Electronic Revenue Accounting System (eRAS)

The Problem

Before the implementation of the initiative, in carrying out its functions as administrator for direct taxes in Malaysia, IRBM uses several ICT systems for the purpose of managing and recording all tax operations being carried out. These computer systems which consists of Stamp Duty System, Withholding Tax System, Income Tax System, and Petroleum Tax System runs independently as standalone systems. Operating in the form of standalone system has generated several problems in terms data consolidation and the different tax accounting recording and reporting. This also have an effect in efficiency of the delivery of service of IRBM.
One of the problems that arise with the situation before the initiative is associated with accessibility of information by tax payers. IRBM was not able to provide taxpayers with the latest information on the tax account position on a regular and timely basis beside the yearly account statement issued to them.
The question of transparency surfaces when taxpayers were unable to get current information of their tax payment records with IRBM. Tax account statement would be generated once a year by the existing system and manually sent by post to taxpayers. Current tax account position could only be provided when there was a request made and it is prepared manually and issued by mail to taxpayer. This will result in the taxpayer’s inability to plan their repayment schedule as their current tax account position is not accessible to them at any point of time.
There were also delays in processing of refund for excess payment or tax repayment due. Payment of refund can only be made by means of issuing cheque. The process is time consuming as preparation of refund voucher was done manually and it involves large number of cases. Furthermore, the process of cheque issuance for refund payment was not centralised. For refunds of under MYR500,000.00, cheque is issued by Finance Department of IRBM while for refunds of more than MYR500,000.00, cheque is issued by Accountants General office. The lengthy process for a refund has made IRBM to rethink and reengineer the processes so that it can be shortened and delivery system of IRBM to be more efficient and timely.
Before the initiative, another issue faced was that the reconciliation of tax collection accounting had to be done manually. This was because; there were different computer systems for different taxes administered by IRBM. The time taken to reconcile payments received by bank appointed as collection agent was also a slow process. The volume of record to be reconciled involves collection from 52 agent banks, payments made at Pos Malaysia and also at IRBM’s payment counters. This also contributes to the delay in preparing and submitting report of tax revenue collection to the stakeholder, i.e. the government of Malaysia which will have an effect to the planning and policy making process. Another major concern of the management is that the accounting system does comply with the General Accepted Accounting Principle (GAAP).

Solution and Key Benefits

 What is the initiative about? (the solution)
The initiative was designed to address issues concerning IRBMs' core business transactions, integrating all revenue collection functionalities into one consolidated collection accounting system under the accrual accounting system electronically.
eRAS introduces electronic accrual accounting and finance system using web based technology. It uses a system integrator application known as Accounting Rules Engine, integrating transactions data from various systems within and outside the organisation, which includes systems used by banks, digital signature agency, Malaysian Electronic Clearing Corporation Sdn Bhd (MyClear); a subsidiary of Central Bank of Malaysia; and Malaysian Electronic Payment System Sdn Bhd (MEPS); Malaysia’s payment network provider.

The main data and information contained in this system includes the taxpayer profile which corresponds to the information in the mainframe of STS system (Self-Assessment System), information of verification and approval process through the electronic systems, the subsidiary ledger and general ledger of taxpayers tax accounts, transaction data of revenue collection, and statements from the bank, the post office counter, counter of stamp duty office, Revenue Service Center and payment counters of IRBM.

The initiative was about improving the tax collection transaction and delivery system in order to increase efficiency and ultimately to increase the amount of revenue from tax collection. To realise this, eRAS was designed to include the following functions:

