e-Filing
Inland Revenue Board of Malaysia

A. Problem Analysis

 1. What was the problem before the implementation of the initiative?
Income tax was the biggest revenue contributor to the Government corpus. In Malaysia, the responsibility to formulate policies rested with a division in the Ministry of Finance. The Inland Revenue Board of Malaysia (IRBM) acted only as the tax administrator and the collection agent for the Government. e-Filing was introduced by IRBM in accordance with the implementation Self-Assessment System (SAS). SAS is a system where a taxpayer is required by law to calculate his/her own income tax liabilities and make payment towards it accordingly. SAS was implemented for the corporate taxpayers in 2001 while for Individual taxpayers, it was implemented in 2004. Accordingly, IRBM introduced the e-Filing system for Companies in 2004 followed by Individuals who do not carry any business (individuals with non-business income) in 2005. Subsequently in 2006, the e-Filing facility was introduced and extended to sole proprietors (individuals with business income). Prior to the introduction of e-Filing, lengthy tax administration processes and procedures were time consuming and delayed finalisation of tax assessment and repayment. The cumbersome of filing paper tax returns adds to the problem that created frustration and unrest amongst taxpayers and mistrust in the competence of the Revenue Board. Automation of tax processes which could be the answer to these problems was not fully operational and faced setbacks in implementation. However,knowing that information technology is the way forward in doing things, IRBM was able to use existing ICT technologies, to design and developed a simple, user friendly system capable of facilitating the filing of income tax returns which have always been a nightmare for taxpayers with the paper return forms. Below are some of the issues and the problems faced by the taxpayers and IRBM prior to the implementation of the e-Filing. 1.1 Issues involving taxpayers : 1.1.1 Manual filling of the Tax Return Forms is time consuming. 1.1.2 Manual calculation of the tax requires some degree of technical knowledge. 1.1.3 Errors in tax calculation as the Tax Return Forms are not filled correctly. 1.1.4 Possibility of delay in postal since submission of the Tax Return Forms is done through the postal service. 1.2 Issues involving IRBM : 1.2.1 Data entry of the Tax Return Forms is done manually. This is tedious and time consuming process which requires large number of workforces. 1.2.2 Imaging system was introduced to speed up the manual process of capturing data. However, the quality of written data in the form does not conform to imaging standard. 1.2.3 Higher operational cost to print and send Tax Return Forms to the taxpayers. 1.2.4 Requires large storage area to store the Tax Return Forms.

B. Strategic Approach

 2. What was the solution?
Efforts to modernize and innovating the tax administration system in Inland Revenue Board Malaysia (IRBM) have been driven as much by the concerted effort and commitment of IRBM’s top management and workforce as well as enabling capabilities of information technology. e-Filing is a key component to modernizing and improving IRBM’s delivery service to taxpayers. The strategy is to make it easier for taxpayers to file in their income tax returns, making taxpayers feels that filing a tax return a hassle free obligation even though it involves technicality in terms of knowledge on requirement of the tax law, besides it being a huge responsibility of a citizen for the nation. Finally, through a system that can provide an increased convenience and flexibility for the taxpayer in discharging their responsibilities towards the prosperity of the nation, it is hoped that the level of tax compliance will also increases accordingly. e-Filing is a facility for taxpayers to submit their tax returns via online. The main objectives of the IRBM in developing e-Filing system were to provide a more efficient and improved service to taxpayers and at the same time can ease and improve tax compliance among taxpayers. One of the facilities provided by the e-Filing is the automatic income tax calculation, thereby helping taxpayers to calculate their taxes accurately, thus reducing errors in taxpayer self-assessment and resulting in the fast and efficient processing of tax returns by IRBM. e-Filing offers additional benefits, including auto-correction function, highlights unfilled fields and auto-compute of tax liability. It also enables faster process of tax refunds. Main Objectives • To make it easier for taxpayers to fill in the Tax Return Forms and submit it electronically. • To expedite processing of the Tax Return Forms. • To reduce IRBM’s workforce on processing the Tax Return Forms thus more emphasis on enforcement activities. • To reduce operating expenses by discontinuing of printing and sending hardcopy Tax Return Forms to taxpayers. • To reduce storage space for hardcopy documents. • To improve the quality of services given by IRBM to the taxpayers. • To reduce errors in tax calculation and filling up forms. The target audience during the first stage of implementation of e-Filing system was the corporate taxpayers because this group of taxpayers may be most appropriate for introducing e-filing of returns, because the businesses that pay these taxes are the most likely to have the capacity for e-filing (in terms of hardware and software as well as computer skills). In the later part of the implementation, when the system was becoming more stable and the infrastructure was ready to accommodate high volume of traffic especially during peak season of submitting income tax return, the system was introduced to the masses, which is the individual group of taxpayers.

