Digital tax raises concerns among Malaysian consumers

A digital tax could lead to price increases for customers. — Reuters pic
A digital tax could lead to price increases for customers. — Reuters pic

Follow us on Instagram and subscribe to our Telegram channel for the latest updates.

KUALA LUMPUR, Sept 28 — The government’s plan to amend the taxation system to include digital tax is leaving Malaysian consumers concern about the issue of double taxation.

This is because the prices of online products sold on e-commerce platforms such as Lazada, Shopee and 11Street have already included the Goods and Services Tax (GST).

However, Deloitte Malaysia Indirect Tax Partner, Senthuran Elalingam said the new form of tax, which may be implemented next year, would only affect foreign service providers, namely those businesses that had no establishment or place of business in Malaysia.

“This is an issue which specifically concerns online services, as imported goods have already been subjected to import duties.

“There is a mechanism under our current GST model that allows for tax to be collected for online services provided local companies to Malaysian consumers, but if the services were provided by foreign service providers, they do not have to pay the GST,” he told Bernama in an interview recently.

GST only applies to businesses with ‘business establishment’ or ‘fixed establishment’ in the country, while those operating outside of Malaysia were not subject to the tax.

However, the implementation of the digital tax may mean that foreign service providers serving Malaysian consumers may be charged with tax.

According to the Malaysia Digital Economy Corporation, Malaysia has 20.62 million active Internet users in 2016, and many of them have opted to shop online as the prices of products are cheaper compared to the physical stores.

However, Senthuran said the implementation of the digital tax might lead to price increases.

“From the consumer’s perspective, digital services would be subject to the tax once the law takes effect, and if the service provider decides to pass on the tax by adding it to their existing price, then yes, the price would increase.

“However, this would be a commercial decision based on several factors and may vary from business to business,” he said.

To-date, the guidelines for the new tax have yet to be determined, and both consumers and online service providers would have to wait for the announcement to be made. — Bernama

You May Also Like

Related Articles