o Integrating all collection functionalities from existing standalone systems into one consolidated collection accounting system.
o A portal (e-ledger) that is designed to display the information of updated transaction of the taxpayer tax ledger account for the current year and the previous financial year. Thus, enabling easy access of information via the internet.
o Enabling the automation of repayment system with minimum manual intervention.
o Deploying the Public Key Infrastructure (PKI) for authentication in eRAS (to access e-Ledger) which is also being deployed in e-Filing application to enable faster refund if filing of income tax return is submitted electronically.
o Developing Executive Information System (EIS) to generate statistical reporting on revenue collection, repayment and accounting to facilitate decision making process.
o Introducing Electronic Fund Transfer (EFT) to enable direct refund/repayment into taxpayer’s bank account.
o Transaction security over the Internet - example: data for refund payment via EFT has two security keys and the paying bank need to check both security key before payment credited into taxpayers account. If both keys could not be verified, the bank must cancel the payment and return it back to the IRBM.
o Initiating the Positive Payment System to enable timely identification of tempered or fraud cheques.
o Introducing e-Notification to enable IRBM to notify the taxpayers via e-mail, letter, telephone or SMS that the refund / repayment had been made to them.
o Performing automatic process control for the reconciliation of bank account statement with cash book.
o Preparing reports on the amount of revenue collection and refund according to branches across the nation.
o Introducing Accrual Tax Accounting System, consisting of two full set of account:
 General Ledger (GL)
 Subsidiary Ledger

Actors and Stakeholders

 Who proposed the solution, who implemented it and who were the stakeholders?
The emphasis for a better delivery system has been given priority by the Special Taskforce to Facilitate Business or PEMUDAH, which was set up by the government to review the status of the public services delivery system and to propose new policies for improvements. In response to this, the proposal to develop e-RAS was first tabled in the IRBM Board’s Meeting.
There were several government agencies and private bodies which actively took part in the initiative from the beginning. They include the Central Bank of Malaysia, Prime Minister’s Department, vendors which supplies the hardware, the network and the software, representatives from participating commercial banks, professional bodies such as chartered accounting associations, bank’s association, and most importantly the Board of Directors of IRBM whom closely administered the progress, the budgeting, the direction and the overall performance of the project.
The initiative was also formulated to fulfill the requirements of the stakeholders. They include the Ministry of Finance, the IRBM’s Board of Directors, and IRBM’s Management. Inputs from the internal and the external users, the tax agents, the commercial banks, the enablers (ICT, vendors and consultants), and the public agencies (ministries and departments concerned) was also seek. They contributed ideas and proposals on how to develop the application in order to fulfill their expectations.
To oversee the implementation and success of the project, IRBM formed a Project Steering Committee headed by the CEO of IRBM. The committee member consists of all the Deputy CEOs, IRBM’s CIO, relevant heads of department and user leaders. In the beginning, the committee understudies the inefficiencies, drawbacks and the stumbling blocks inherited in the existing ICT system. The committee later proposed suggestions on their requirements and recommendations towards the upgrading, enhancement and improvement of the system, taking into consideration also the requirements of stakeholders.
The committee would also make decisions whether to approve, to reject or to propose alternative solutions if necessary. All approved proposals were officially endorsed by the committee. At the latter stage, this committee would determine whether the project would be carried out internally, externally or through joint effort between IRBM’s staff and the selected vendor.
The first phase of development and the commissioning of the project were fully outsourced to the appointed vendor company. During the second phase of the development, IRBM’s ICT officers jointly worked together with the vendor in preparation for the future undertaking of the project. The development of the system was monitored through the establishment of Technical Committee and the Working Committee under the watchful eye of the Steering Committee. The members of the two committees consisted of IRB officials and related representatives from vendor companies.
The proposed project was approved by the Ministry of Finance on April 10th, 2008. eRAS project was presented and approved by the Federal Government Accounting System Committee in the Accountant General's Department in accordance with the requirements of the Treasury Order 232. While the accounting document generated by this system was approved by Treasury of Malaysia.