 3. How did the initiative solve the problem and improve people’s lives?
e-Filing system was developed to beuser friendly and safety have been given priority.Access and data of taxpayers are secured by Public Key Infrastructure (PKI). The system can be easily accessed online and able to save taxpayers’ time in filing a tax return. While manual tax return forms requires at least 30 minutes fill up and approximately 3 days delivery via postage, e-Filing only requires less than 10 minutes to fill and acknowledgement of submission can be obtained right after the submission is successfully done. Taxpayers need to fill their personal information only once and those data will be kept and displayed on e-filing forms for subsequent years.Errors in tax computation was eliminated because calculation of mandatory fields such as total income, tax reliefs and tax payable is done automatically. The function of pre-filled information such as taxpayers’ salary and total monthly tax deduction shortened the time taken to fill in tax return and amendments can be done before submitting. Fast processing of assessment means the processing of tax refund can be done faster.e-Filing brings freedom and mobility to the users to use the system on different computers because the system can operate on various web browsers.

C. Execution and Implementation

 4. In which ways is the initiative creative and innovative?
IRBM launched the first electronic system for the submission of Tax Return Forms for companies in year 2004 meanwhile for individuals, electronic system was launched on 15 February 2005.During that time, the system requires taxpayers to have smart card reader for Digital Certificate verification enabling them to submit the Tax Return Forms electronically. Accessing the system was also limited to Windows platform application using the Microsoft Excel only. 2006 - the Malaysian Government gave its consent for IRBM to work directly with a Digital Certification Authority (CA) in improving the process of identity authentication through Digital Certificate as required under the Digital Signature Act 1997. However, the system still requires taxpayers to fill in the Tax Return Forms in an offline mode after downloading the form to their computer. 2007 - IRBM took a positive move to deploy the online Tax Return Forms utilising web-based platform while retaining the CA services. A more user friendly forms were introduced in the effort to expedite the filling and the submission processes. 2008 - IRBM made another massive improvement to the system. A secure environment for login validation and signing using centralised Roaming Public Key Infrastructure (Roaming PKI) was deployed. This initiative eliminates the need to download the certificate to the user’s computer. It brings freedom and mobility to the users to use the system on different computers. Another notable improvement made is for the users to access e-Filing using most of the popular Operating System which include Linux and Macintosh via web browsers such as Mozilla Firefox, Opera and Safari. Improvement was also made to eliminate the need to download ActiveX plug-in as was previously required.Disaster Recovery Centre (DRC) was set up to enable IRBM to resume normal business operations by restoring data, application and systems communication after a disaster. Prior to 2008, electronic submission of the Tax Return Forms was only applicable to taxpayers who had registered for a digital certificate. Hence Tax Agents were denied the opportunity to utilise e-Filing facility on behalf of their clients. The introduction of the Tax Agent e-Filing (TAeF) module allows Tax Agents to furnish and submit the Tax Return Forms electronically. 2009 -IRBM made other introductions which are e-Estimate, bi-language form, HK3 online, auto renewal digital certificate and .net platform. 2010 -Pre-fill information from payroll system such as salary, EPF, insurance, and zakat were introduced. 2011 -few improvements were made for individuals e-Filing which were to display challenge phrase questions if taxpayer fails to change his/her password after 3 attempts and also provides HK3 online for spouse who elects for joint assessment In 2012, an Organizational e-Filing Module (OeF) was introduced. OeF is the digital certificate for companies. Therefore in order to submit Form C electronically, companies which do not use any tax agent services must use the company’s digital certificate. Another improvement are by introducing few applications such as to reset password through email and to apply e-filing pin number for new taxpayers through email. Another service which has been successfully launched was the e-Filing via smart phone which is also known as m-Filing. 2013 -taxpayers can change their password via m-Filing. Submission of electronic forms by batches (e-BaS) was introduced whereby it can be done by tax agents by using the standard file via XML (Extensible Markup Language). One can submit maximum of 20 electronics forms at one time. Another change was displaying hint of email address if the email address does not match with the IRBM’s record.

