Putrajaya should have pursued the specific religious bodies that had allegedly abused their tax exemption instead of introducing a new blanket tax that penalises all faith organisations, non-Muslim and Muslim groups have said.
Malaysian Gurdwaras Council president Jagir Singh said the government’s justification that the new law was meant to address alleged cases of religious bodies using their funds to profit and give huge allowance to their committees was “deeply-flawed”.
“It may be just 1 per cent of the total religious bodies, that may have made profit by buying and selling property. But you are punishing 99 per cent of the churches, temples, gurdwaras, by this amendment which is applicable across the board,” he told Malay Mail Online in a statement when rejecting the government’s justification.
In listing out three other reasons why he felt the justification for restricting tax exemption for religious bodies was flawed, Jagir highlighted that none of the local gurdwaras — places of worship for the Sikh community — pay any allowances to their committees, which he believed to be the same position for other religious bodies.
“Many of the places of worship are in poor state and require renovations and need money income. The amendment is also punishing these poorer places of worship.
“Most bodies that do invest, derive very small profit, which is channelled back into the activities of the religious body,” said Jagir, who is also the vice-president of non-Muslim group Malaysian Consultative Council of Buddhism, Christianity, Hinduism, Sikhism and Taoism (MCCBCHST).
He also questioned which religious bodies were making huge profits with their funds through property transactions, adding that the government should only have “targeted” these bodies for action.
Jagir said the Inland Revenue Board’s (IRB) Tuesday explanation that the tax law change was meant to clear up previous confusion was “mind-boggling”, noting that there was no such confusion in the past and the amendment was “clearly aimed at narrowing down severely instances when exemption was granted to religious bodies, to now only for direct contribution by donors”.
The amendment — which effectively removes full tax exemption status — appears to cover both non-Muslim and Muslim religious bodies, he said when noting that most mosques and Muslim welfare bodies would fall under state Islamic law and enjoy tax exemption as government bodies.
Stressing that consultation with stakeholders was mandatory, he noted with regret that none of the religious bodies was consulted before the government introduced the amendment to the Income Tax Act.
“We therefore call upon the government to repeal this ill-advised amendment and revert to the situation prior to the amendment,” he said.
Jagir was responding to Finance Minister II Datuk Johari Abdul Ghani’s explanationthat the amendment was meant to plug a legal loophole and ensure public donations to religious bodies are used solely for religious purposes instead of profit-making.
The IRB had said donations to all religious bodies for religious purposes will remain tax exempt after the amendment, but said income arising from business activities or rental will be taxable.
Hindu Sangam president Datuk R. S. Mohan Shan noted that religious bodies registered under the Registrar of Societies (RoS) would have to submit their accounts yearly, adding that the amendment was unnecessary as both the RoS and IRB could probe complaints on individual cases of abuse.
“Because not everybody doing that… and for that reason you want to change the law, it’s not right. Not happening with the majority, just one or two cases, you can’t punish the rest genuinely running associations,” Mohan, who is also MCCBCHST deputy president, told Malay Mail Online when contacted.
With the amendment, the majority of the religious bodies that are genuinely serving the community will now have to start paying tax on profits that were meant to be used for charitable purpose, he said.
“These committees are good enough to save money which are collected from donation, then they invest in something to generate funds to run the association; the money received they don’t take it into their pockets, they are using it to serve the community and maintain worship places. To maintain temples or worship places, the cost is very high, so they should try to generate funds,” he said, having noted that the government does not fund places of worship.
Hindu Sangam will write to the finance minister to say that those genuinely managing religious bodies’ funds for religious purposes should not be punished, he said.
He also said that donors who give donations for religious purposes should also enjoy tax exemption on their contributions instead of only when it is for religious bodies’ building funds, noting that this had already been raised several times to the government but had yet to be introduced.
“They are giving donation for religious purposes, for worship purposes, why should they be taxed for that,” he said when calling for the exemption, adding: “And it shouldn’t be for one religion only, it should be for all religions.”
Rev Eu Hong Seng, chairman of the country’s umbrella body for churches Christian Federation of Malaysia, similarly said the government should have audited those allegedly abusing the income tax exemption instead of introducing the law change.
“We have no idea who he is talking about… If there are people not doing it properly, just investigate these people. So what they should do is investigate those who abuse the system rather than have blanket ruling that affects everybody,” he told Malay Mail Online when contacted.
Eu said CFM members will have to seek further clarification from the Finance Ministry next month, noting that the situation was not as simple as envisioned by IRB.
“Like interest from fixed deposit, these are ploughed back for charitable purposes; so rental that comes from property owned by religious organisations, these are ploughed back for charitable purposes; so it’s not so simple to say they should be taxed, so we need to clarify with them,” he said.
Mohd Azmi Abdul Hamid, the president of the Malaysian Consultative Council of Islamic Organisation (Mapim) that has around 800 individual members and 80 member organisations, said he was in the dark about the allegations that any religious bodies had abused the tax system.
“If it’s kind of blanket ruling that proceeds coming from business to organisations is taxable, I think it’s not fair on the organisations, most of the religious organisations — very few got enough funds to run their activities.
“On that basis, I think we do not see this need for amendment, but more to find the cases that is proven of abuse of funds or proceeds for personal interest,” he said.
“I suppose if the funds are being used to do economic activities and the profit accumulated from that activity is proven to be used solely for religious activities, then it should not be burdened to be incurred as taxable income,” he said, adding that Mapim will either wait for a briefing or approach the Finance Ministry directly for clarification.
Tan Hoe Chieow, president of the Federation of Taoist Associations Malaysia (FTAM) that has over 400 members including state associations, said he hopes the government will reconsider the amendment where religious bodies have to pay some tax, adding that the group prefers the status quo where all income received by religious bodies are tax exempt.
“What we worry is incurring extra cost in engaging public accountants to do our accounts, now it’s done by committee,” he said, noting that associations’ accounts are currently prepared internally by volunteers acting as treasurers.
“Religious bodies, we are cash strapped, we have to raise funds from devotees, so now it’s an added burden,” the MCCBCHST vice-president told Malay Mail Online when contacted.
“Any new amendments will face a lot of teething problems, so we will help our members on the teething problems and if need be, to have representative members to meet up with the ministry,” he said, adding that an estimated 10,000 Taoist bodies nationwide — including those not directly under FTAM — would be affected by the law change.
Source : IDA LIM @ The Malay Mail Online