Tax regime faces digital economy sweep

Issues like BEPS, ESR and e-commerce will be deliberated at 2-day Malaysian Tax Conference 2018 in Kuala Lumpur


Tax practitioners seem to face a juggernaut of overwhelming change sweeping the landscape with the advent of the digital economy. They are also grappling with issues like base erosion and profit shifting (BEPS), earnings stripping rules (ESR) and e-commerce.

Needless to say, the tax practitioners are managing multiple issues on multiple fronts.

“The major issue faced by tax practitioners relates to the extensive legislative changes being introduced and new guidelines/rulings being issued by the tax authorities which increases the tax compliance burden,” accomplished author and tax observer Dr Veerinderjeet Singh told The Malaysian Reserve (TMR).

The nation’s tax fraternity will converge for the two-day Malaysian Tax Conference 2018 in Kuala Lumpur on April 17-18 to discuss some of these issues.

The event is organised by the Malaysian Institute of Accountants (MIA) and the Malaysian Association of Tax Accountants.

One of the issues on top of the minds of many tax practitioners revolves around e-commerce. The boom in e-commerce means that the nation stands to collect a significant amount of tax.

However, current regulations need to be amended to capture higher taxes on e-commerce transactions because many large online retailers are offshore, observed a note promoting the conference.

Grant Thornton Malaysia (GTM) tax advisory and international tax head Daniel Woo will join a panel at the conference discussing matters concerning e-commerce and taxation.

The session will allow industry experts on digital tax developments from the public practice, industry and the Inland Revenue Board (IRB) to offer their perspectives on how to manage the taxation opportunities and challenges in e-commerce.

GST and Income Tax

Another session expected to grab the attention of participants concerns the conflict between the Goods and Services Tax (GST) and income tax.

All tax practitioners should become more invested and vocal about tax reforms, as they have an obligation as accountants to uphold and protect public interest, according to the conference promoters.

“A keen proponent of tax reforms to promote sustainability, competitiveness and social wellbeing, the speakers will address two key reform issues: 1) Calling for the gradual reduction of income tax rates to offset potentially higher GST; and 2) Urging for policymakers’ commitment to fiscal discipline to curb wastage and deliver economic results and public services that match taxpayers’ contributions,” according to the note promoting the conference.

YYC KK Chow Tax Sdn Bhd ED Zen Chow is slated as the speaker and GTM indirect tax and GST head Alan Chung as the moderator for an ensuing panel session.

When contacted, Zen said GST legislation states that a GST registrant is required to incur certain expenses under certain circumstances to comply with the GST law. However, these expenses are non-tax deductible, according to the Income Tax Act 1967.

“As such, it will be viewed as ‘unfair’ to the taxpayers as they are required by law to incur such expense, but do not get tax benefit from this expense. This will increase the cost of doing business even further,” he told TMR.

Handling Multinational Enterprises

Another panel session aims to look at how to manage emerging permanent establishments (PEs) risks under the new PE guidance — which affects many businesses, especially multinational enterprises (MNEs).

Failure to manage these risks appropriately may result in additional reporting requirements, penalties for non-compliance, corporate tax exposure, reputational risk and increased scrutiny from tax authorities, said the conference promotion material.

The session, moderated by Advent MS Tax Consultants Sdn Bhd ED Chow Chee Yen, will feature Tycoon+ Advisors CEO/founder Sathya Kumar. They are expected to provide an overview of the tax residency rules applicable in the different jurisdictions.

The tax cases update session will be presented by Shook Lin & Bok partner Sudharsanan R Thillainathan.

A panel session on the same topic will include IRB legal department director Abu Tariq Jamaluddin and Faisal Advisory Sdn Bhd tax director Mohameed Faisal Syed Ibrahim as the moderator.

The conference will also discuss the ESR which came up in Budget 2018. Slated to take effect on Jan 1, 2019, the ESR will replace the existing thin capitalisation legislation.

It aims to reduce the use of interest deductions by businesses, especially MNEs, to reduce domestic tax.

Amir Zainuddin Abdul Hamid — IRB principal assistant director at its international tax department — is expected to discuss the parameters and outline of the ESR, the impact on businesses, the limitations and the recommended steps that should be taken to prepare for the ESR.

A related panel session, to be moderated by Thannees Tax Consulting Services Sdn Bhd MD SM Thanneermalai, will also involve EY Asean tax leader Yeo Eng Ping.

The conference will also have a panel discussion on the economy outlook in the next few years with a presentation by Malaysian Rating Corp Bhd chief economist Nor Zahidi Alias.

A panel discussion, to be moderated by Veerinderjeet (picture) — who is also MIA taxation practice committee chairman — will feature Ministry of Finance undersecretary for fiscal and economics division Dr V Sivabalasingam and Sunway University Business School economics professor Dr Yeah Kim Leng.