 5. Who implemented the initiative and what is the size of the population affected by this initiative?
5.1 Stakeholders Stakeholders comprise of Minister of Finance (MoF), Malaysian Treasury and IRBM Board of Directors. They play an important role in policy/programme legislation and main activities of IRBM. MoFas the main stakeholder is responsible in setting up the KPIs target. In order to realize the stakeholders mission IRBM will published an e-Filing Programme for Return Forms each and every year in order to focus on achieving the KPIs as per targeted. Additionally the annual programme which was formerly known as Taxpayers Service Monthand has been rebranded as Program Hasil4U will also be held every year.The purpose of this programme is mainly to assist the taxpayers especially in the process of submitting their tax return forms manually or electronically. Nevertheless, taxpayers will be highly recommended to file their tax return forms via e-Filing. Another programme called Public Finance Reform LABwhich is being led by MoF is one of the initiatives to increase the efficiency of tax return forms submission as well as increasing the revenue collection. 5.2 Customers • Internal customers which comprise of IRBM’s staffs either in branches or Call Centre who directly involve in giving feedback in the policy legislation process that involves the KPI and Working Process. • External customers which comprise of taxpayers, tax agents and third party agency including government and private sectors that involves indirectly in the policy legislation process. • e-Filing Lab will be held every year to discuss on the related matters in order to improve and rendering better service • Feedbacks pertaining e-Filing also can be gained through meeting between IRBM and the Accountants Association (DESIRE) which will be held four times a year.
 6. How was the strategy implemented and what resources were mobilized?
In terms of human resources, the project started its development with the formation of several committees which include:  Project Sponsor – Director General / Chief Executive Officer IRBM  Project Steering Committee – Headed by Deputy Director General (Operations) as the chairman, this committee monitors and reviews project plan and status, financial matters and to approve proposed alternatives and to resolve disputes.  Project Development Team – Headed by Director of the e-Services Division of Information Technology Department. This team carries out the overall development of e-Filing which include system analysis and design, integration, maintenance of the software and hardware, security and conducting user acceptance test (UAT) and stress test. The Project Development Team reports to the Steering Committee.  Project Implementation Team – Headed by Director of Operation Division of Revenue Management Department. This team carries out the overall implementation of e-Filing which include agreeing on milestone, approving draft documents and conducting acceptance test. The Project Implementation Team reports to the Steering Committee. • System Center Operation Manager 2012  For monitoring e-filing application performance Costing for the project were as follows: • RM 12.99 million was initially allocated for the first 5 years for the development and implementation of the e-Filing application system. In 2007 an additional allocation of about RM 20 million was granted to further enhance the system for it to be more user friendly. • As for the human resource required to develop and implement e-Filing, IRBM mobilises 14 staffs under the e-Services Division and 10 staff from the user group. • RM 19.10 million was allocated for 3 years (2011 – 2013) development and implementation of the e-Filing application system. 67.3% of the expenditure was allocated for the payment of digital certificate. • In 2011, RM 49.2 million was allocated for 3 years (2013-2015) for the development and implementation of the e-Filing application system. 83% of the expenses were allocated for the payment of digital certificate.As for the human resource required to develop and implement e-Filing, IRBM mobilises 10 developers under e-Filing unit and 13 staffs from the user group.

