Support for move to tax digital economy

KUALA LUMPUR: The government’s proposal to tax the digital economy is a step in the right direction, says World Bank Group representative and country manager for Malaysia Faris Hadad-Zervos.

Tax imposition on the digital economy will allow diversification of the government’s revenue sources, aside from creating more buffers for an improved fiscal management.

“For Malaysia to sustain its economic momentum, it is important to have broadbased growth, buttressed by diversified sources of income for the government.

“The World Bank is positive on the proposal to tax the digital economy as it would create an additional revenue stream for the government. This is important because the digital economy will continue to have a growing role in the overall economy and it is only right to tax the digital players similar to other regular businesses,” said HadadZervos at an economic update briefing.

Royal Malaysian Customs Department director-general Datuk Seri Subromaniam Tholasy had previously said the government planned to collect taxes from foreign service providers operating in Malaysia under the digital economy.

He indicated that the Customs Department aimed to propose the amendments to the Goods and Services Tax (GST) Act 2014 when Parliament reconvenes later this month.

The World Bank has recommended that Malaysia should broaden the base of the personal income tax, apart from reducing exemptions under the GST regime.

“The favourable domestic environment provides a crucial opportunity for the government to further strengthen its finances towards a more sustainable debt path.

“Broadening of revenue sources and reducing exemptions on GST could further enhance revenue collection, while addressing the rising civil servants’ salaries and pensions could contain the expansion in operating expenditures,” it said.