(a) Strategies

 Describe how and when the initiative was implemented by answering these questions
 a.      What were the strategies used to implement the initiative? In no more than 500 words, provide a summary of the main objectives and strategies of the initiative, how they were established and by whom.
Two important objectives become the primary basis in the development of this initiative. Apart from the objective to provide the best services as well as improve delivery system, the other objective of the initiative was to achieve the highest level of voluntary tax compliance. The many functions in eRAS were developed to instill public confidence in the integrity and fairness of Malaysian tax administration.
The introduction of ‘e-Ledger’ module in eRAS enables the viewing of taxation transactions and information of an individual taxpayer. Taxpayers who have an electronic identification via digital signature will be able to view their respective tax ledger information online. Records of tax account transaction pertaining to the individual are made available in a fast and easy manner, at any time via the internet. This will show transparency by IRBM in managing payments made by taxpayers. The latest application being introduced is e-Ledger for corporate taxpayer.
eRAS would help to expedite the repayment for excess payment of tax within a stipulated time, provided that the return was lodged via e-Filing. For any straight forward cases, the refund process was automated. Using the Electronic File Transfer (EFT) whereby the refund is directly transferred to the taxpayer’s account, the process would take three days while using the check it would take five days.
Promoting a better communication between taxpayer and the tax administrator with the use of the electronic medium is another objective of eRAS. Taxpayers will be able to confirm the accuracy of the information regarding personal details and keep up to date their tax records by using the information available in the e-Ledger. Further inquiries can be made by email or by calling the toll free line 1-300-88-LHDN (5436) which is manned by officers at the Customer Service Centre. To further increase the voluntary compliance, the E-Notification which acknowledges the taxpayers of their refund status was also introduced.
eRAS promotes the collaboration between IRBM and private sectors in an effort to enhance productivity and service delivery. For example, in matters of tax collection eRAS facilitates appointed bank agents in managing the activities of payment of tax as well as preparing accounting reports on payment transaction at the end of each working day. This can achieved through a fully integrated eRAS system which manages and record accounting transactions electronically.
The system is also developed to enhance the productivity and capability of IRBM’s workforce. Through the ‘e-collection’ modules (which commenced operations from August 2009), as well as ‘e-Accounts’ module, accounting activities, preparation of reports and the respective financial analysis of the revenue collection and accounts receivable can be prepared faster despite the huge volume of transactions involved.
Finally, with the Executive Information System (EIS) module in eRAS, IRBM’s management can obtain accurate daily accounting information. This will facilitate IRBM management in making strategic decisions with the up to date information on the performance of either IRBM’s branches throughout the nation or performance in accordance with the core activity IRBM, i.e. tax assessment activities, revenue collection, and repayments.

(b) Implementation

 b.      What were the key development and implementation steps and the chronology? No more than 500 words
The proposed eRAS project was approved by IRBM’s Board of Directors on January 25th, 2007. The project was later approved by the Ministry of Finance on April 10th, 2008. The signing ceremony of the eRAS System Development Agreement was held on August 1st, 2008. The project development period is for two years.
eRAS project was presented to and approved by the Federal Government Accounting System Committee in the Accountant General's Department. While the accounting document generated by this system have been approved by Treasury of Malaysia.
The development of eRAS was carried out by outsourcing it to vendor with the user specification requirement and the technical requirements provided by the IRB officials from the Revenue Collection Department and Information Technology Department. The development of the system was monitored through the establishment of three (3) committees namely the Steering Committee, Technical Committee and the Working Committee
When the system was fully developed, it was launched in phases according to module beginning with e-Refund module in April 2009. eRAS was fully launch to taxpayers nationwide on November 1st, 2010. The project was officially handed over the IRBM on December 27th, 2010.
The key development and implementation steps of the e-RAS project were as follows:
A. User Requirements Study (URS)
- Preparation of User Requirements Specification
- Preparation of Software Functional Specification

B. Design
- Design Specification
- Program/Report Specification

C. Development
- Technical Manual
- On-line Help
- Source-code Documentation
- Program Listing and Specification

D. Testing
- Test Plan
- Test Procedures and test Scripts
- Test Environment
- Test Reports

E. Integration
- Integration Test Plan
- Integration Test Report

F. User Acceptance
- User Acceptance Test Plan
- User Acceptance Test Report

G. Training
- Training Manual
- End-user guides

H. System Commissioning
- System Commissioning Plan
- Operations Guides, System Manuals and References

Since the development and the commissioning of the project were outsourced, the chosen vendor progressively presented to the steering committee the progress of the project from the very beginning until its commissioning. The vendor was also responsible for the preparation of:
• Project Work Plan
• Project Kick-off Presentation
• Project Schedule and Milestones
• Project Resource Plan
• Team Organization Chart
• Project Quality Plan
• Software Engineering Plan
• Configuration Management Plan
• Training Plan
• Master Test Plan
• Transfer of Technology Plan
• Risk Management Plan
• Project Documentation Standards and Template
• Issue List
• Weekly Status Report
• Meeting Minute

