Taxation

Abstract

Taxation is essential for sustainable economic development and tax administration is a basic function of a successful state. Electronic system for filing and paying taxes, can be both benefit tax authorities and tax payers. Malaysia’s experience has shown the opportunities that technology can provide as well as the challenges that may emerge as the users are phasing in the change over time. Thus, in this study, the BeWise Smartphone App was developed based on current LHDN-Malaysia income tax rules and regulations. The BeWise Smartphone App is a mobile application which taxpayers can install from the Apple Store on their mobile device (Apple iPhone, iPad/iPad mini), regarding tax and regulation in Malaysia based Income Tax Act 1967. The rapid change in the mobile industry provides excellent opportunity for income tax calculator. This income tax calculator app is very useful for salaried people to compute their annual income tax and for tax filing. It is very simple and easy to use.

Chapter 1

Introduction

1.1        Background and Problem Statement

Across the globe, 3.4 billion people subscribe to a mobile service, with mobile providers estimated to contribute 1.4% of global gross domestic product (GDP). These services have been shown to increase investment and technological development, reduce income inequality and poverty and increase tax revenue. The mobile sector has a key role to play in economies across the world, and especially in emerging markets, where technology can support inclusive socio-economic development. Mobile services have wide-ranging direct economic impacts and positive externalities, thus contributing to innovation and enhancing labour productivity.

The use of technology to foster tax compliance by the United States Internal Revenue Service (IRS) shows that more developed economies also face challenges in increasing the use of e-filing. In 2004, Malaysia’s Inland Revenue Board (IRB) spearheaded an initiative to implement a system for filing and paying taxes that would promote electronic, paperless transactions. The study also draws upon research by academics and international organisations on considerations in taxation design to formulate a set of recommendations that build a framework for future taxation of mobile services. e-Filing is a most convenient way to submit Income Tax Return Form (ITRF). It also saves a lot of time and very easy to complete it online rather than conventional methods by manually filling up the form because all the calculation is automatic. Taxpayers are encouraged to complete their Income Tax Return From (ITRF) via e-Filing.

In 2012, Brazil has an extremely complex and high taxation burden. In the case of mobile broadband, it has been estimated that tax increases the cost of use by 40 per cent and the cost of an average handset by 57 per cent. Further, in all the scenarios considered, the tax reduction on mobile broadband would be more than offset by the additional tax generated arising from increased consumption of the service and from wider economic growth.

Income tax calculator by a mobile app is a new system which increase the quality and quantity of information available to tax officers, enabling them to complete transactions faster and more accurate. This mobile app is well designed electronic systems which can lower corruption by reducing face to face interactions. Taxes and fees levied on mobile services appear to be increasing over time and at a faster rate than other sectors in the economy.

1.2        Project Rationale

The purpose of the project is to develop income tax calculator mobile app which taxpayers can install from the Apple Store on their mobile device (Apple iPhone, iPad/iPad mini), regarding tax and regulation in Malaysia based Income Tax Act 1967. Moreover, this mobile app can allow Malaysian citizen to utilize the incentive and relief provide by government to maximize citizen net income. Through efficient tax planning individual can minimize their income tax payment and maximize their wealth. The mobile sector is widely recognised as generating externalities that contribute to economic growth and productivity. Therefore, a central issue in the design of taxes and fees levied on this sector should be to maximise the economic opportunity from these effects within the wider framework of an effective and efficient tax system. Public authorities should also consider the deadweight loss caused by taxes and fees. This can be observed by exploring the output change resulting from the introduction or change of a tax or fee. The larger the output change, the more likely it is that the tax or fee is relatively more distortionary.