 7. Who were the stakeholders involved in the design of the initiative and in its implementation?
7.1 Outcome of the implementation of e-Filing from year 2006 until now is shown below: e-Filing Statistics: In the year of its inception (2005), the responses from taxpayers were not too encouraging because they have to bear the cost of buying the smart card reader and it only attracted only 28 users. In 2006, after improving the process of identity authentication through Digital Certificate, it attracted 189,330 taxpayers to use the system. In 2007, with the deployment of online Tax Return Forms utilising web-based platform while retaining the CA services the e-Filing system attracted 712,283 taxpayers . During the years, the number of taxpayers using e-Filing were as follows: 2008 - 1,126,122 users 2009 - 1,600,880 users 2010 - 1,925,468 users 2011 - 2,261,656 users 2012 - 2,717,387 users 2013 - 3,061,188 users 2014 - 3,285,795 users (as at 30th September 2014) Comparison between manual and e-Filing process are as per shown below : No. Tax Return Forms Manual e-Filing 1 Filling 30 minutes 5-10 minutes 2 Submission 3-7 days Less than 5 secs. 3 Processing 10 activities/7 days 3 activities/1 day 4 Tax Refund Process Within 90 days Within 30 days 7.2 Cost effectiveness Year Total submission via e-Filing Total Cost Saving(RM) [RM6.88 per physical form processed] 2004 1 6.88 2005 28 192.64 2006 189,330 1,302,609.33 2007 712,283 4,900,578.27 2008 1,194,280 8,216,765.83 2009 1,613,206 11,099,018.60 2010 1,975,040 13,588,472.70 2011 2,356,124 16,210,368.73 2012 2,859,459 19,673,363.87 2013 3,257,223 22,410,019.96 2014 3,520,549 24,221,729.17 (as at 30th September 2014) 7.3 Award : Prime Minister’s Innovation Awardin year 2010 with a winning prize worth RM1 Million 7.4 Complimentary. Some of the complimentary received by customers via Feedback Form at IRBM Official Portal and has been compiled. It shows that there are 91 complimentary received as at 4th August 2014. Some examples of the complimentary are : i) “Congratulations for implementing continuous improvements for the benefits of taxpayers. The tax refund process is directly credited into our accounts.”- 24/02/2011 ii) “I perceive that e-Filing is so competent and smart.” – 05/03/2014 iii) “e-Filing service is so friendly especially for the new users like me and very easy to understand” – 19/03/2014 iv) “Easier, faster and efficient for users. Improvements and progress shown time to time.” – 19/03/2014 v) “Congratulations IRBM! E-Filing has downloaded all data automatically and helps us to fill up forms much easier.” – 21/03/2014

 8. What were the most successful outputs and why was the initiative effective?
• To ensure the success of the project, the following committees were formed with specific duties.  Project Sponsor – Director General / Chief Executive Officer IRBM  Project Steering Committee – Headed by Deputy Director General (Operations) as the chairman, this committee monitors and reviews project plan and status, financial matters and to approve proposed alternatives and to resolve disputes.  Project Development Team – Headed by Director of the e-Services Division of Information Technology Department. This team carries out the overall development of e-Filing which include system analysis and design, integration, maintenance of the software and hardware, security and conducting user acceptance test (UAT) and stress test. The Project Development Team reports to the Steering Committee.  Project Implementation Team – Headed by Director of Operation Division of Revenue Management Department. This team carries out the overall implementation of e-Filing which include agreeing on milestone, approving draft documents and conducting acceptance test. The Project Implementation Team reports to the Steering Committee. • System Center Operation Manager 2012  For monitoring e-filing application performance • Network monitoring  Multi Router Traffic Grapher - for monitoring and measuring the traffic load on network links. It allows the user to see traffic load on a network over time in graphical form.  Packetshaper - Application Traffic Management and optimization for wide area networks.

