‘Mechanism to tax tech firms must be reviewed’
PUTRAJAYA: Malaysia should impose tax on technology and social networking giants, such as Google and Facebook, considering the profit they make through digital advertising in the country, said the Malaysian Association of Tax Accountants (Mata).
Mata president Datuk Abd Aziz Abu Bakar said based on the principles of tax justice, the companies should be taxed, but the implementation of the mechanism must be studied and reviewed first.
He said many factors had to be taken into account, including regulations and the mechanism’s implementation, to ensure that the process was thorough.
“We need a strong mechanism and regulations. It is not impossible to impose tax on the companies, but I don’t think it can be implemented in the near future.”
He said tax matters must be referred to the Income Tax Act 1967.
“When the act was designed, there were no online businesses and social media. As such, changes must be made.”
He was commenting on a proposal by Star Media Group Bhd managing director and chief executive officer Datuk Seri Wong Chun Wai that the government should impose tax on Google and Facebook as they controlled nearly 70 per cent of digital advertisements in Malaysia.
Wong suggested this to Deputy Prime Minister Datuk Seri Dr Ahmad Zahid Hamidi at a talk session with senior editors and publication permit holders on Tuesday.
Zahid said he would raise the matter in the cabinet.
Aziz said it was important to determine Google and Facebook’s income to ease taxation.
“Google and Facebook have no permanent establishment in the country. A company or entity that can be imposed with tax in Malaysia must have a permanent establishment here.
“They do have branches in the country and the business community here pays them for digital advertising, but we are not sure about their income. Do they get royalty? Do the transactions happen in Malaysia?
“That’s why we need a study to ensure that the tax implementation mechanism will benefit the country.”
The Inland Revenue Board (IRB) said there was no provision relating to tax on digital advertising.
IRB chief executive officer Datuk Seri Sabin Samitah said the issue of digital advertising payments would be determined based on the facts of a case as well as the Income Tax Act 1967.