Malaysia must reform its tax system to address weaknesses that led to tax evasion losses, according to economist Jomo Kwame Sundaram.

He said weaknesses identified in the present tax system allowed for various methods of evasion either by individuals or companies.

"Surveys done some years ago found that half of the owners of luxury cars did not even pay income tax.

"Of course you can be a very rich widow, you're not paying any income tax, but you can still afford your BMW or whatever cars that rich widows drive," said Jomo at a press conference on the United Nations Conference on Trade and Development report 2019 at Kenanga Research Institute's headquarters in Kuala Lumpur yesterday.

Jomo also cited a report by business weekly Focus Malaysia, published two years ago, on how the three richest women in Malaysia at that time are widows.

"But I'm sure not every owner of luxury cars is a rich widow.

"So you have to wonder, how successful and easy tax evasion is in this country," he said.

Similarly, Jomo said there are large international companies that had set up operations overseas only to benefit from various government incentives and tax breaks.

"We need to have international cooperation so that we can tax these companies.

"They are making money in our countries but somehow or rather, we are giving them a lot of tax breaks.

"By manipulating their accounts and so on, they avoid paying taxes or minimise taxes which they pay," he said, adding that such tactics have been facilitated by the rapid growth of the digital economy.

Jomo, who is a senior visiting fellow at think tank Khazanah Research Institute, said there are companies in Malaysia that continued to enjoy tax incentives and tax breaks from the 1950s until today.

He said the situation is a clear sign that the time has come for the government to introduce reforms to the taxation system to make it more effective.