‘Potential double taxation may prompt exit of global firms’

KUALA LUMPUR: A public relations (PR) consultant has suggested that international marketing communications firms will exit Malaysia if the cost of doing business rises drastically.

Boutique PR firm Syed Idid Associates chief engagement officer Syed Mohammed Idid said the potential double taxation under the Sales and Services Tax (SST) would affect the bottomline of advertising agencies, PR consultancies, creative communications firms and design houses.

“Some international brands are required to return 25 per cent of the profits back (to their headquarters overseas),” he wrote in a Marketing Magazine.

“How can they build a sustainable business, here, unless they move away to cities that are more business friendly? We have seen a couple of international PR firms exiting Malaysia and servicing their clients from nearby locations,” asked Syed Idid.

He was commenting on the industry players’ concerns over the possible double taxation after a meeting with the Customs Department recently.

Industry representatives at the meeting were shocked to learn that SST would be an exponential tax system, snowballing from one party to another.

Citing an example, they claimed that after a media owner had charged an agency the six per cent SST in its invoice, the agency would also have to add another six per cent on that bill when invoicing its client.

“Hence, if the original invoice is RM106 to the agency, the agency will have to bill the client RM112.36 after adding another six per cent SST.

Syed Idid said it was time for the industry to come together and be part of policy building.

“The digital economy will create new tax regimes that will affect the channels we operate in,” he added.