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A state of flux

S Saravana Kumar of Lee Hishammuddin Allen & Gledhill believes tax practitioners will be kept busy for the foreseeable future thanks to the change in Malaysia’s tax regime

Please give us an overview of the current legal market in Malaysia and how any recent developments have impacted your practice?

The renewed emphasis on the rule of law and transparency under the new government, as well as the new Prime Minister’s promise that illegally collected taxes will be returned, is encouraging for tax practitioners. We will work alongside the government to effect reforms that will increase efficiency in the tax appeal process and effect institutional reforms to fortify the independence of the judiciary. Such reforms will promote taxpayers’ confidence in the tax dispute resolution process and continue to drive Malaysian tax litigation.

What significant trends exist in the Tax market presently? Are you seeing these just domestically or internationally as well?

Malaysia is the only country in the world that has introduced and then abolished consumer service tax (the goods and services tax (GST) and VAT). The return to the sales and services tax (SST) regime will see tax practitioners advising on legacy issues under the GST regime (significant claims for input tax credits remain outstanding) and transitional issues on the re-implementation of SST.

What are the three biggest challenges to practising Tax in Malaysia at the moment?

Recruiting and retaining new talent remains one of the biggest challenges in managing a tax litigation practice. Tax will not seem like the ‘sexiest’ area of law for fresh graduates, and while there will never be a shortage of fresh hires, maintaining a technically mature and committed team of lawyers will be essential to growing a practice.

Secondly, it is common knowledge that the tax appeal process is inundated with a backlog of cases. Swelling the ranks of the judiciary and the Special Commissioners of Income Tax (SCIT) with legal minds to match the likes of the current judges will be essential.

Finally, educating taxpayers on the importance of obtaining professional legal advice and basics such as keeping proper file records is also crucial in helping them achieve better management of their tax risks.

How does Tax fit into the firm as a whole? Is it easy to collaborate with other teams?

Our tax department is unique in its ability to work independently yet seamlessly when needed with other teams on contentious and non-contentious matters. On contentious matters, we are able to draw on the strength of some of the country’s best advocates in areas such as civil recovery and anti-money laundering proceedings. In an advisory role, the tax team adds on value to the corporate practice through sought-after advice on the tax implications of corporate transactions and activities.

What advice would you give to the next generation of Tax lawyers?

As with any industry, developing and sustaining a great work ethic is essential in preparing you for the rigours of practice in taxation law. Keeping pace with ongoing economic, political and legal trends is also crucial in maintaining relevance. Likewise with understanding your clients’ needs and tailoring your advice accordingly.

What are your predictions for Tax in Malaysia over the next five years?

The tax industry in Malaysia will remain in a constant state of flux in the course of the next five years. As highlighted, the abolishing of GST and reintroduction of SST will bring about legacy and transitional issues. The abolishing of GST has been regarded as necessary due to its wider tax net, which was seen as disproportionately affecting the country’s lower income groups. However, 160 countries worldwide have implemented GST/VAT, and the return of GST in the not-too-distant future cannot be ruled out should income levels rise.