT 2000 ANNUAL REPORT 2000

COMPLIANCE

Street Survey

Non-compliance 661 of STD 291

Failure to Submit 410 Form E 369

924 Failure to Submit 1999 2000 Return Form 3,078

Incomplete 2,944 Record 7,845

Newly Registered 2,095

Street Survey Findings Files 5,382

No. of 13,811 Premises 32,515

0 5 10 15 20 25 30 35 Thousands Numbers

Tax Audit

100,400,324

41,414,516 35,126,704

20,418,861 Investigation

811 694 1,045 706 2,108 1,148 3,827 1,337 688 1997 1998 1999 2000 672 609

Number of Cases Cases Finalised Back Taxes & 504 549 Penalties (RM) 485 514 454 429

341 207,100,000 267,783,005 210,274,985 261,471,780 302,241,190 426,065,819 509,785,103 362,063,106 407,362,869 428,137,788

1991 1992 1993 1994 1995 1996 1997 1998 1999 2000

Back taxes charge (RM million) Number of cases

75 INTERNATIONAL RELATIONS

POLICY

In its effort to promote long term investment, strengthen the resilience and competitiveness of the economy, Malaysia has to identify investors and trading partners of the right potential.

In this context, IRB as the government’s tax adviser has created an attractive trading and investment climate in its negotiations to conclude Double Taxation Treaties for the Avoidance of Double Taxation (DTAs) with countries that have trading ties with Malaysia. These DTAs are continuously reviewed to safeguard Malaysia’s interest.

DOUBLE TAXATION AGREEMENT (DTA)

In summary, 44 DTAs are in force, 9 signed and gazetted, 12 concluded and 6 are still in the midst of negotiation.

DTA negotiations DTA signed and DTA ratified in 2000 officially concluded in 2000 in 2000 • Chile • Kyrgzstan • Jordan • Croatia • Malta • Iran • Australia • Luxembourg (protocol) • Oman

DTAs IN FORCE

United States of America Ireland Czech Republic (Limited Agreement)

People’s Saudi Arabia Italy Republic of (Limited Agreement) China

Australia Japan Romania (New Agreement)

Austria Germany Russia

76 ANNUAL REPORT 2000 ANNUAL REPORT 2000

Bangladesh Jordan Singapore

Netherlands Canada Sri Lanka (New Agreement)

Belgium South Korea Sweden

Denmark Mauritius Switzerland

United Arab Mongolia Taiwan Emirates (Tax Exemption Order)

Philippines New Zealand Thailand

Fiji Norway Turkey

United Finland Pakistan Kingdom (New Agreement)

Papua New Hungary Uzbekistan Guinea

India France Vietnam

Indonesia Poland

77 DTAs SIGNED AND GAZETTED

Albania Malta Namibia

Argentina (Limited Agreement) Egypt Sudan

Bahrain Myanmar Zimbabwe

DTAs CONCLUDED

South Africa Kazakstan Morocco

Brunei Kuwait Oman

India Kyrgyzstan Singapore (New Agreement) (New Agreement)

Sweden Iran Luxembourg (New Agreement)

DTAs IN NEGOTIATIONS

Finland Chile (New Agreement) Spain

Croatia Mexico Uruguay

78 ANNUAL REPORT 2000 ANNUAL REPORT 2000

INTERNATIONAL CONFERENCES

Malaysia has been given the honour to host the 31st Study Group on Asian Tax Administration and Research (SGATAR) conference, to be held in Kuala Lumpur from 4 November to 9 November 2001. There are two major activities i.e. the SGATAR annual meeting and the SGATAR research project.

In order to expose IRB officers to international tax issues and administration, several officers have been sent overseas to take part in conferences, seminars, meetings, workshops and courses in addition to being hosts to visiting study groups and delegations from overseas.

SEMINAR Topic Place Date

Transfer Pricing Chonan, South Korea 12 - 17 April 2000

The Working Level Seminar for SGATAR Members Bangkok, Thailand 15 - 16 June 2000

Tax Treaties and Transfer Pricing Paris, France 20 - 22 September 2000

Auditing Multinational Enterprises Chonan, South Korea 9 - 13 October 2000

Tax Modelling Vienna, Austria 10 - 14 October 2000

COURSE Topic Place Date

Executive Development Program for Malaysian Government Officials South Korea 8 - 28 May 2000

Government at Risk - How to Manage Washington, Contingent Liabilities USA 30 May - 2 June 2000

Tax Analysis and Revenue Forecasting Harvard University, USA 19 June - 21 July 2000

Commonwealth Tax Inspectors Course United Kingdom 14 Aug - 22 September 2000

Principles of International and Comparative Taxation Netherlands 21 Aug - 1 September 2000

General Tax Course Japan 21 Aug - 18 November 2000

79 CONFERENCE Topic Place Date

Budgeting Processes and Public Expenditure Management Washington, USA 18 - 26 May 2000

30th SGATAR Conference Kyoto, Japan 13 - 16 November 2000

8th General Meeting - CATA’S 21st Technical Conference/ Workshop New Delhi, India 27 November - 1 December 2000

MEETING

Topic Place Date

TAG’s Proposal Physical Meeting Paris, France 6 - 7 April 2000

CATA Management Committee London, Meeting United Kingdom 9 -10 May 2000

Trade and Investment Mission to Denver, Portland and the United States of America San Jose, USA 18 - 25 May 2000