 9. What were the main obstacles encountered and how were they overcome?
Below are some of the issues and the problems faced by IRBM prior to the implementation of the e-Filing. 9.1 Issues Involving Taxpayers : 9.1.1 Creating Awareness and Promotions: - Letting people know that this service exists and is available for them - Getting them interested and build trust in the service - Organizing education and publicity programs for tax agents and taxpayers - Working towards changing the taxpayers’ attitude of waiting for the last minute to submit tax return forms - For internal and external users ~Collaboration with professional bodies e.g. CTIM, MIA, MICPA, MATA, MAICSA ~Joint effort with industry player e.g.; Malaysian Employer Federation (MEF) and Federation of Malaysian Manufacturers (FMM) 9.1.2 The System - Development ~Costing ~ Hardware and software requirement ~ Time-frame ~ In-house expertise ~ Co-ordination between parties involved ~ System integration ~ In line with government ICT initiative (G2C) - Security ~ Secure Socket Layer (SSL) ~ Public Key Infrastructure (PKI) - Readiness ~ To develop / enhance within time: o Yearly budget proposal – amendment of act o new filing season 9.1.3 The Customers’ Need Issues Involving Taxpayers: - Manual filling of Tax Return Forms is time consuming. - Manual calculation of the tax requires some degree of technical knowledge. - Errors in tax calculation as the Tax Return Forms are not filled correctly. - Possibility of delay in postal service 9.2 The Support Services - To response to all complaints, feedback, comments, etc to call centre, helpdesk, customer service and web interactive service.

D. Impact and Sustainability

 10. What were the key benefits resulting from this initiative?
e-Filers also perceived that e-Filing is user friendly, useful and easier to access at anytime and anywhere. Furthermore, the tax computation is more accurate and it is done automatically thus reduce the possibility of error done by the e-filers. It is also time saving and processing of tax refund will be faster compared to manual returns. There will be no doubt on the security issues as access and data of taxpayers are secured by PKI – Public Key Infrastructure and SSL – Secure Socket Layer. PKI is an application to confirm taxpayers identity and use digital certificate to sign the form. While SSL is a standard asecurity technology for establishing an encrypted link between a server and a client. e-Services innovation by IRBM gives clear impact on e-Filing usage, increase of collection, operational cost saving and empowering the agenda of Electronic Government as follows: (i) Amenity and time saving offers to tax payersby introducing e-Filing has increased the level of usage from 3,061,188 (78%) in year 2013 to 3,285,795 (83%) in year 2014 (as at 30/09/2014) (ii) Effectiveness of collection is in linewith the increment of e-Filing usage whereby reduces the error of filling up forms and tax computation, accumulation of complete data and tax payment online. Collection has been increased fromRM124.89 billion in year 2012 to RM128.93 billion in year 2013. In year 2009, the collection has drop to RM88.4 billion due to current economic turmoil; (iii) Reduces the cost of printing physical forms, imaging of the forms, delivery and return of forms via post.Cost saving for the period from 2004 to 2014 is estimated amounting to RM24.22 million in year 2014; (iv) Capability of refund within 14 to 30 days to e-filers can be a wow factor for IRBM’s service delivery system. Refund policy without prior application from taxpayers contributes to positive perception to IRBM and the government. In year 2013, IRBM had successfully processed refund amount RM 1.59 billion compared to Rm 1.26 billion in year 2012; (v) IRBM e-Services package support the objective of e-Government agenda which desired by government as a quick delivery service,efficient,comfortable and effective for the benefit of customers.The usage of e-Services innovation by numerous increase of users will contribute to the IT savvy society inline with the information and communication environment.

 11. Did the initiative improve integrity and/or accountability in public service? (If applicable)
As indicated by the outcome, e-Filing is a resounding success. The effectiveness of e-Filing is clearly demonstrated by the ever increasing number of users. It also shortened the time taken to fill, submit and process the Tax Return Forms, thus enabling IRBM to initiate refunds faster than before. As a value added to the e-Filing, IRBM provided e-Payment System to facilitate taxpayer to make an online payment. However IRBM realises there are still room for further improvement. Hence, IRBM will listen to all positive comments and suggestions and will incorporate them into future enhancement of e-Filing to make it even more attractive to the taxpayers. As indicated by the KPI, the target was set 2.7 million of e-Filing cases in year 2013 yet IRBM has achieved 3.06 million of e-Filing cases (113.38%) in year 2013, while in year 2014, the KPI was set at 2.8 million of e-Filing yet IRBM has achieved 3.28 million of e-Filing cases in year 2014 as at 30/09/2014(117.35%) , e-Filing is a resounding success. The effectiveness of e-Filing is clearly demonstrated by the ever increasing number of users. It also shortened the time taken to fill, submit and process the Tax Return Forms, thus enabling IRBM to initiate refunds and repayments faster than before. However IRBM realises there are still room for further improvement. Hence IRBM will listen to all positive comments and suggestions and will incorporate them into future enhancement of e-Filing to make it even more attractive to the taxpayers.

