The hidden costs of Malaysia’s revenue leakage explained

Free Malaysia Today

FMT explores how tax evasion, excise fraud and corruption are costing the nation billions in revenue, and the potential ramifications of this.  Read More: https://www.freemalaysiatoday.com/category/nation/2025/10/13/the-hidden-costs-of-malaysias-revenue-leakage-explained  Free Malaysia Today is an independent, bi-lingual news portal with a focus on Malaysian current affairs.    Subscribe to our channel - http://bit.ly/2Qo08ry   ------------------------------------------------------------------------------------------------------------------------------------------------------ Check us out at https://www.freemalaysiatoday.com Follow FMT on Facebook: https://bit.ly/49JJoo5 Follow FMT on Dailymotion: https://bit.ly/2WGITHM Follow FMT on X: https://bit.ly/48zARSW  Follow FMT on Instagram: https://bit.ly/48Cq76h Follow FMT on TikTok : https://bit.ly/3uKuQFp Follow FMT Berita on TikTok: https://bit.ly/48vpnQG  Follow FMT Telegram - https://bit.ly/42VyzMX Follow FMT LinkedIn - https://bit.ly/42YytEb Follow FMT Lifestyle on Instagram: https://bit.ly/42WrsUj Follow FMT on WhatsApp: https://bit.ly/49GMbxW  ------------------------------------------------------------------------------------------------------------------------------------------------------ Download FMT News App: Google Play – http://bit.ly/2YSuV46 App Store – https://apple.co/2HNH7gZ Huawei AppGallery - https://bit.ly/2D2OpNP  #FMTNews #RevenueLeakage #TaxEvasion #ExciseFraud #Corruption

Transcript

00:00Every year, Malaysia loses tens of billions of ringgit.

00:06That's enough money to fund major infrastructure projects like hospitals and highways

00:11or significantly boost the country's social security nets.

00:15But the money doesn't just disappear.

00:18It's systematically curing from the nation's coffers through tax customs fraud,

00:23corporate tax avoidance, and corruption.

00:26This is called revenue weakage, and it's costing Malaysia big time.

00:32A study in the Journal of Financial Crime estimates Malaysia's shadow economy

00:37at nearly RM118 billion, about a quarter of the country's GDP.

00:43Economist Jeffrey Williams says part of the problem is compliance.

00:48For small and medium enterprises, registering for and collecting sales and service tax is complicated.

00:55And due to enforcement difficulties and low penalties, people just avoid tax.

01:01One of the biggest drains? Customs and excise fraud.

01:05But here's the thing. We already have a powerful tool to fight it.

01:10Malaysia uses enhanced tax stamps which combine the best of digital and physical security.

01:16Bank note-grade printing with unique digital codes that make it clear what's legitimate and what isn't.

01:22Each stamp carries a unique code that lets authorities trace items like alcohol and cigarettes from production to the shop shelf.

01:31It also proves that taxes have been paid and empowers consumers to verify that the products they are purchasing come from legal sources.

01:39So if a pack has a fake stamp or doesn't have one at all, it's illicit.

01:45Plain and simple.

01:47The system is robust and the technology exists to trace and prosecute offenders with forensic evidence.

01:53So what's the actual problem? Enforcement gaps.

01:57When oversight falters, even the best safeguards can't stop smuggling and fraud.

02:02Between 2018 and 2023, the Malaysian Anti-Corruption Commission estimated corruption alone cost the country RM277 billion.

02:12Williams puts it into perspective.

02:15That's about the size of Malaysia's entire public health budget.

02:19Or enough to give 3 million people a monthly pension of RM1,500.

02:25Gaps in enforcement opened the door for insider involvement.

02:30And that makes the problem worse.

02:32MACC's Op Sicaro busted a tobacco and cigar smuggling syndicate that caused a RM250 million tax loss,

02:41with help from enforcement officers themselves.

02:44Another case saw 34 customs officers arrested for taking RM4.7 million in bribes.

02:51The result? Between RM1.5 and RM2 billion in lost revenue in just two years.

02:57Pushpan Murugia, from the Center to Combat Corruption and Cronism,

03:01explains that cronism at the top drains money meant for development into offshore accounts,

03:07benefiting foreign companies instead of Malaysia.

03:10And there's a social cost too.

03:12If ordinary citizens believe the wealthy can dodge taxes, why should they pay theirs?

03:18That erodes trust in institutions and fuels a vicious cycle of non-compliance.

03:24So what's being done?

03:26The government is rolling out new measures.

03:28A capital gains tax on unlisted shares.

03:31A nationwide e-invoicing system to boost compliance.

03:36Platforms like the e-Pelaria and Chuukai system,

03:39which lets citizens report tax evasion anonymously.

03:42Because the truth is,

03:44Malaysia already has everything it needs.

03:47Enhanced tax stamps provide a clear way to identify illicit goods.

03:51Strong enforcement agencies are in place to act.

03:55And a clear policy roadmap, including nationwide e-invoicing,

03:59is already being rolled out.

04:01The real challenge isn't finding new solutions.

04:04It's making good use of the ones we already have.

04:07With consistent, well-coordinated multi-agency operations

04:11and the expansion of these efforts,

04:13Malaysia can plug the leaks, strengthen its economy,

04:16and ensure a system where everyone contributes and everyone benefits.

04:20Natasha Bust, FMT.

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