KUALA LUMPUR (Jan 26): Former economy minister Datuk Seri Mohd Rafizi Ramli said in Parliament on Monday that the government may have "overstated" its revenue as the figure includes outstanding tax refunds that have yet to be returned to taxpayers.

Rafizi noted that Malaysia adopts cash-based accounting rather than accrual accounting, meaning tax revenue reported in the annual budget reflects collections made during the year without deducting excess amounts that should be refunded.

As a result, the federal government’s reported revenue of RM322 billion for 2024 includes RM33.3 billion in unpaid tax refunds, as stated in the Federal Government Financial Statements for 2024, he said.

“If the outstanding refunds were accounted for, the fiscal deficit for 2024 would amount to an estimated 5.8% to 6.0% of gross domestic product, compared with the official figure of 4.1%, based on an economy valued at between RM1.65 trillion in real terms and RM1.93 trillion in nominal terms,” the member of Parliament for Pandan said while debating the royal address.

Concerns have previously been raised by several quarters, including government backbenchers, over delays by the Inland Revenue Board (IRB) in processing tax refunds, particularly for corporate and business taxpayers, which they say have strained the cash flow of small and medium enterprises.

To address the issue, Prime Minister and Finance Minister Datuk Seri Anwar Ibrahim announced on Dec 7 last year that the government would increase the tax refund allocation to RM4 billion from RM2 billion to expedite outstanding payments to taxpayers.

According to Deputy Finance Minister Liew Chin Tong, the tax collection agency refunded a total of RM22.45 billion in excess taxes to 3.6 million taxpayers last year. The IRB has also committed to completing corporate tax refunds for the 2023 and 2024 assessment years within 2026.

On Monday, Rafizi said the RM4 billion allocation appeared small when measured against the government’s total tax refund commitments, which have risen sharply in recent years.

Citing the Federal Government Financial Statements for 2024, he said outstanding federal tax refund liabilities rose from RM14.6 billion in 2020 to RM21.8 billion in 2021, RM25.7 billion in 2022, RM25.5 billion in 2023, before jumping to RM33.3 billion in 2024 — an increase of 128% over four years.

Based on the trend, tax refund arrears for 2025 are likely to exceed RM33.3 billion, he added.

Rafizi questioned whether delays in refunding excess taxes reflected administrative inefficiencies or a deliberate policy choice to present a narrower fiscal deficit.

He urged the Finance Ministry to disclose the country’s actual fiscal position by fully accounting for outstanding tax refund liabilities, calling for greater transparency in public finance management.

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