WORKSHOP

Topic Place Date

CATA/OECD/APN Workshop National Tax Academy (NTA) Bangi, Malaysia 2 - 20 October 2000

FOREIGN DELEGATE VISITS

Delegates Date

Delegates from Indonesia 18 January 2000

Professor Ann Harding from the University of Canberra - “Tax Forecasting” 26 January 2000

Delegates from the Ministry of Finance, Indonesia - Study Banding 23 March 2000

Delegates from Ministry of Finance, Vietnam 19 - 21 July 2000

Delegates from Egypt 14 August 2000

Delegates from Russia 24 August 2000

Mr. Yoshiyasu Okada, Deputy Commissioner, National Tax Administration, Japan 18 October 2000

80 ANNUAL REPORT 2000 ANNUAL REPORT 2000

HUMAN RESOURCE MANAGEMENT & DEVELOPMENT

MANPOWER

In the year 2000, 69 new officers were recruited to fill vacant posts. This consists of different categories of staff which are the Executive Assessment Officer (Grade 7), Assistant Executive Assessment Officer (Grade 9) and Supporting Staff (Grades 11 and 15) posts. This new recruitment programme is in line with the implementation of SAS and the upgrading of the main activities in branches especially assessment and collection functions.

Human resource management planning also includes the promotion exercise of 39 officers. IRB is alway perceptive to staff career development at all levels and continues to develop and upgrade their performance through various internal and external courses.

In an effort to develop knowledgeable officers in taxation as well as relevant fields, the National Tax Academy (NTA) has been continuously improvising its training programmes and courses conducted during the year 2000. In the course of developing capable tax officers, a new evaluation and meritocracy system was introduced in the year 2000. This is to ensure that IRB officers show better commitment to the training programmes.

Besides the inhouse programmes, the NTA is also conducting courses under the Tax Education Programme especially for the general public, representatives from companies and new tax agents. This training programme is focussed on legislation and the changes in the work processes towards the Self-Assessment System.

Distribution of Manpower According to Activities

56 Estate Duty 26 23 22 0 Stamp Duty 211 207 138 Information Technology 15 0 133 216 Investigation 197 172 481 Headquarters 37 8 3 81 1,326 Collection 1,356 1,221 4,088 Assessment 4,237 3,874 - 500 1,000 1,500 2,000 2,500 3,000 3,500 4,000 4,500

19981999 2000

81 Recruitment According to Grades

Grade15 9% Grade 11 12%

Grade 9 6% Grade 7 73%

Promotions According to Grades

Grade 8 6%

Grade 10 Grade 10 (Assessment) (Clerical) 52% 42%

Establishment and Post Filled by Categories

31 Accountants 41 2401 Administration 2512

Information Technology 614 711

Legal 17 20 3457 Technical 3573

Executive Management 5 5 - 500 1,000 1,500 2,000 2,500 3,000 3,500 4,000

Establishment Post Filled

82 ANNUAL REPORT 2000 ANNUAL REPORT 2000

TRAINING PROGRAMMES

No. of participants In Service Training General and Specific Induction Course Support Group Grades 11, 12, 13 and 14 408

Preliminary Training Executive Officer (Assessment) Grade 7 and Tax Assistant (Assessment) Grade 11 197

Workshop Law I & II and Accounts I & II Executive Officer (Assessment) Grade 7 247

Workshop Law I & II Tax Assistant (Assessment) Grade 11 42

Skills Training Advance Law Course 1 & 11 Executive Officer (Assessment) Grade 7 392

Specialization and Skills Improvement Course Self Advancement Executive Officer (Assessment) Grades 6 and 7 and Support Group Grades 11, 13 and 14 1,262

Audit Course Executive Officer (Assessment) Grade 7 518

Tax Education Training Of Trainers - Branch Coordinators Programme and Tax Agents Executive Officer (Assessment) Grade 7 and Tax Agents 120

Self-Assessment Course General Public 2,006

International Course The General Tax Administration Course (GTAC) This course was attended by participants from tax administrations of various developing countries including Malaysia, under the auspices of the Malaysian Technical Cooperation Programme. The objective of the course is to provide a forum for the exchange of ideas, concepts and modern management techniques relating to tax administration. 25

Workshop On Taxation of International Transactions This course was participated by tax administrators from the Commonwealth countries, including Malaysia, with the cooperation from The Commonwealth Association of Tax Administrators and The Organization for Economic Cooperation and Development. This course focuses mainly on the rules and regulations of international taxation with emphasis on tax agreements. 20

83 UPGRADING OF INFRASTRUCTURE SYSTEM

MODERNISATION OF REVENUE SYSTEM

PROJECT STATUS

Preparation for Application of INTACT INTACT SG, OG and C system was implemented in System the Peninsular on 1st of November 2000 involving 1,500 users. In Sabah/Sarawak, the implementation of this system was scheduled in April 2001.

Preparation for Application of Office The Office Automation facility was extended to Automation (OA) branches in Sabah and Sarawak in April 2001. In the upgrading of the application of Office Automation, a number of user systems were prepared such as:- • Human Resource Management System • Real Property Transaction System • Technical Reference System

Other systems were also developed for users especially Leave Application System, Help Desk System, Distribution Information System, MPPC Statistics System and Manual User INTACTSG and OA.

