Industry concerns

While the general consensus is that the digital tax will not end up being too much of an adverse factor for consumers, industry player iPay88 Holding Sdn Bhd believes that introducing the tax in the near-term may be detrimental to the growth of our digital economy.

In a media statement, the group’s executive director Chan Kok Long stated that it is currently far too early to impose a digital tax into our markets as our digital sector is still struggling to make profits.

“The fintech industry, for example, has made inroads in disrupting the financial industry and changing the way we do business yet the players are still investing in the business rather than making a profit.

“On the other hand, the marketplace is still in infancy stage in Malaysia and many companies within the digital industry are still trying their best to break- even. At the same time, these new tech companies are taking risks while continuously investing in research and development to stay ahead.

“Taxing them now may even push them to collapse or seek other countries as their base,” he argued while adding that the tax would also hinder innovation and growth of the industry.

He elaborated that the taxation of such a young and emerging industry would only cause players to look for greener pastures in neighbouring countries – ending up as losses for Malaysia.

A solution to this he suggested would be that the digital tax should be based on profit instead of industry.

“Tax is an important revenue for the government. However, instead of an industry based tax, the government should look at taxing based on profits.

“For example, international players should be taxed as they have established themselves and are able to expand into different countries. We believe that the government should set a margin based profit tax to enable the industry to mature into a fully developed economy.

“I hope the government will do an in- depth study into the industry and its challenges before implementing a digital tax without putting a barrier to the growth of the industry.”

Chan also touched on bottom tier SMEs, who are the backbone of the e- commerce industry.

“A considerable number of businesses on market places and social media are made up of small-time business owners like housewives and young entrepreneurs who just make a comfortable income, rather than millions in profit.

“They shouldn’t have to pay an additional digital tax. Instead the government should create incentives and soft loans so that this segment can benefit more from e- commerce,” Chan said.

In supporting the digital economy, Chan hoped the government will defer the digital tax introduction until the digital sector is ready and when many companies in Malaysia can successfully conquer overseas market. He also proposes for the government to form a new ministry to handle digital and technology.

“To help companies like payment gateways, data centres, logistics and marketplaces to build the digital ecosystem and infrastructure, we urge for the government to provide tax incentives in the upcoming Budget 2019,” Chan said.