KUALA LUMPUR – The size of the country’s shadow economy may have decreased over the years, but it remains a cause for concern, said the Finance Ministry.
In its Economic Outlook 2021, the ministry said Malaysia’s shadow economy stood at 18.2% last year, following a gradual decrease since 1990.
It flagged red tape as among the reasons businesses have gone underground, saying a larger government would lead to heightened regulatory burden, which, in turn, would induce firms to operate in the shadows.
Heightened activity in the shadow economy will push up demand for the local currency because such transactions “tend to be in cash”, or even cryptocurrencies, as these are “difficult to be detected”, it said.
Also, hidden transactions “assumed to be carried out in cash to avoid leaving a paper trail for the authorities”.
The ministry said Putrajaya should take a leaf out of the book of countries such as New Zealand, which “provides a tax number to every newborn child upon registration of birth”, or Australia, where the taxation office “allows taxpayers to pre-fill their income tax returns with information, such as salary, interest and health insurance, with data sourced directly from employers, banks and insurers”. – The Vibes, November 9, 2020
