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Income Tax Laws – I

Notes hand, encompasses the past, present and future. This includes tracking past sales, deductions,
assets and more, making current tax payments and preparing tax documents for any future
payments that must be made.
While there are plenty of differences between tax planning and tax management, there is also
one primary similarity. The primary similarity between tax planning and tax management is
that tax planning is a subset, or a part, of tax management. When an individual or business is in
the process of tax planning, they are also taking into account all of the aspects of tax management,
including tax deductions, proper auditing of the accounting files and records, putting together
and filing the tax return documents on time and planning for tax scenarios that may come up
during that particular tax year.

Self Assessment

State whether the following statements are true or false:
13. Poor tax management may lead to levy of interest, penalty, prosecution, etc. In some cases
it may lead to heavy financial loss if proper compliance is not made.
14. Tax planning is a requirement for either a business or individual.
15. Tax management on the other hand is about avoiding the payment of interest or fees for
not abiding by the tax laws and regulations.

Case Study Tax Avoidance or Tax Evasion

n. Khir, the company accountant, was deep in thought in his office. His friend, Ravi,
who was passing by Khir’s office, saw him through the glass window. On seeing
Ehis worried look, Ravi knocked and entered.
“What is haunting you? Immersed so deeply in something? What is in your mind,” Ravi
asked.
Khir replied, “Our human resources manager is recruiting some software employees
from India and has assigned me the job of recommending the most tax efficient remuneration
package equivalent to RM 200,000 per annum. To attract expatriates, the manager feels
that they should pay lower income tax as compared to others earning the same level of
income.”
“How is it possible for us to pay lesser income tax for the same level of income? Is it not
tax evasion?” Ravi asked. He cautioned Khir that tax evasion was illegal and both
employees and the organisation would be penalised for this by the Government for
violating the income tax laws. Moreover, tax evasion was unethical and also a crime
against society.
Khir explained, “Ravi, yes, tax evasion is illegal and punishable. But tax avoidance is not
punishable. In fact, tax law encourages assessors to plan their taxes and pay lesser tax by
properly applying the relevant sections of the Income Tax Act.”

”Is it so? It is interesting. Could you please elaborate? I am also an expatriate employee
and I want to know more about this,” Ravi replied.
Khir continued, “I think our employees especially those who draw more than RM100,000
per annum should be advised on this tax avoidance and tax planning techniques because
Contd...

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