1. Briefly explain background of Malaysian tax system.
The main source of income for the Government in Malaysia depend on the tax revenue.
In 1910, Straits Settlements (Singapore, Malacca, Penang) Legislative Council introduce a draft bill for imposing a tax on income, but faced strong opposition from tax-paying public. So, proposal s to introduce income tax were stated as to "fund the Imperial War Expenditure", not to raise revenue. The public agreed. Then, War Tax Ordinance was introduced, in force up to 1919. It was then converted into Income Tax Ordinance 1920, effective from 1 January 1920. In 1922, taxpayers opposed the Ordinance as the 1922 revenue was used to meet local expenditure rather than to advance the war efforts of the Imperial Government. As a result, the Ordinanc e was repealed in that year also.
Till 1941, a tax on profit and income was reimposed in the Straits Settlement. The Ordinance was renewed in 1942 but the attempts to collect taxes were forestalled by the Japanese Occupation of Malaya during 1942 till 1945 (War War 2).
Post Japanese occupation, the Special Tax Adviser to the Governent, R.B. Heasman, was appointed in 1946 to draft a tax legislation. A comprehensive report was completed in 1947, and the Income Tax Ordinance 1947 took effect from 1 January 1948. This marked the beginning of the modern form of income tax on a permanent basis in Malaya. Even then, the press opinion was hostile to this introduction of income tax.
The provisions of Income Tax Ordinance 1947 were based on the Model Colonial Territories Income Tax Ordinance 1922 (UK). The taxability of income for a year of assessment was covered under sec 31 of the Income Tax Ordinance 1947.
The Income Tax Ordinance 1947 was subsequently replaced by the Income Tax Act (ITA) 1967, came into effect on 1 January 1968. This happen in accordance to the formation of Malaysia in 1963. The Income Tax Act 1967 consolidated the three laws of income taxation existing before...
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