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Need for enhanced tax awareness in F&B industry

  • The authorities should also encourage business operators to declare their tax returns by optimizing the taxation system to take the "underground" operators "above ground". Photo courtesy: Sin Chew Daily

Sin Chew Daily

The inland revenue department (LHDN) is currently running a two-week "Ops Saji" tax recovery operation targeting legal as well as illegal F&B operators failing to pay their due taxes, including eateries, hawker stalls and food processing operators.

The targeted operators are either not registered with LHDN or registered but not declaring their tax returns. Some might have filed their tax returns but shortpay their taxes or do not pay their dues at all.

During the first week of operation, LHDN has paid "courtesy visits" to targeted premises before beginning tax auditing on specifically targeted operators.

LHDN reiterates that the operation's objective has been to enhance tax awareness of relevant operators and remind them of their tax obligations.

Part of the targeted operators could be categorized as "underground economy". Being "underground" doesn't mean they are illegal, but that they are generally small-scale operators with unsteady incomes and have not been registered with the government, making it difficult for the authorities to know about their businesses.

Having said that, the F&B industry is generally perceived as one that is highly lucrative, more so for the unlicensed operators. From the perspectives of national economy, it will be a loss to the country if these operators do not pay their taxes.

It is indeed hard to estimate the exact number of hawkers in this country, licensed or unlicensed. Unlike ordinary wage earners whose incomes are totally transparent, these hawkers must have the self awareness to file their tax returns and pay their taxes as responsible citizens. This will also serve to protect their own interests in future.

In the event these hawkers plan to seek bank loans in future to expand their businesses, their income and financial status will be easily proven if they have declared their tax returns, and this in turn will make them easier to secure bank loans.

Moreover, certain fees are deductible during tax declaration, and traders must not make "increased burden" an excuse not to file their returns.

However, some F&B operators feel that LHDN should be more flexible given the unfavorable economic climate at this moment. They argue that they are not making as much money as outsiders would believe and many are struggling like the rest of the people.

Meanwhile, some say they have already registered with the authorities since the implementation of GST, and have been filing their tax returns conscientiously, showing that they are indeed law-abiding citizens.

To be fair, LHDN's actions are not that drastic after all, as F&B operators have been given ample time to prove their tax status, and should extend full cooperation in LHDN's auditing operation.

From what we understand from some industrial organizations, their members have been encouraged to cooperate with LHDN, as they have nothing to hide if they do not break the law.

To promote a fairer taxation environment, besides tax auditing, perhaps the authorities should adopt other approaches to encourage business operators to declare their tax returns, for example by optimizing the taxation system, to take the "underground" operators "above ground".



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