Preparation for Branch Infrastructure For branches in Sabah and Sarawak, preparation for and Communication Lines infrastructure such as installation of communication lines and equipments were completed in the month of April. The availability of this infrastructure has enabled the OA application in these branches.

UPGRADING OF SAS AND CYS SYSTEMS

The overall development commenced when IRB appointed a consultant i.e. XYBASE Technologies (M) Sdn. Bhd. at the end of March 2000. In the preliminary stage the consultant generated the user requirements after a study. Up to end of year 2000, about 60 percent of the design and construction of the system has been implemented. Pilot and CYS application changes is expected to be implemented in the year 2001.

PLANNING FOR THE YEAR 2001

• Implementation of INTACTSG in Sabah and Sarawak. • Upgrading of COINS network lines from 64kbs to 128kbs and back-up ISDN lines in the Peninsular branches. • Implementation of Phase I and II of the SAS system. • Preparation for data recovery centre in Jalan Duta. • Implementationof e-payment, payment of tax via internet. • Upgrading of INTACTSG system and OA application. • Preparation for e-stamping application. • Preparation for specifications of the SAS system development for non-company tax payers.

84 ANNUAL REPORT 2000 ANNUAL REPORT 2000

SELF-ASSESSMENT SYSTEM (SAS)

LEGISLATION

The following amendments and new provisions to the Income Tax Act 1967, was brought about by the Income Tax (Amendment) Act 2000 for the purpose of implementing SAS.

SECTION EXPLANATION 21A • A new section for companies only (section 21 will no longer be applicable to companies). • The basis of assessment for companies with non-business income has been changed from basis year to basis period. • As a consequence of the amendment to section 21, sections 26, 44 and 92 are amended accordingly.

90 • A new subsection (2A) is introduced in order to allow the Director General to raise an assessment when a company does not furnish a return.

107C • Subsection (9) was amended to provide that the total sum consisting of any unpaid instalment amount which is due and payable and the ten percent increase is recoverable as if it were tax due and payable.

108 • A new section 108 is introduced to substitute section 108 of Act 53 so that the requirement under section 108 are in accordance with the basis period and the Self-Assessment System. • The concept of available credit for purposes of distributing dividend is changed from tax on chargeable income to tax paid. • Consequential amendment was also made to section 110 to allow the Director General to make an assessment or additional assessment on the shareholder where the company fails to pay the tax payable under section 103A or the excess credit under section 108. • Consequential amendments were also made to sections 111 and 120.

119A • A new section is introduced to provide that any person who contravenes or fails to comply with an order or notice under section 82 (relating to keeping of records) commits an offence punishable under this section.

PUBLIC RULINGS ISSUED IN 2000 Number Title 1/2000 Basis Period For A Non-Business Source 2/2000 Basis Period For A Business Source (Companies and Co-operatives) 3/2000 Basis Period For A Business Source (Individuals and other than Companies/Co-operatives) 4/2000 Keeping Sufficient Records (Companies and Co-operatives) 5/2000 Keeping Sufficient Records (Individuals and Partnerships) 6/2000 Keeping Sufficient Records (Individuals and other than Companies/Co-operatives) 7/2000 Providing Reasonable Facilities And Assistance 8/2000 Wilful Evasion of Tax and Related Offences

85 IMPLEMENTATION

mendments to the SAS concerns the Ascope of section 108 and the basis period for the year of assessment while the amendment to the Income Tax Act is in relation to the implementation of the SAS which was gazetted on the 23rd of December 2000. To consolidate the legislative process, a new committee, i.e. SAS Consultative Council was set up.

Besides contributing to the legislation and rulings relating to the implementation of SAS, the committee also endeavoured to prepare the new Income Return Forms for the Year of Assessment 2001 for companies From the information technology together with the explanatory book standpoint, the design and testing for the pertaining to filling of the returns. data module and systems development is extensively pursued. It includes tax To better equip officers in the transition of collection modules, form processing, audit, SAS work process, the Tax Audit Manual was customer management and technical distributed to all assessors who conduct the support. A consultant was appointed for audit process, while giving them intensive the integrated software development, audit courses and training. In line with this, documentation identification and a tax audit guide book which will be a technology transfer relating to the reference guide to the work process is being implementation of SAS. The objective prepared. is to overcome issues with respect to improving tax compliance, to facilitate the assessment process and to expedite collection, analysis and data query.

A clear understanding is important in the implementation of SAS. Besides source references and literature such as SAS guide book and brochures to explain and publicise to the public, IRB conducts training for tax agents, trainers and courses for the taxpayers at the national level. Via IRB internet portal www.hasilnet.org.my, current information is made available to aid users. It also provides an avenue for e-mail queries to assist users to obtain further clarifications of doubts on the SAS.

