KUALA LUMPUR, April 16 — The Malaysian Medical Association (MMA) said it is deeply disappointed by a news article today which seemed to imply that tax evasion by doctors was widespread.
MMA president Dr John Chew said the association believed that the situation was quite the opposite as doctors in general were extremely law-abiding, and had been meticulous about declaring income and paying all taxes owed.
“We feel that a gross injustice had been done with this misreporting. We trust the director-general (and chief executive officer Datuk Sabin Samitah) of the LHDN (Inland Revenue Board) will clarify his statement if he has been misquoted,” he said in a statement today.
Dr Chew alluded to a report, quoting Sabin, which appeared to imply that specialist doctors in private practice had been systematically and maliciously defrauding the government of tax revenue by wrongly declaring their income under their private limited companies, rather than in their individual names.
The MMA president said that the formation of a private limited company by doctors was and is entirely legal.
“No law restricts or prevents doctors from forming such companies. The LHDN accepts this,” Dr Chew said.
Doctors, he explained, were generally not very knowledgeable about tax, accounting and such matters, which prompted them to employ people like accountants and tax consultants.
“It is generally these professionals who approach their doctor clients and advise them to form companies to facilitate tax planning. To ignore the advice of a professional that I have hired to counsel me would be foolish,” he said.
Dr Chew said that since independence, doctors in private practice had been forming private limited companies, and they had been submitting their taxes in the prescribed fashion since then.
“And the LHDN (and its predecessor, the Income Tax Department) has been accepting these returns. Many doctors have been thoroughly audited over the years. The LHDN has always been aware of the use, by some doctors, of the private limited company,” he said.
Dr Chew noted that in the past, company taxes had been the same as personal taxes, thus, the tax savings would have been minuscule, if any.
“In fact for the last two years, company tax had been higher than personal tax. In the recalculation, the doctors had over paid their taxes and will be getting a refund. This suggests that tax avoidance was not the primary motivation for setting up companies,” he said.
Recently, he said, the LHDN decided that some private specialists, having signed contracts to supply services to hospitals in their private capacities, should not pay that money into their company accounts, but instead declare it as personal income.
“Since this was a significant and systemic change, the MMA engaged with the LHDN for clarification. We came to what we believed was a satisfactory resolution,” he added. — Bernama