 12. Were special measures put in place to ensure that the initiative benefits women and girls and improves the situation of the poorest and most vulnerable? (If applicable)
• ICT challenges  Increase the knowledge and skills of IRB Officer in the latest information technology  Realibility / Dependancy of the system Implementation of Secure Socket Layer and Digital Certificate to enhance system security in line with other online services. IRBM has been given recognition ISO/IEC 27001:2005 and MS ISO/IEC 27001:2007 certification for Information Security Management System For Operation Of e-Filing System At Data Centre LHDNM, Cyberjaya from SIRIM QAS International Sdn. Bhd. on 10 Januari 2014. • Operational challenges :  Companies are required to file through Organizational e-Filing (OeF) with effective of Year Assessment 2014  Overall e-filers are only 83% as at 30/09/2014 if compared with total tax return forms received.  Feedback from IRBM’s Call Centre where the phone line was congested due to application to reset e-filing password. Thus IRBM has introduced an application to reset password through email and apply pin number via online.  Last minute submission has caused congested lines thus a grace period of 15 days for submission via e-Filing was introduced  Post mortem through e-Filing Post-mortem Lab which are held every year. This lab comprises of ICT officers, User groups and branch representatives. As a result from the Lab, problems incurred will be discussed and solved by certain actions such as :  Introduction of Challenge Phrase in order to help taxpayers to remember their password  e-BE ( tax return form for taxpayer without business income) for Year of Assessment 2014 has been simplified  Requesting e-Filing pin number  Grace period of 15 days exclusively for e-Filing submission only  Lodgment of complaints through aduan@hasil.gov.my  Lodgment of ideas through Sistem Maklumbalas Pelanggan at the IRBM official portal Overall experiences through this initiative are : (a) Great impact on rebranding of the IRBM image through term redefinition from ‘Tax’ to ‘Revenue’ and as well as ‘Taxpayer’ to ‘Customer’; (b) General positive perception as a result of IRBM’s operational approach from conservative approach towards taxpayer to a more friendlier approach towards them (c) Engagement process with customer including consultants and tax agents through meeting and discussion pertaining e-Filing matters as well as ideas in improving the service (d) Problem solving and information sharing through periodical meeting between the IRBM CEO and managers in the scenario of e-Filing implementation. (e) Compilation of ideas and suggestions through the feedback channels prepared by IRBM are welcomed from staffs at any levels. (f) To maximise the human capital of IRBM effectively and avoid the jobs burden during peak period pertaining assessment as well as revenue collection matters. (g) The implementation effort in order to assist customers especially during utilizing the e-Filing services and will be handled by branches and consultation from IRBM officers. Few sharing of experiences were done with other countries Knowledge Sharing Workshop such as : • Cambodia • Vietnam • Sri Lanka • Bangladesh • India • Phillipines (workshop which was organized by Asia Development Bank – Knowledge Sharing Workshop on Electronic Tax Administration).

Contact Information

Institution Name:   Inland Revenue Board of Malaysia
Institution Type:   Government Agency  
Contact Person:   Puteh Aziah Mohd Yusoff
Title:   Director Quality Management & Innovation Division  
Telephone/ Fax:   +60383138843/+60383187834
Institution's / Project's Website:  
E-mail:   puteh.aziah@hasil.gov.my  
Address:   Headquaters Inland Revenue Board of Malaysia, Corporate Services Department, Level 13, Menara Hasil, Persiaran Rimba Permai, Cyber 8
Postal Code:   63000
City:   Cyberjaya
State/Province:   Selangor
Country:  

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