86 ANNUAL REPORT 2000 ANNUAL REPORT 2000

AMENDMENTS TO THE TAX LAW 2001

INCOME TAX ACT 1967 STAMP ACT 1949

• The treatment of both man and • The definition of the words “banker”, woman taxpayers is standardised, by “contract note”, “dealer”, and “insurer” allowing the husband to elect to be were amended/introduced. assessed together on the wife and the wife • Bankers, businessmen or insurance be given husband deduction of RM3,000 underwriters are authorised to impose as well. compound on payment of duty on cheque, • Tax rebate is increased from RM110 to contract note or insurance policy not RM350 (for individual), and from RM60 stamped. to RM350 (for wife), and the chargeable • The maximum penalty is reduced to twice income entitlement is increased to the amount of duty not paid and the RM35,000. Collector is allowed to remit or reduce • New deduction for medical check-up the penalty where it is not more than (RM500 maximum) and purchase of RM5,000. books, journals, magazines, for the • The amount of duty on a number of items enhancement of knowledge (RM500 in Schedule One of the Act is fixed at maximum). RM10. • Scope of deductible expenses is extended • The imposition of stamp duty under the to include expenses relating to conventional principle on security letter communication technology and of notes is made uniform with the information; expenses on scholarship; ‘syariah’ principle. and for the purpose of acquiring grants • The rate of duty for property transactions for quality system and standards and is fixed at a flat rate of RM3.00 for “halal” certification. every RM100 for any amount exceeding • Cash donation by companies to approved RM500,000. institutions is restricted to 5% of the aggregate income. INCOME TAX • The restriction for qualifying plant (AMENDMENT) ACT 2000 expenditure on vehicles is increased to RM100,000 (cost of vehicle not more • Section 21A than RM150,000). A new section was introduced to enable all companies, including investment PETROLEUM (INCOME TAX) holding companies to comply with the ACT 1967 Self-Assessment System. The basis of assessment for companies having non Amendments are in consistent with the business income is changed from “basis changes made to the provisions of the year” to “basis period”. The concept of Income Tax Act, such as: ‘operation’ was also introduced, (section • Scope of deduction is extended to include 21 was also amended making it no longer expenses incurred relating to provision applicable to companies). for scholarship for students; and for the purpose of acquiring grants for quality • Section 26 system and standards and “halal” Arising from the amendment to section certification. 21, it is further provided in cases where • The restriction for qualifying plant there is any overlapping of basis periods, expenditure on vehicles is increased to dividend income is to be taxed once and RM100,000 (cost of vehicle not more so is the deduction for section 110 set than RM150,000). off (section 44 and 99 were also amended accordingly). 87 • Section 82 provisions so that the requirement is in The period to retain records of business accordance with the basis period in Self is 7 years from the end of the year to Assessment System. The concept of tax which any income from the business credits for the purpose of distribution of relates to. If there is a delay in the dividend is changed from tax on furnishing of the Return Form for the chargeable income payable to tax paid. related year of assessment, the period for retaining records is 7 years after the end As a result of the changes made to of the year in which the return is this concept, special provisions, furnished. exemption provisions and transition provisions were introduced to Provisions were also introduced to accommodate the changes. elaborate on: • Requirement for record keeping where (Section 120 was also amended to it is in electronic form/converted to provide for penalties for failure to furnish electronic form, returns or information under section • All records related to any business in 108(5)). Malaysia is to be kept in Malaysia, • The meaning of the word ‘record’. • Section 110 A new provision was added to enable the • Section 90 Director General to make an assessment A new provision was added to enable the or an additional assessment on the Director General to make an assessment shareholder if the company fails to pay where a company fails to furnish its the tax payable under section 103A or return within the prescribed period. any excess under section 108 to counter the benefit to shareholders. • Section 99 Amended to enable appeals to be made • Section 119A in the following year against an advance A new section was introduced to provide assessment made in the current year. for penalties where any person who fails to comply with the orders or contravenes • Section 107C notices under section 82 commits a Amended to enable the total amount of punishable offence. unpaid instalment as a debt due and the increase of 10 percent to be claimed as a • Section 152A debt due and payable. A new provision was added to enable the Director General to allow any forms • Section 108 prescribed under the Income Tax Act to Amended by substituting with new be furnished electronically.

TAXATION ORDERS ISSUED IN THE YEAR 2000 Reference Title P.U.(A) 49 INCOME TAX RULES (DEDUCTION FOR EXPENSES INCURRED IN THE RESTRUCTURING OF CORPORATE ASSET) 2000 P.U. (A) 50 INCOME TAX RULES (DEDUCTION FOR PAYMENT MADE ON TRANSPORT FROM SABAH OR SARAWAK TO PENINSULAR MALAYSIA) P.U. (A) 51 INCOME TAX RULES (DEDUCTION FOR THE EXPENSES INCURRED RELATED TO INFORMATION TECHNOLOGY) 2000 P.U. (A) 52 INCOME TAX RULE (ANNUAL ALLOWANCE FOR QUALIFIED PLANT) 2000

88 ANNUAL REPORT 2000 ANNUAL REPORT 2000

89 EVENTSEVENTS OFOF

11 JANUARY

The Strategic Management Seminar was officiated by Y. Bhg. Tan Sri Othman bin Mohd. Rijal. Talk was presented by Dr. Hamzah Kassim. 9 MAY

Launching ceremony of the Schedular Tax Deduction (STD) payment scheme via Bumiputra Commerce Bank.

