Takes cue from Europe to tax digital providers

Taxation measures for digital service providers like Airbnb, Grab involve complex procedures and international regulations

By D KANYAKUMARI / Pic By AFIF ABD HALIM

Malaysia is awaiting to see what measures are introduced to tax digital service firms in the Organisation for Economic Cooperation and Development (OECD) said Second Finance Minister Datuk Seri Johari Abdul Ghani.

He said the taxation measures for digital service providers such as Airbnb and Grab involve complex procedures and international regulations.

“Malaysia could not move to tax these services on its own because it involves a complex process.

“At this moment it (taxation) would depend on the developed countries. It is up to them to find the right solution on how to tax these services,” Johari told reporters after officiating the 22nd Tax Day in Cyberjaya yesterday. Johari, however, did not dismiss the possibility that these services will be taxed eventually.

“We are waiting for the mechanism which they have and then we will comply accordingly. Otherwise at this moment, even if you wanna tax them it’s very difficult to tax them because they are not based here,” he said.

Johari stressed the mechanism to tax these services has to be right as it involves international laws.

“We as the associate members in OECD, in order to learn from them on how they do this (taxation) in developed countries, will now have to look into this because most of this technology originated from their side,” he said.

Johari stressed that the Inland Revenue Board (IRB) has to update its system and laws in order to keep up with recent developments.

“Take for example — taxis — we used to tax taxi companies but now, who even uses taxis? People use Grab and Uber. These people provide the same services that we used to tax, but they don’t pay taxes.

“If our tax system doesn’t change and our court is still referring to laws from the 1960s, then it’s going to be a problem,” he said.

Last September, Royal Malaysian Customs Department DG Datuk Seri Subromaniam Tholasy said that foreign digital service providers will soon be imposed the Goods and Services Tax (GST), as authorities are currently drafting law amendments to tax such companies.

Subromaniam said these digital companies could contribute “a few billions ringgit” in GST once the amendments are enforced.