The country is estimated to lose about RM70 billion each year due to untaxed business activities and illicit activities, known as the shadow economy. This amount is approximately 20% of the total estimated value of the shadow economy, which is worth RM350 billion per year, or 30% of the Gross Domestic Product (GDP).
LHDN takes action on Malaysia’s shadow economy
The shadow economy is related to criminal activities such as tobacco and drug smuggling, prostitution, gambling, passport counterfeiting, and human trafficking. It also includes the informal unregistered sector such as online businesses, influencers, cash economy transactions, and part-time workers who do not report their income to the Inland Revenue Board (LHDN).
The Economic Review Report 2021 released by the Ministry of Finance estimated that Malaysia’s shadow economy averaged 33.7% of GDP between 1990 and 2019. LHDN’s Chief Executive Officer, Datuk Dr Mohd Nizom Sairi, said that LHDN is taking measures to address this problem by selecting and distributing cases for tax and employer audits, among other measures.
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