MCA highlights concerns over tax refund delays affecting businesses

MCA is deeply concerned about the challenges confronting businesses due to delays in tax refunds.

The combination of global economic uncertainty, adjustments in tariff policies, and rising operational costs has placed corporate cash flow under unprecedented strain.

We share the sentiment expressed by Datuk Ng Yih Pyng, President of the Associated Chinese Chambers of Commerce and Industry of Malaysia (ACCCIM), that prolonged delays in refunds are akin to tightening another strap around the breathing tube of businesses.

We believe the issues identified through ACCCIM’s engagement are not limited to specific sectors, but represent a widespread challenge across industries.

While it is the duty of businesses to pay taxes, it is equally the government’s commitment to process refunds in a timely manner.

When obligations are met by businesses while commitments are delayed by the administration, trust is gradually eroded in the process.

There appear to be three main factors contributing to this situation:

– First, the refund delays may stem from fiscal management priorities. In managing competing demands, the government may understandably prioritise allocation of funds towards major infrastructure, social assistance, or debt servicing. However, when tax refunds are repeatedly treated as deferrable payments, short-term fiscal stability may come at the expense of business liquidity and market confidence.

– Second, administrative efficiency within the tax authority could be improved. Some taxpayers have reported that even with complete documentation, they face multiple layers of verification, manual processing, and procedural reviews, extending refund timelines to six months or longer. The reliance on legacy systems and manual processes seems to be creating bottlenecks inconsistent with modern administrative standards.

– Third, there may be inconsistencies in policy implementation and communication gaps. Varying interpretations across departments appear to be creating additional compliance burdens for businesses. Coupled with insufficient integration of digital platforms, companies find it difficult to track refund status, leading to operational uncertainty and anxiety.

These challenges are creating significant difficulties for businesses:

– Cash flow constraints are particularly challenging in the current high-interest environment. Many businesses are compelled to seek costly short-term financing to bridge gaps, effectively meaning the government is using business funds interest-free during the delay period.

– Small and medium enterprises are disproportionately affected. With limited financial buffers, delayed refunds can directly impact their ability to meet payroll, purchase supplies, and maintain operations. Some have even had to consider staff reductions or postpone expansion plans.

– Investment confidence is being affected. When international investors observe inefficiencies in tax administration, it raises concerns about the predictability of Malaysia’s business environment.

– Supply chain and pricing pressures are emerging. As businesses face cash constraints, some may need to adjust pricing or pass on costs, potentially contributing to inflationary pressures.

– Most importantly, trust is being undermined. When administrative practices don’t match policy commitments, it creates a credibility gap that can have long-term consequences for the relationship between business and government.

In response to these concerns, we would like to propose five constructive suggestions:

– Implement an automated refund timeline framework, similar to practices in other countries. Establishing clear processing deadlines (such as 90 days) with appropriate compensation for delays could help address administrative inefficiencies while demonstrating respect for business concerns.

– Develop a comprehensive e-Refund tracking system through the Inland Revenue Board. A transparent digital platform would allow businesses to monitor refund status in real time, reducing uncertainty and improving communication.

– Introduce tiered processing with fast-track options for compliant businesses with clear financial records. This would reward compliance and reduce unnecessary bureaucracy.

– Consider establishing a dedicated refund account within the Treasury. Ring-fencing funds for refund purposes would ensure their availability and enhance transparency in budget execution.

– Strengthen regular engagement with ACCCIM and other business associations. Creating a structured coordination platform between the Treasury, business representatives, and the tax authority would allow for quarterly review of refund processes and ensure business perspectives inform policy implementation.

The relationship between taxation authorities and businesses is built on mutual understanding and trust.

While businesses consistently meet their tax obligations, it is equally important that the administration honours its commitments regarding refunds.

Through constructive dialogue and practical improvements, we believe we can work together to restore confidence and strengthen Malaysia’s economic foundation.

DATUK DR MAH HANG SOON

MCA Deputy President