Jeyapalan Kasipillai

Travel demand management: Lessons for Malaysia

Growth in the number of motor vehicles has exacted costs on both the Malaysian economy and environment. For reasons such as increasing disposable incomes and poor management of the public transit system, the number of vehicles has grown unabated and, in fact, is aided by various contradictory policy measures such as national car projects and existence of fuel subsidies. A phased, 5-pronged Transport Development Management-based approach is recommended towards targeting a sustainable transportation system in Malaysia: 1) alteration of charges on road taxes/car insurance, 2) elimination of fuel subsidies, 3) imposition of fuel taxes and amendments in the bases for car taxation, 4) congestion charging, particularly in Kuala Lumpur, and 5) national road pricing. This move towards an eventual sustainable transportation system is presented for consideration.

Influence of Ownership Structure and Corporate Governance on Effective Tax Rates and Tax Planning: Malaysian Evidence

The effective tax rate (ETR) may be used to measure the impact of changes in a countrys tax policy on a companys tax burden. Our study examines if the ownership structure and the firms corporate governance mechanisms affects the ETRs and the tax planning of Malaysian public listed companies (PLCs). Using a sample of 345 PLCs, we find that government ownership, management power, and total accruals are important determinants of companies ETRs. Additionally, the results show that companies that mitigate the agency conflicts with lower total accruals are more likely to have lower ETRs, and executive compensation is a good predictor of long-term tax planning by PLCs. Although preferential tax treatments for certain industries like tourism and manufacturing help lower ETRs, our findings suggest industry firm size is related to ETR and it is a political asset that helps to maximize the countrys wealth. The effective tax rate (ETR) may be used to measure the impact of changes in a countrys tax policy on a companys tax burden. Our study examines if the ownership structure and the firms corporate governance mechanisms affects the ETRs and the tax planning of Malaysian public listed companies (PLCs). Using a sample of 345 PLCs, we find that government ownership, management power, and total accruals are important determinants of companies ETRs. Additionally, the results show that companies that mitigate the agency conflicts with lower total accruals are more likely to have lower ETRs, and executive compensation is a good predictor of long-term tax planning by PLCs. Although preferential tax treatments for certain industries like tourism and manufacturing help lower ETRs, our findings suggest industry firm size is related to ETR and it is a political asset that helps to maximize the countrys wealth.

R&D reporting practice: case of a developing economy

Purpose – The purpose of this paper is to provide empirical evidence on the level of research and development (R&D) reporting practices by public listed companies (PLC) in Malaysia. R&D activities initiated by a firm are an important signal for a firms potential future value‐creation. Due to the uncertain nature of the outcomes of R&D, many companies report R&D costs as an expense. These costs are immediately written off from the balance sheet. However, this practice underestimates the intellectual capital accumulation of the firm and does not accurately capture its equity strength.Design/methodology/approach – The PROBIT model was used to empirically evaluate the R&D reporting practices among PLCs in Malaysia. The impact of total assets, and profit before tax on the R&D reporting patterns among Malaysian PLCs were also investigated. This study was conducted on 230 PLCs from the Main Board of Bursa Malaysia (previously known as the Kuala Lumpur Stock Exchange) for the 2004 reporting year.Findings – Empir...

Influence of Ownership Structure, Corporate Governance, and Culture on Tax Policy: Evidence from Malaysia

This study examines whether the tax avoidance strategies that reflect special tax provisions provided to industries is determined by the ownership structure and the firm’s corporate governance mechanisms including incentives given to executives. The study is conducted in Malaysia because it implemented a tax policy to gradually reduce the corporate tax rate from 40% to 25% over a period of ten years. The sample consists of 397 Malaysian public listed companies for whom data is available for 2007-2008. The study finds that government ownership, management power, and agency issue proxies’ the free cash flows and total accruals are determinants of companies using effective tax rates (ETR) as a conduit to affect their market values. Additionally, the results show that companies that mitigate the agency conflicts with lower free cash flows and total accruals are more likely to have lower ETR, and these are also good predictors of long-term tax planning. These findings are explained in the context of making Malaysia an attractive destination for investments as well corporate taxes being a reliable source of government revenue.

Tax implications of mergers and acquisitions involving financial institutions

In recent years, there have been a significant number of mergers and acquisitions (M&As) among financial institutions in American, European as well as in Asian countries. The Malaysian government too has encouraged mergers among financial institutions since the 1997‐98 financial crisis so as to create stronger and more viable business entities. Through M&As Malaysian financial institutions are expected to emerge more resilient to withstand the pressures and challenges arising from the increasingly globalized business environment. Numerous tax considerations arise as a result of mergers and acquisitions (M&As) and this has financial implications for the new entities. This paper examines broad tax issues involving M&As. The types of taxes that would become payable include income tax, real property gains tax and stamp duty. Income tax effects include deductibility of payments for termination of employees, legal fees, bad debts and treatment of business losses as well as capital allowances. Aspects involving stamp duty payment are also analyzed. Mergers and acquisitions inevitably involve a transfer of shares or property and as such the property gains tax issues are also addressed.

Finally, a Goods and Services Tax for Malaysia: A Comparison to Australia's GST Experience

Malaysia had two attempts since 2005 to introduce a consumption tax, and on the third and finally successful attempt, its Goods and Services Tax Act 2014 took effect from April 2015. Similarly, Australia’s path to a broad‑based consumption tax was hard fought, with three attempts to 1981 by then Coalition Treasurer, John Howard. The next proposal in 1985 by Paul Keating as Federal Treasurer failed through lack of internal party support and an unconvincing argument of tax efficiency over regressivity. The 1993 attempt by then Federal Opposition leader, John Hewson had a goods and services tax (GST) on the party platform, but he failed to win over the electorate. Australia’s GST was finally implemented by the Howard Government in 2000.This article concerns an investigation into Malaysia’s recent introduction of a GST and seeks some answers to explain the issues delaying its previous attempts. Australia’s GST experiences from 1985 to 2000 are compared to Malaysia’s delayed introduction of the GST over the period 2005 to 2014 and its implementation in 2015. The focus, in particular, is on two issues underpinning the delays: tax architecture and GST educational support. Comparative data is sourced from academic journals, Malaysia’s mainstream newspapers and online commentaries. Findings suggest that a key factor for Malaysia’s delayed GST includes flawed tax architecture, as income tax rates were pre‑emptively lowered in anticipation of the passage of the second, failed attempt in 2009 at passing a GST Bill through the Malaysian Parliament. By contrast, Australia’s tax architecture was not compromised in the same way as cuts to income tax rates and its new GST regime were legislated concurrently for commencement in 2000. Further, concerns raised by the Malaysian electorate indicate that clearly targeted GST educational programs are necessary for the continuance of effective implementation.