(c) Overcoming Obstacles

 c.      What were the main obstacles encountered? How were they overcome? No more than 500 words
Perhaps the greatest obstacle to eRAS success was initial resistance by the stake holders and IRBM’s personnel itself on the new approach of using web based technology for data transaction. The innovative eRAS methodology represented a major departure from the normal procedure of data exchange. The issue of maintaining data security using web based environment was a major concern especially when all data concerning taxpayers are confidential information.
The issue was resolved by providing assurance to the parties in doubt on the safety of data through the use of digital signatures by deploying the Public Key Infrastructure (PKI) for authentication in eRAS. The effectiveness of digital signatures has been proven in terms of its security which is being use in e-Filing system that is already being implemented by IRBM and has gain trust by taxpayers. The security is further enhanced while dealing with banks and third party with the use of secured file transfer protocol (ftp) and both parties using the same PKI and encrypted data.
There were also setbacks in the part of the vendor’s inability to fulfill the IRBM’s requirements. Among them were:
• The failure to migrate the complete and comprehensive data from the current system into e-RAS. This had caused the failure in accessing some account which had been left out during the migration process.
• The delay in the development and the commissioning of EIS module due to the system’s inability to produce the statistical report in the form of graphical representation within accepted waiting time due to big volume of data. This was overcome by making use of whatever portion of EIS which was working satisfactorily or by combining the manual and the automated processes to produce the reports urgently needed.
• The problem of data security during the transfer of data between the IRBM and the banks. This was overcome by repeating the migration process until the complete data were migrated.

Another obstacle faced was the issue of obtaining the budget to improve the system during the development stage. The upgrading and replacement of hardware, networking, and software licenses is capital intensive and requires substantial financing which needed the approval of the Ministry of Finance. The procedures of getting the budgets normally took a long period to be approved. To overcome the problem, the budget needed was acquired from some other allocation within IRBM’s resources.

Users are new to the new work processes and tend to make mistakes. User acceptance of using web base and digital signature in certain application was low. This obstacle was overcome by strengthening the training strategy and setting up of coordinated help-desk.

(d) Use of Resources

 d.      What resources were used for the initiative and what were its key benefits? In no more than 500 words, specify what were the financial, technical and human resources’ costs associated with this initiative. Describe how resources were mobilized
The costs of this initiative are relatively low compared to the positive outcome that it brings. The financial budget spent in the first phase from 2008 to 2010 was MYR10.8 million for the development and commissioning. Another MYR3.8 million was for the annual maintenance of the system. Since eRAS is using existing data information, there is no additional cost generated from implementing this system in terms of data obtained.
The collaboration with agent banks and other related third parties also does not involve high costs. This is because an agreement has been reached between the two parties in which no costs will be charged by banks on the services for receiving payment of tax on behalf of IRBM. The banks get returns from this strategic collaboration through overnight placements of the collections made on behalf of IRBM. This win-win situation provides benefit for both parties.
The first phase of eRAS development was established through outsourcing, where the human resource involved in the development process of the system was mostly from the vendor company. Full involvement of IRBM’s officers throughout the first phase of the development process was in the form of monitoring and cooperation to ensure vendors fully understand the requirements and work processes of taxation and revenue accounting. The number of IRBM’s personnel involved in the first phase of the development was very minimal. The deployment of the software was done through input from IRBM IT Department. This is to ensure that the system that was developed complemented existing infrastructure.

Further mobilization of human resources was deployed during the development of the system to ensure that the initiative progress smoothly. The progress of the initiative was monitored through the establishment of three (3) committees namely the Steering Committee, Technical Committee and the Working Committee of which the members were made up of IRBM’s top management and officers.

This system was also developed with the collaboration of various quarters involving both internal and external parties. Cooperation between internal parties involves the Information Technology Department, Procurement and Assets Department, Finance Department, Tax Operations Department and Corporate Services Department. While collaboration with external parties includes commercial banks, Percetakan Nasional Malaysia Berhad (National Printers), Certification Authority Digital Signature (Digicert), Pos Malaysia Berhad and Malaysian Electronic Payment System (MEPS).

Most of the computer devices such as printers and PCs that were mobilized for the development of this initiative were either belongs to IRBM or the vendor. As the vendor was stationed at one place, all equipment used was placed at IRBM’s office throughout the project implementation.