28 MARCH

The signing of the agreement between IRB and XYBASE Technologies (M) Sdn. Bhd. at the Mandarin Oriental for the development of a computer system under the Self Assessment System (SAS). 31 MAY

The Menara Jati lobby, Johor Bahru on the last day of submission of Return Form.

24 APRIL

Tax Payers’ Service Week (MPPC) was launched by Y.B. Dato’ Chan Kong Choy at the Sungei Besi Toll Plaza.

28 JUNE

Y.A.B. Dato’ Syed Razak Syed Zain, the Kedah Menteri Besar visited the IRB stall in conjunction with the Kuala Muda District People Friendly Program 2000. 90 ANNUAL REPORT 2000 ANNUAL REPORT 2000 THETHE YEARYEAR

25 NOVEMBER

IRB Ipoh Branch was awarded the Malaysian Public Services MS ISO 9000 Quality System Registration Certificate in the assessment of real property gains tax and stamp duty. The certificate was presented by the Chief 25 AUGUST Secretary To The Government, Y. Bhg. Tan Sri Abdul Halim bin Ali.

Deputy Prime Minister of Malaysia, Y.A.B. Dato’ Seri Abdullah Ahmad Badawi launched the 2000 Women’s Exhibition and visited the IRB service counter.

27 NOVEMBER

A goodwill get together between the Chief Executive and the Media at the PJ Hilton Hotel. A good rapport between IRB and the Media is mutually beneficial. 27 OCTOBER

Special service line for 2001 budget at the IRB Headquarters at the 15th floor of Block 11, immediately after the budget speech announced by the Finance Minister.

1 DECEMBER

An IRB service counter was set up at a Shopping Carnival in Bukit Jalil from 1 December to 23 December. A total of 633 taxpayers visited the counter for tax services including 28 OCTOBER that of confirming tax position on-line.

Launching of Budget 2001 and Excellence Service Certificate Award of IRB by YB Tun Daim bin Zainuddin, Minister of Finance Malaysia. 91 Forever Remembered

26 August 1969 to 31 July 2000

Y. Bhg. Datuk Najirah Binti Mohd Tassaduk Khan, the first woman to hold the post of Chief Executive and Director General of Inland Revenue, clocking out for the last time on the eve of her retirement.

“I have sentimental feelings for my officers who have been with me for 31 years” ~ Translated from Utusan Malaysia, August 1, 2000

“She hoped her officers would continue to keep up with the good work to bring more success for the IRB” ~ The Sun, August 1, 2000

“Her retirement was greeted with sadness as many said they would miss her firm but fair leadership” ~ New Straits Times, August 1, 2000

92 LAPORANANNUAL REPORTTAHUNAN 2000 2000 ANNUAL REPORT 2000

93 CERTIFICATE OF THE AUDITOR GENERAL ON THE ACCOUNTS OF THE INLAND REVENUE BOARD MALAYSIA FOR THE YEAR ENDED 31 DECEMBER 2000

I have audited the Balance Sheet of the Inland Revenue Board as at 31 December 2000, Income and Expenditure Statement and Cash Flow Statement for the year then ended. These financial statements are the responsibility of the management of the Inland Revenue Board. My responsibility is to express an opinion of these financial statements based on the audit carried out.

2. The audit was conducted in accordance with the Audit Act 1957 and the International Standards on Auditing. These standards require that the audit be planned and performed so as to provide reasonable assurance that the financial statements of the Inland Revenue Board are free of material misstatements. An audit includes examining records, on a test basis, evidence supporting the amounts and ensuring sufficient disclosures in the financial statements. Assessment is also conducted on the accounting principles used and the overall presentation of the financial statements.

FIXED ASSETS RM122.44 million

3. Included in the total above are assets which the Board acquired between the years 1956 until 1990 valued at RM3.49 million. The acquisition and the position of the Board’s assets could not be verified due to the fact that the life of some of these assets exceeded 11 years and may no longer be of use especially for computers. The Board has taken actions to dispose of these assets.

4. Net book value of assets includes work-in-progress amounting to RM28.73 million, which also includes payments for office equipment and furniture. It is suggested that the amount be shown separately in the financial statements.

5. Notwithstanding what has been mentioned in paragraph 3 and 4, in my opinion, the financial statements are properly drawn up to give a true and fair view of the state of the financial affairs of Inland Revenue Board as at 31 December 2000 and of the results of the operations and cash flows for the year then ended.

(DATUK DR. HADENAN BIN ABDUL JALIL) AUDITOR GENERAL MALAYSIA PUTRAJAYA 3 SEPTEMBER 2001

(the original certificate was issued in Bahasa Malaysia)

94 ANNUAL REPORT 2000 ANNUAL REPORT 2000

STATEMENT BY THE CHAIRMAN AND A MEMBER OF THE INLAND REVENUE BOARD

We, DATO’ DR. SAMSUDIN BIN HITAM and SITI MASLAMAH BINTI OSMAN being the Chairman and one of the Members of the INLAND REVENUE BOARD OF MALAYSIA, do hereby state that, in the opinion of the Members, the accompanying Balance Sheet, Income and Expenditure Statement and Cash Flow Statement, together with the enclosed notes are drawn up so as to give a true and fair view of the state of affairs of the INLAND REVENUE BOARD OF MALAYSIA as at December 31, 2000 and of their results and changes in financial position for the year ended on that date.

