KUALA LUMPUR (May 23): The Royal Malaysian Customs Department is set to launch a new approach known as Compliance Verification Audit (AViP) in July this year to promote self-compliance and encourage voluntary disclosure.

To reduce the risk of revenue leakages, the Customs Department changed its strategy from detecting leakages to preventing leakages this year, Customs Compliance Management Division director Almirulita Mohd Yusoff said in her opening speech at a seminar.

“The AViP approach is more facilitative, aimed at helping to rectify any errors and providing advice for business entities to understand and comply with the laws and regulations administered by the Customs Department,” she said.

Audit officers will advise entities to pay any tax or levy shortfalls voluntarily for any discrepancies in revenue discovered under the new approach, Almirulita said. Refusal of voluntary disclosures will result in a full or field audit, she said.

Furthermore, the AViP approach will come with incentives for voluntary disclosure, such as blanket approval for penalty remission and instalment payment on bill of demand, said the division’s senior assistant director Chew Han Aun.

Chew acknowledged that businesses often face cash flow issues, and noted the AViP initiative will allow applications for instalment payments to settle their tax shortfalls based on their financial capabilities.

Customs Department should introduce permanent voluntary disclosure programme — Grant Thorton

While the initiative is seen as a positive development, Grant Thorton Taxation Sdn Bhd’s tax advisory and compliance senior executive director Alan Chung has suggested the Customs Department introduce a permanent voluntary disclosure programme.

Presently, there is no policy that allows remission.

“If they come forward to rectify the mistake, what assurance do they have in terms of reduction for penalties?” he told The Edge in an exclusive interview. “In most instances, they would rather wait for a full audit instead of coming forward.”

A permanent voluntary disclosure programme would allow taxpayers to rectify and move forward to pay the additional taxes correctly. “If not, people will continue with what they are doing, and [the government] will be left without the taxes,” he said.

Such a long-term initiative would also benefit the government by allowing it to collect more taxes despite lower penalties, Chung said.

“It is almost zero resource — [the authorities] don’t have to throw in auditors and profiling team and go for a full audit before they can find a non-compliance,” he said. “The target is for the government to capture the taxes, not the penalties.”

The Customs Department is targeting revenue collection of RM56 billion in 2024. Last year, it reported revenue of RM55.1 billion, exceeding its target of RM53.5 billion.

In June 2023, the department launched a Special Voluntary Disclosure and Amnesty Programme to encourage taxpayers to declare any indirect taxes, duties and levies that have been underpaid or misreported.

The programme, which offers a full penalty waiver, will end on May 31, 2024.