Sustainability and Transferability

  Is the initiative sustainable and transferable?
The success of the initiative is due to a clear vision and a structured approach in developing the system that is capable of evolving. The development of the initiative involves current and leading edge IT technology. The diversity and adaptability of the functionalities also contribute to its sustainability.
eRAS was developed to be a flexible system so that further improvement and modifications can be made to meet future needs. For example, payments by EFT which have been introduced widely to individual taxpayers will be extended to the corporate taxpayers. By doing so, corporate taxpayer can also receive refund of excess payments faster. This will reduce the usage of cheques tremendously and able to minimise fraud and saving costs of printing and postage.

The financial costs of implementing and continuing the initiative are minimal; indeed, the fact that the programme reduces government spending helps guarantee its continuation.
Even so, the initiative is being sustained financially by using the allocation given in the 10th Malaysia Budget Plan. Financial budget was also acquired from internal sources through saving made from other projects. This kind of acquisition is normally done to finance the enhancement or the upgrading of the application, servers and the ICT infrastructure.

In order for this initiative to be regulatory sustainable, further developments have been undertaken since its inception so that eRAS will always remain relevant with current requirements. For example, with the introduction of imaging system for cheque clearance by Central Bank of Malaysia, IRBM have been working closely with appointed commercial banks to come up with a new work process known as Positive Pay System. This system involves the provision of information for cross reference purposes by the banks to ensure that only authentic cheques issued by IRBM to be honoured.

Further to this, the initiative is closely monitored by the Ministry of Finance and the Prime Minister’s office on the capacity as the main stakeholder. The concern on the initiative was due to the fact that it is capable of increasing taxpayer’s voluntary compliance which in turn gives direct impact over the IRBM’s ability to collect more tax.

As mentioned earlier, this initiative has been approved by the Federal Government Accounting System Committee in the Accountant General's Department in accordance with the requirements of the Treasury Order 232. While the accounting document generated by this system have been approved by Treasury of Malaysia. The recording accounts and database also comply with the General Accepted Accounting Principle (GAAP).
eRAS was developed specifically to suit the requirements of IRBM in managing its accounting systems and towards more efficient governance of tax revenue collections. Due to the nature of IRBM’s function, this initiative is unique to us and has not been replicated to any other public agencies or service. Internally, the system is being disseminated throughout IRBM’s branches nationwide. However, the basic principle of the system may be replicated by other organization that has similar functions and duties.

Lessons Learned

 What are the impact of your initiative and the lessons learned?
Implementing a project with a significant impact on the effectiveness of the service provided by a government agency requires an effective implementation plan. It also requires the agreement and support, a solid commitment and a common goal on the part of the key stakeholders, and all the parties concerned from the very start. The key stakeholders must be involved and hold regular steering committee meetings if an initiative is to stay on course and advance in a timely manner.

As for eRAS project, the commitment of the Steering Committee, Technical Committee and the Working Committee has given proper direction and steered the project towards the intended goal. The use of a clear and structured approach was the secret in avoiding any complications. With simple projects designed plan, and clear development goals that can be achieved at each stage, through constant project implementation evaluation, the project has been successfully implemented.

One very significant factor that contributed to the success of eRAS was the trust and close collaboration with related departments within IRBM, government agencies and private-sector. In any undertaking, flexibility, understanding of each other’s difficulties and needs, and positive approaches to the tasks at hand can help ensure mutually beneficial enterprises. The collaboration among all parties especially the vendors, the IRBM’s staff and the management has brought a big success to the project.

Other important lessons learned from this project were:
• The IRBM’s ICT officers should have been given opportunity to be involved in the development of the project from the very beginning. Their involvement towards the end of the project did not help much in resolving some of the glithces arising at the commissioning stage.
• The party responsible for budget allocation should monitor the project to ensure that the initiative is progressing smoothly and completed in time and payment made in a timely manner.

Contact Information

Institution Type:   Government Agency  
Contact Person:   MOHD SALLEH BAKAR
Title:   MR  
Telephone/ Fax:   Tel: 03-8313 8824 / Fax: 03-8318 7823
Institution's / Project's Website:   www.hasil.gov.my
E-mail:   mohdsalleh@hasil.gov.my  
Postal Code:   63000
State/Province:   SELANGOR
Country:   Malaysia

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