Uber, Grab open to talk about paying GST


Ride-hailing service provider Uber Technologies Inc will wait for the final mechanism on the proposed consumption tax for digital goods and service providers operating in the country.

Its head of communications for South-East Asia Leigh Wong said the US-based e-hailing service provider will discuss with the relevant tax authorities, but stressed the company is already complying with all requirements prescribed by the present law.

“Uber is open to engaging with the government on the best way forward. We await the final details of such proposed regulatory updates,” Wong told The Malaysian Reserve (TMR).

“Uber is compliant regarding all current taxation requirements in Malaysia,” he added.

The Royal Malaysian Customs Department and Inland Revenue Board (IRB) announced this week that the two tax collecting agencies are drafting amendments to the present tax laws to make digital companies operating in Malaysia from an overseas base liable to local taxation.

The government is expected to table the amendments to the Goods and Services Tax (GST) Act 2014 at the next Dewan Rakyat sitting.

Internet-based goods and service providers that are based abroad escape the jurisdiction of local tax authorities, especially on the profit that is generated from Malaysia.

These firms also choose countries where the corporate taxes are lower as their base, besides the various incentives offered by the respective countries.

Malaysia is losing billions in revenue as the present tax laws do not have jurisdictions over these companies on their net businesses.

Grab, meanwhile, said it is compliant with the tax regulations in each of its countries of operations.

Its Malaysia country head Sean Goh said the company, which is headquartered in Singapore, will continue to work with local authorities on the proposed regulations and policies.

“We will continue our collaborative efforts with the authorities and look forward to continuing our efforts in engaging and working cohesively with them in all the cities we are currently in,” Goh told TMR.

“We will continue to monitor with great interest the proposed amendments to the GST Act 2014,” he said.

Customs DG Datuk Seri Subromaniam Tholasy said digital companies could contribute “a few billion ringgit” in GST once the amendments are enforced.

The law reforms, he said, will incorporate the permanent establishment (PE) clause, that would enable the department to include digital companies into the GST bracket.

A local economist said the government could use tax digital platforms at the local payment gateways before a more comprehensive and globally accepted tax regime is formulated.

Sunway University Business School economics Professor Dr Yeah Kim Leng said a full tax structure on digital multinationals can only be enforced once a framework is agreed by the Organisation for Economic Cooperation and Development (OECD).

“The OECD is trying to forge an agreement. Once all countries become signatories of the arrangement, then all governments can push ahead with their respective tax initiatives, including Malaysia,” Yeah told TMR.

Until such agreement comes into force, Yeah said Putrajaya may opt to tax foreign digital companies on the transactions conducted through payment gateways where levy like the GST can be imposed.

IRB CEO Datuk Sabin Samitah recently said most developing countries wanted the OECD to draw up the laws by next year instead of 2020, due to the massive revenue losses.

He said these Internet firms, traditionally allow about 80% of their revenue to be transferred to lower tax jurisdictions.

He added that the proposed amendments to the current tax structure can provide a level playing field for companies conducting businesses in Malaysia, while boosting the country’s growing digital economy.

Meanwhile, Uber has also said it will cooperate with the Malaysian government on the proposed taxation of companies operating in the country without a PE.

The development comes on the back of the Customs striving to achieve RM42 billion in GST collections this year, while IRB aims to secure a 12% increase in tax revenue to RM127.7 billion.

Both agencies are looking to expand the tax net to include foreign-based digital players under its jurisdiction.