On behalf of the board,

Name : DATO’ DR. SAMSUDIN BIN HITAM SITI MASLAMAH BINTI OSMAN

Title : CHAIRMAN MEMBER OF INLAND REVENUE BOARD THE INLAND REVENUE BOARD

Date : APRIL 27, 2001 APRIL 27, 2001

Place : KUALA LUMPUR. KUALA LUMPUR

(the original certificate was issued in Bahasa Malaysia)

95 DECLARATION BY THE OFFICER PRIMARILY RESPONSIBLE FOR THE FINANCIAL MANAGEMENT OF THE STATUTORY BODY CONCERNED

I, MOHD. IBRAHIM MERICAN, the officer primarily responsible for the accounts of the INLAND REVENUE BOARD MALAYSIA, do solemnly and sincerely declare that the accompanying Balance Sheet, Income and Expenditure Statement and Cash Flow Statement, together with the enclosed notes, to the best of my knowledge and belief, are correct and I make this solemn declaration conscientiously believing the same to be true and by virtue of the provisions of the Statutory Declaration Act, 1960.

Subscribed and solemnly declared ) by the abovenamed at ) Kuala Lumpur ) MOHD. IBRAHIM MERICAN on 27 April, 2001. )

Before me,

COMMISSIONER FOR OATHS

(the original certificate was issued in Bahasa Malaysia)

96 ANNUAL REPORT 2000 ANNUAL REPORT 2000

Balance Sheet AS AT 31 DECEMBER 2000

Notes 2000 1999 RM RM Current Assets Cash And Bank Balances 3 19,230,976 13,227,211 Fixed Deposits And Short Term Investment 4 51,987,999 84,708,000 Advances And Loans to Employees 5 16,986,141 12,158,909 Deposit And Prepaid 91,374 610,137 Sundry Debtors 6 239,342 78,469 Total Current Assets 88,535,832 110,782,726

Less:

Current Liabilities

Provision For EPF Contribution 7 -0000 - Provision for Audit Fee 58,235 58,235 Sundry Creditors 8 12,918,107 17,785,605 International Courses Account 9 253,973 269,939 Total Current Liabilities 13,230,315 18,113,779

Net Current Assets 75,305,517 92,668,947

Fixed Assets 10 122,443,371 114,087,153

Total Net Assets 197,748,888 206,756,100

Funded By:

Development Fund 11 99,108,289 89,021,742 Accumulated Surplus / (Loss) 62,243,314 81,481,885 Other Funds 12 36,000,000 36,000,000 Trust Funds 13 397,285 252,473 197,748,888 206,756,100

The accompanying notes to the accounts on pages 100 to 108 are an integral part of these accounts.

97 Income And Expenditure Statement FOR THE YEAR ENDED 31 DECEMBER 2000

Notes 2000 1999 RM RM

Income 14 302,620,418 288,475,375

Less:

Expenditure 15 322,446,434 320,812,258

Surplus / Deficit of Income Over Expenditure (19,826,016) (32,336,883)

Add: Accumulated Surplus From Previous Year 81,481,885 106,191,475 Prior Year Adjustment 587,445 7,627,293

Accumulated Surplus Carried Forward 62,243,314 81,481,885

The accompanying notes to the accounts on pages 100 to 108 are an integral part of these accounts.

98 ANNUAL REPORT 2000 ANNUAL REPORT 2000

Cash Flow Statement FOR THE YEAR ENDED 31 DECEMBER 2000

Notes 2000 1999 RM RM Cash Flow From Operating Activities

Receivable And Other Income 16 299,157,400 282,764,771 Cash Paid To Suppliers And Employees 17 (309,289,276) (298,719,483)

Net cash flow from Operating Activities (10,131,876) (15,954,712)

Cash Flow From Investing Activities

Investment In Fixed Asset (25,793,429) (34,018,991) Interest And Dividend Received 3,820,908 5,187,073

Net cash flow from Investing Activities (21,972,521) (28,831,918)

Cash Flow From Financing Activities

Grant For Development Fund 10,086,547 48,579,362 Provision For EPF Contribution -0000 - International Courses Account (15,966) 224,910 Trust Fund 144,812 67,097 Advances And Loans to Employees (4,827,232) (3,026,775)

Net cash flow from Financing Activities 5,388,161 45,844,594

Net (Decrease) / Increase in Cash (26,716,236) 1,057,964

Cash And Cash Equivalents At Beginning Of Period 97,935,211 96,877,247

Cash And Cash Equivalents At End Of Period 71,218,975 97,935,211

The accompanying notes to the accounts on pages 100 to 108 are an integral part of these accounts.

99 Notes to the accounts FOR THE YEAR ENDED 31 DECEMBER 2000

1. PRINCIPAL ACTIVITIES

Inland Revenue Board (IRB) was incorporated on 1st. March, 1996 under Act 533 Lembaga Hasil Dalam Negeri Malaysia, 1995.

The Board acts as an agent to the Government in providing services related to the administration, assessment, collection of and enforcement on the payment of income tax, real property gains tax, estate duty and stamp duty.

2. SIGNIFICANT ACCOUNTING POLICIES

(a) Basis of Accounting

The accounts have been prepared under the historical cost convention and in accordance to the approved accounting standards.

