KUALA LUMPUR, Offshore accounts were a legitimate method to minimise tax obligations, said minister Datuk Paul Low amid global controversy over the practice following the exposure of the so-called “Panama Papers”.
The minister in the Prime Minister’s Department in charge of governance and integrity also said there was nothing wrong in avoiding taxes by shifting assets abroad as long as the gains were not ill-gotten.
“This financial system is a global financial system… and I mean people can put their money anywhere, in any part of the world. “It’s not called tax evasion, it’s tax avoidance… nothing wrong with it and people put money in places where taxes are low.
Tax evasion is the non-payment or underpayment of taxes owed to the government and is illegal, while tax avoidance is the reduction of tax obligations via legitimate accounting means.
The second method sometimes includes the use of tax havens, such as Panama, which is now under the global spotlight following the leak of millions of documents that exposed global leaders and luminaries believed to have engaged in the practice.
The Panama Papers leak has claimed at least one country’s leader, Iceland Prime Minister Sigmundur Gunnlaugsson who stepped down after being accused of concealing his family’s wealth using offshore accounts. But Low argued that it was unfair to penalise politicians and government leaders for having offshore accounts, saying that the contents may simply be personal savings.
“The point is what the source of your income? If it’s legitimately earned, not a problem but if you’re hiding ill gotten gains using these accounts, then it is not right, it becomes money laundering,” he added. Low’s comments concur with those of Umno veteran Tengku Razaleigh Hamzah, who said it was acceptable to “save” on taxes using offshore accounts despite acknowledging the concerns involved.
Sources said that the practice raises moral and ethical issues when used by politicians and government officials, particularly in the absence of public asset declarations.
Putrajaya has sought to increase its tax base, and last year introduced the unpopular Goods and Services Tax (GST) that is levied on all Malaysians regardless of income levels. The Panama Papers information leak involves over 11.5 million confidential documents created by Panamanian corporate service.
The documents provide detailed information on more than 214,000 offshore companies, the names of their shareholders as well as their directors, which include among them government leaders, their close associates and even close relatives.
