PIKOM, the National ICT Association of Malaysia, is supportive of the Malaysian Government’s stance to impose a 6% digital tax on foreign service providers as of January 1, 2020.

KUALA LUMPUR: PIKOM, the National ICT Association of Malaysia, is supportive of the Malaysian government’s stance to impose a 6 per cent digital tax on foreign service providers as of January 1, 2020.

“The digital tax creates a level playing field for local players,” said PIKOM chairman Ganesh Kumar Bangah of the 6 per cent that will be imposed on imported online services, including software, music, video and digital advertising.

“Under the current tax regime, business-to-business sales are already covered. However, foreign business to local consumer sales, in particular for digital goods and services are not taxed.

“Hence this is the ‘hole’ that the government is trying to plug and to level the playing field among local and foreign companies, as well as between online and offline service providers,” he explained.

Other countries like Singapore, New Zealand, Australia Taiwan, Norway, South Africa, Japan already have such taxes or rulings on imported digital related transactions. New Zealand, Russia and Norway are currently imposing relatively higher taxes – at 15%, 18% and 25% respectively.

“In comparison, Malaysia’s 6% digital tax can be considered low,” Ganesh further said, although he acknowledged that it could increase in the future.

“Consumers ultimately would be absorbing higher cost of imported digital services. Hence, it is of paramount importance that cost does not run ahead of affordability for consumers,” he added.

On enforcement of the digital tax, PIKOM believes that a conducive collection mechanism or platform should be in place to ensure seamless implementation. The association cautioned that, otherwise, consumers could end up bearing much higher costs for foreign products and services.

“All in all, though, the digital tax should result in elevating the competitiveness of the industry in terms of services and product quality for both local and foreign players,” he concluded.

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