(b) Fixed Assets and Depreciation

All fixed assets are accounted for at cost. Freehold Land and Work In Progress are not depreciated. Depreciation is calculated on a straight line basis from the time they are available for use so as to write off their costs over the estimated useful lives.

Rates of depreciation for fixed assets are as follows:-

Type of Fixed Asset Depreciation Rate

Land - Leasehold Period of Lease

Building 2%

Office Equipment 20%

Furniture and Fittings 20%

Vehicles 20%

Facilities 20%

Other Fixed Assets 20%

100 ANNUAL REPORT 2000 ANNUAL REPORT 2000

Interest income from Conventional Banking Scheme is recognised on the accrual basis while profit from Al-Mudharabah is included in the Profit and Loss Account on the receipt basis.

(d) Work In Progress

Work In Progress represents the cost of assets under development and payments made in more than one instalment or where the period of completion extends to more than one accounting period.

3. CASH AND BANK BALANCE 2000 1999 RM RM

CASH Branch Offices Headquarters 42,611 41,761

SUB-TOTAL 42,611 41,761

BANK BALANCES

Branch Offices Headquarters 18,872,742 10,927,086 Penang 32,928 244,866 Ipoh 4,373 376,228 Malacca 56,751 286,666 Johore 6,321 168,964 Kuala Terengganu 89,692 275,170 Kota Kinabalu 42,560 493,654 Kuching 82,998 412,816

SUB - TOTAL 19,188,365 13,185,450

TOTAL 19,230,976 13,227,211

101 4. FIXED DEPOSIT AND SHORT TERM INVESTMENT 2000 1999 RM RM

Licensed Finance Institutions 45,000,000 20,000,000 Licensed Banks 6,987,999 64,708,000

51,987,999 84,708,000

5. ADVANCES AND LOANS TO EMPLOYEES 2000 1999 RM RM

Conveyance Loan 11,227,940 10,095,797 Computer Loan 2,572,865 1,973,116 Personal Advances 3,185,336 89,996

16,986,141 12,158,909

6. SUNDRY DEBTORS 2000 1999 RM RM

Accrued Interest & Profit 239,342 78,469

239,342 78,469

102 ANNUAL REPORT 2000 ANNUAL REPORT 2000

7. PROVISION FOR EPF CONTRIBUTION

A total amount of RM100,000,000, which has been received in 1997 from Finance Ministry has been set aside for EPF contribution for employees who have been placed under the pensionable scheme to the date of joining the Board. Balances at close of 2000 account:-

2000 1999 RM RM

Balance as at 1 January - 71,262,182

Contribution - -

Set off against 1998 annual fee - (57,287,202)

Adjusted to revenue - (13,974,980)

Balance as at 31 December - -

8. SUNDRY CREDITORS 2000 1999 RM RM

EPF 3,724,221 7,008,001

SOCSO 151,081 146,332

Amount due to Staff 12,813 75,310

Deposits, Advances and Loans 70 (37,530)

Supply / Services 9,029,922 10,593,492

12,918,107 17,785,605

9. INTERNATIONAL COURSES ACCOUNT

International Courses Account of RM253,973 (1999 - RM269,939) consist accounts managed by Akademi Percukaian Negara Malaysia and ASEAN-Cooperation Unit. Total amount of RM129,109 is the balance from International Courses Account which is managed by Akademi Percukaian Negara Malaysia whereas a total amount of RM124,864 is the balance from ASEAN-Cooperation Unit budget.

103 Equipment And Fittings Assets Progress

------

Land Building Office Furniture Vehicles Facilities Other Fixed In Work Total

(RM) (RM) (RM) (RM) (RM) (RM) (RM) (RM) (RM)

15,519,541 33,417,940 38,331,482 2,254,270 3,042,560 742,264 404,886 28,730,428 122,443,371

Net Book Value Net Book Expenditure and Accumulated Depreciation which does not form Fixed Asset Fixed which Depreciation does not form Accumulated and Expenditure

10.1 Fixed Asset 2000

10. FIXED ASSET

Cost :

1 January 2000 6,400,000 38,201,934 72,042,254 10,596,325 6,689,912 930,151 1,491,277 31,486,709 167,838,562

Add: RecategorizeAdd: - - 2,951,281 (195,000) - - - (2,756,281) -

Add: PurchasesAdd: 9,128,822 691,503 11,857,422 2,047,242 1,636,897 307,716 129,560 - 25,799,162

Less: Disposals - - (5,900)* - (102,230) - - - (108,130)

31 December 2000 15,528,822 38,893,437 86,845,057 12,448,567 8,224,579 1,237,867 1,620,837 28,730,428 193,529,594

Depreciation : Depreciation Charges Current Add: 1,920 2,640,167 10,980,006 2,048,937 1,300,721 180,500 284,960 - 17,437,211

1 January 2000Less: Disposals 7,361 2,835,330 37,533,737 - 8,145,360 3,983,527 - 315,103 930,991 (168)* - - 53,751,409 (102,229) - - - (102,397)

Add: Recategorize Add: 31 December 2000 9,281 5,475,497 48,513,575 10,194,297 5,182,019 495,603 1,215,951 - 71,086,223

