Putrajaya mulls taxing online transactions

Economic Affairs Minister Datuk Seri Mohamed Azmin Ali speaks at a press conference in Kuala Lumpur July 2 2018. In the plan’s mid-term review published today, the Ministry of Economic Affairs is planning to increase the contribution of indirect taxes and non-tax revenue such as licenses, permits, fees and rentals, in addition to suggesting tax on online transactions. — Picture by Mukhriz Hazim
Economic Affairs Minister Datuk Seri Mohamed Azmin Ali speaks at a press conference in Kuala Lumpur July 2 2018. In the plan’s mid-term review published today, the Ministry of Economic Affairs is planning to increase the contribution of indirect taxes and non-tax revenue such as licenses, permits, fees and rentals, in addition to suggesting tax on online transactions. — Picture by Mukhriz Hazim

KUALA LUMPUR, Oct 18 — Putrajaya is looking to diversify its revenue in its revision to the 11th Malaysia Plan, as a balanced budget by 2020 seems out of reach due to the possibility of its fiscal deficit temporarily shooting up during its transitional reform period.

In the plan’s mid-term review published today, the Ministry of Economic Affairs is planning to increase the contribution of indirect taxes and non-tax revenue such as licenses, permits, fees and rentals, in addition to suggesting tax on online transactions.

“As e-commerce and activities related to sharing economy are on the rise, the government will explore imposing tax on these online transactions,” it said in the review report, but did not elaborate on the proposed tax.

The government is also keen to get more of the bottom 40 per cent of households on board digital economy. It plans to do this by training the country’s lowest wage earners to do business online, including on social media platforms.

It also suggested the digitalisation among small and medium enterprises to increase their technology adoption, as a way for them to outreach to the global market, reduce cost of doing business and create more skilled jobs.

In addition to the abovementioned tax, the ministry will also undertake more initiatives to improve tax compliance to ensure collection is maximised from both direct and indirect taxes, in addition to enhancing non-tax revenue by maximising cost recovery of government assets, among others.

“In this regard, the funds accrued will be used to finance operating costs, particularly for asset maintenance. These efforts will reduce government dependency on oil-related revenue that is inherently volatile,” it said.

This comes as the previous goal of a balanced budget by 2020 was revised to a fiscal deficit of 3 per cent of the gross domestic product (GDP) by that year.

But Finance Minister Lim Guan Eng was quoted saying in August that the target this year would already be 2.8 per cent of GDP.

He told state news agency Bernama the target would be met through various measures, including cancelling and postponing unimportant low-multiplier government expenditure by RM10 billion.

Prime Minister Tun Dr Mahathir Mohamad previously said the government may need to consider additional forms of taxation to address its debts, as it is the only other option, despite its unpopularity, besides selling off the nation’s assets.

In the revised Plan, Putrajaya also plans to further consolidate its operating expenditure to maintain a surplus current account balance by, among others, reforming government agencies, strengthening procurement process through open tenders, as well as restructuring debt.

It will also rationalise the ceiling amount for development expenditure from RM260 billion originally to RM220 billion during the Plan period, to consolidate the fiscal position — following lower revenue.

“Public investment will focus on strengthening public infrastructure and developing economic enablers. Over 4,000 ongoing projects will still be continued across the nation, among others, the building of affordable houses, schools, hospitals and roads,” it said.

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