Taxation In Taxation

Introduction

Tax is a one of important portion in one country that can effected the economics direct or indirectly. Tax can identified as a certain amount that must be paid by the citizens of the country and also can defined an amount of money that people and business must pay towards a country’s expenses that is taken by the government from people’s salaries or income or from the profit of the business or from the sales of goods and services. Taxation is one of the important elements in managing national income, especially in developed countries and has played an important role in civilized societies since their birth thousands years ago. Tax is defined as ‘a compulsory levy, imposed by government or other tax raising body, on income, expenditure,

It is means, not all disbursement to the government consider as the taxes for example, toll. The main objective of imposing certain taxes on the public is to generate revenues for the government for public expenditure (Singh, 1999; Shanmugam, 2003; Lymer and Oats, 2009: 2).

The main objective of certain taxation that apply to the public is to gain the profit or revenue to the government for public expenses. However, the other objectives is to reduce the inequality of redistribution of income and wealth so that the gap between the richer and the poorer will be imperceptible.

The current tax that practice in Malaysia was introduced by the British colonial government in the Malay Peninsular in 1948, in Sabah and Serawak in 1957 and in 1961 respectively. In 1967, the income tax laws were associated and reviewed to created a unified federal income tax law which was endorsed by the Parliament and became effective though out Malaysia and this new regulation was called as the Income Tax Act

In 2005, tax revenue contributed 75.81 % of the national income (MOF, 2006), while non- tax revenue contributed 24.19% of the total income. Based on the total tax revenue, direct tax has been the biggest contributor at 50.37% while the balance was made up of indirect taxes at 25.44% (Abdullah Al-Mamun, Jan 2014).

The types of taxes in Malaysia can divided into two categories :

1. Direct taxes which is administered by the Inland Revenue Board (IRB).

2. Indirect taxes which is administered by the Royal Malaysian Customs (RMC).

Personal Income Tax

Personal income tax is a tax for individual when they have the income that accrued or obtained from Malaysia or received in Malaysia from outside Malaysia for a year assessment is taxable in Malaysia. For example, a Malaysian, who works in London, received his income or salary when he was in Malaysia and he was taxable in Malaysia. A resident individual is subject to tax on income accruing in or derived from Malaysia; and income received in Malaysia from outside Malaysia, while a non-resident individual is subject to tax on income accruing in or derived from Malaysia (ZAKARIA,