NBV at 31 December 2000

Notes : NBV

104 ANNUAL REPORT 2000 ANNUAL REPORT 2000

Machinery Equipment And Fittings Assets Progress

Land Building Plant & Office Furniture Vehicles Facilities Other Fixed In Work Total

(RM) (RM) (RM) (RM) (RM) (RM) (RM) (RM) (RM) (RM)

6,392,639 35,366,604 - 34,508,517 2,450,965 2,706,385 615,048 560,286 31,486,709 114,087,153

10.2 Fixed Asset 1999

Cost :

1 January 1999 6,400,000 29,430,918 120,394 62,433,063 8,203,795 5,507,116 526,027 1,755,095 19,443,163 133,819,571

Add: RecategorizeAdd: - 7,607,305 (118,194) 2,317,585 293,696 29,155 (78,222) (383,150) (9,668,175) -

Add: PurchaseAdd: - 1,163,711 (2,200)* 7,291,606 2,098,834 1,153,641 482,346 119,332 21,711,721 34,018,991

Less: Disposals ------

31 December 1999 6,400,000 38,201,934 - 72,042,254 10,596,325 6,689,912 930,151 1,491,277 31,486,709 167,838,562

Depreciation : Depreciation

1 January 1999 5,440 1,778,530 75,346 28,618,846 5,371,380 2,689,117 272,713 806,007 - 39,617,379

Add: RecategorizeAdd: - 37,643 (74,430) 91,175 88,799 29,154 (46,560) (125,781) - -

Add: Current Charges Current Add: 1,921 1,019,157 (916)* 8,823,716 2,685,181 1,265,256 88,950 250,765 - 14,134,030

Less: Disposals ------

31 December 1999 7,361 2,835,330 - 37,533,737 8,145,360 3,983,527 315,103 930,991 - 53,751,409

NBV at 31 December 1999

Notes : NBVValue Net Book *Asset Fixed which Depreciation does not form Accumulated and Expenditure

105 11. DEVELOPMENT FUND 2000 1999 RM RM

Balance as at 1 January 89,021,742 40,442,380

Annual Fee from Federal Government 14,235,000 50,906,535

Expenditure which does not form Fixed Asset (4,148,453) (2,327,173)

Balance as at 31 December 99,108,289 89,021,742

12. OTHER FUND 2000 1999 RM RM

(a) Conveyance Loan 15,000,000 15,000,000

(b) Computer Loan 3,000,000 3,000,000

36,000,000 36,000,000

13. TRUST FUND

The trust fund of RM397,285 (1999 - RM252,473) consists only of the Akademi Percukaian Negara Malaysia Trust Account. It has been set up to account for all receipts and payments related to the welfare of courses participants, training activities, research and publications of the Akademi Percukaian Negara Malaysia.

106 ANNUAL REPORT 2000 ANNUAL REPORT 2000

14. INCOME 2000 1999 RM RM

Services and Services Payments 160,110 530 Sales of Stores 30,286 2,593 Sales of Others 32,940 32,481 Rental Received -0000 74,862 Interest and Interest on Loans 3,981,781 5,107,967 Penalties -0000 12,102 Refund of Expenditure 495,248 661,291 Refund of EPF -0000 294 Refund of Other Expenditure 2,411 4,573 Annual Fee 297,864,600 282,336,100 Government Grant -0000 241,786 Profit / (Loss) on Disposals of Assets 45,397 - Other Income 7,645 796 Total 302,620,418 288,475,375

15. EXPENDITURE 2000 1999 RM RM

Emolument 158,862,846 150,869,396 Fixed Allowance 5,858,463 5,660,793 Statutory Contribution 33,927,166 33,316,997 Overtime Allowance 1,522,951 1,557,258 Other Allowances 7,008,560 24,042,133 Transport and Travelling 4,151,044 3,117,650 Transportation of Goods 888,413 602,258 Communication and Utilities 9,941,712 10,385,390 Rental 52,538,118 51,728,642 Supply of Materials for Maintenance and Repairs 651,622 522,806 Other Supplies 5,006,579 4,551,272 Maintenance and Minor Repairs 5,179,521 4,361,694 Professional Services and Hospitality 19,417,934 15,923,122 Internal Grant 49,748 37,000 Depreciation 17,437,211 14,134,030 Other Expenditure 4,546 1,817 322,446,434 320,812,258

107 16. RECEIVABLE AND OTHER INCOME 2000 1999 RM RM

Total Income (Note 14) 302,620,418 288,475,375

Interest and Interest on Loans (3,981,781) (5,107,967)

Deposits and Prepaid 518,763 (602,637)

299,157,400 282,764,771

17. CASH PAID TO SUPPLIERS AND EMPLOYEES 2000 1999 RM RM

Total Expenditure (Note 15) 322,446,434 320,812,258

Other Fund -0000 (6,000,000)

Depreciation Expenses (17,437,211) (14,134,030)

Sundry Creditors 4,867,498 (8,308,197)

Provision for Audit Fee -0000 1,765

Prior Year Adjustment (587,445) 6,347,687

309,289,276 298,719,483

18. INCOME TAX

All the revenues raised from the operation are exempted from tax.

19. COMPARISON FIGURES

The comparison figures have been rearranged to suit the account presentation for the current year.

108 ANNUAL REPORT 2000 ANNUAL REPORT 2000