a. Under Section 104 of the Income Tax Act 1967 and Section 22 of the Real Property Gains Tax Act 1976, individual or company directors would be barred from leaving the country if they failed to settle their taxes. Director General of Inland Revenue (DGIR) can issue restriction certificates to prevent a person from leaving the country by sending the certificate to the last known address of the taxpayer personally or by a registered post. Tax defaulters must settle the fully amount of taxes owed as stated on the certificates issued before they can apply for the travel restrictions to be lifted. If the tax defaulters failed to settle the full amount, they can still apply for a provisional or temporary release in accordance with the prescribed conditions. Temporary release letter will be issued to the taxpayer who contains an approved limited release period. As at June 2016, a total of 128,165 certificates of restrictions on travel abroad by DGIR with tax arrears involved amounting to RM3.4 billion are still in force.
b. Audit findings revealed that travel ban management under Section 104 of the Income Tax Act 1967 and Section 22 of the Real Property Gains Tax Act 1976 from the aspect of enforcement actions taken by the Inland Revenue Board of Malaysia (IRBM) is satisfactory. This is shown by the increasing number of cases registered plus the amount involved on income and real property gains tax for the year 2013 to 2015. However, there were some aspects in the travel ban‟s implementation that need to be given due attention as follows:
i. Notice of Legal Action/CP91 and CKHT 16 was not issued to taxpayers subjected to travel restrictions, which accounted for 704 cases of individuals with restrictions amounting to RM24.96 million, 49 cases for company directors with restrictions amounting to RM17.30 million and 194 cases for foreigners with restrictions amounting to RM12.97 million;
ii. delay in the issuance on Notice of Legal Action/CP91 and CKHT 16 involving 288 cases of individuals with restrictions amounting to RM11.38 million (delay between 3 days to 26 years 9 months and 18 days); 3 cases of company directors with restrictions amounting to RM62,804 (delay between 13 days to 1 year and 8 months) and 75 cases of foreigners with restrictions amounting to RM6.76 million (delay between 6 days to 9 years and 4 months);
iii. as at the date of Audit being carried out, the enforcement of travel restrictions is yet to be approved in Self-Assessment System for Non- Company in lieu of 180 cases involving 137 individual taxpayers, 10 cases of company directors and 33 cases of foreigners with restrictions amounting to RM11.02 million;
iv. status on several tax defaulters who already being barred from leaving the country were not updated in the Immigration Status on Travelling Overseas System, involving 147 cases of individuals with restrictions amounting to RM6.82 million and 19 cases of company directors with restrictions amounting to RM13.69 million;
v. a civil suit has yet to be taken against the tax defaulters with 1,600 cases even though they have been barred from leaving the country. These include cases of individuals, company directors and foreigners with restrictions amounting to RM95.25 million;
vi. temporary relief had already been approved even before the agreed payment has been received from taxpayers involving 11 cases of individuals with restrictions amounting to RM1.42 million;
vii. non-compliance with the conditions set by IRBM among taxpayers who have been given temporary releases, which includes failure to make installment payments amounting to RM1.06 million and prescribed installment were underpaid amounting to RM29,801 involving 32 individual cases with restrictions amounting to RM1.58 million; and
viii. as many as 14 individual cases and one foreigner case with travel restrictions amounting to RM990,804 have managed to receive a second temporary release despite the fact that they failed to comply with the conditions set by IRBM upon their first temporary release.