Cautiously optimistic on new digital service tax
KUALA LUMPUR: Whilst optimistic, analysts exert caution on the latest digital service tax at a fixed rate of six per cent per annum effective January 1, 2020 for those with the annual threshold of RM500,000.
This follows the passing of the Service Tax (Amendment) 2019 Bill in the Dewan Rakyat on Monday.
Under the Bill, tax defaulters may be fined up to RM50,000 and/or imprisoned for up to three years upon conviction.
“We are cautiously optimistic on this development as it still remains to be seen the extent to which the tax will benefit local players,” commented AmInvestment Bank Bhd (AmInvestment Bank) on the matter.
“According to Deputy Finance Minister Datuk Amiruddin Hamzah, Malaysia’s digital tax rate sits lower compared with rates in New Zealand, Russia and Norway at 15, 18 and 25 per cents respectively.
“Furthermore, pricing alone might not deter customers from choosing preferred content provided by foreign over-the-top content players.”
Foreign service providers under the Bill is defined as a person outside Malaysia providing digital service to a consumer and includes any person operating an online platform for buying and selling goods or providing services (whether or not such person provides any digital service).
Meanwhile, a digital service is defined as service delivered or subscribed over the internet and other electronic network and which cannot be obtained without the use of information technology and where the delivery of the service is essentially automated.
“Aimed at levelling the playing field between local and international online service providers, the digital tax might benefit media companies with TV and over-the-top (OTT) segments such as Astro, Media Prima and Star Media as competition from OTT players such as Netlfix has pressured subscription revenue and average revenue per user,” AmInvestment Bank added.
“Thus, we maintain our neutral stance on the media sector due its unexciting prospects amid a challenging operating environment following the structural shift from traditional media to digital platforms.
“This is coupled with the challenging monetisation of digital initiatives and a subdued adex outlook for 2019.”
We are cautiously optimistic on this development as it still remains to be seen the extent to which the tax will benefit local players. AmInvestment Bank