IRB to act against KDSB?

IRB to act against KDSB over tax arrears
By Clara Chooi July 14, 2010

KUALA LUMPUR, July 14 —The Finance Ministry announced today that the Inland Revenue Board (IRB) was taking “appropriate action according to the provisions in the law” against turnkey contractor Kuala Dimensi Sdn Bhd for failing to settle RM328.4 million in taxes.
Deputy Finance Minister Datuk Dr Awang Adek Hussin told Parliament today that the IRB had no provisionary powers under the Income Tax Act 1967 to confiscate assets or cash from KDSB, the key contractor in the controversial Port Klang Free Zone (PKFZ) project.

“However, the IRB is taking appropriate action according to the provisions in existing laws,” he said in his response to an adjournment speech by Tony Pua (DAP-PJ Utara) this evening.

In his speech, Pua questioned IRB’s apparent lackadaisical and carefree attitude towards KDSB by allowing it owe such a high amount in backdated taxes over the past 13 years.

“The IRB’s attitude has led to a lack of public confidence towards the government. It looks as if the government is partial towards companies owned by influential tycoons. Meanwhile, the common man who works hard to support his family is punished quickly by the IRB to prevent him from evading taxes.

“We hope that the IRB will take stern action quickly to collect these tax arrears from KDSB, including taking court action,” he said.

KDSB is owned by Bintulu MP and Barisan Nasional backbenchers club chairman Datuk Seri Tiong King Sing.

Pua further questioned why the board had not exercised its powers under the Income Tax Act 1967 to collect the tax arrears before any appeal or dispute was made.

“Why did the IRB not seek court intervention to confiscate the cash and assets of the KDSB, worth as much as RM932 billion, to settle the arrears?” asked Pua.

He pointed out that KDSB should be bound by Section 103A(2) of the act, which stipulates that “tax payable under an assessment for a year of assessment shall be due and payable on the due date whether or not that company appeals against the assessment”.

“This means that whatever the assessment made by the IRB should be paid by the individual or the company although the said party plans to appeal or dispute the amount quoted,” Pua asserted.

He said that on July 23, the IRB had produced a letter to the Port Klang Authority, ordering it to stop payment to bondholders in the troubled PKFZ project.

The IRB had then invoked the law to compel the PKA to act as a collecting agent and remit the RM328.4 million owed in outstanding taxes.

“But after an appeal was made by the PKA following protests from the bondholders, the IRB had on June 30, retracted its orders to the PKA.

“According to the KDSB chief executive officer Datuk Faisal Abdullah, the outstanding taxes in question came from came from accounts in the years 1997 and 1998.

“The KDSB further disputed the amount quoted by the IRB,” said Pua.

In his response, Awang Adek explained that KDSB had submitted its tax returned for the years 1996 until 2006.

“In the years 1996 and 1999, the KDSB was subjected to income tax, which it settled in full. For the other years, KDSB was not taxed as it reported high losses.

“For the assessment year of 2000, which is the waiver year, however, KDSB reported unusually high profits and the IRB found there were discrepancies in the information it was furnished. Due to this, the IRB initiated an investigation on the firm on Nov 1, 2007,” he said.

He added that the investigation showed that KDSB had under-reported its revenue and made unlawful expense claims under the act.

“However, the KDSB disputed our findings and failed to provide documents to prove its claims,” he said.

Awang Adek said that on June 18 this year, the IRB produced an additional assessment of taxes under Section 91 of the act, which amounted to RM328.4 million.

“Since this issue was brought up in 2010, the issue of the tax arrears for the past 13 years does not arise,” he said.