Government mulls new mechanism to impose digital tax

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KUALA LUMPUR (Sept 12): The government is looking at a new mechanism to impose digital tax towards overseas service content providers — foreign entities who provide services in Malaysia, as way to explore new sources of revenue for the country.

Deputy Finance Minister Datuk Amiruddin Hamzah said the government is wondering if the matter on digital tax can be incorporated in the upcoming Budget 2019, which is scheduled to be tabled on Nov 2. 

“We are looking at the matter (digital tax) but I'm not sure if we can quickly incorporate it in the Budget presentation. We need to explore new sources of revenue.

“This will definitely be a matter that we will look into deeply,” Amiruddin told reporters on the sidelines of launching a new World Bank report entitled “Malaysia’s Digital Economy: A New Driver of Development” today. 

However, Amiruddin said the government has yet to decide on the to-be-imposed tax rate at a later stage on the digital economy players. 

“We will come out with a new mechanism, but we are still studying it and we will impose something for them.

“If we put this matter (digital tax) aside, I think the nation will be losing revenue,” he said.

Meanwhile, the World Bank report summarises the work of a program managed by the World Bank Group Global Knowledge and Research Hub in Malaysia, in collaboration with the Ministry of Finance (MoF) and other partners.

According to the report, Malaysia’s past performance offers substantial optimism about the future of its digital economy.

Furthermore, the report highlighted four important policy goals for unlocking the full potential of the digital economy in Malaysia, including to create more dynamic digital ecosystem, with increased competition to achieve universal, fast and inexpensive internet connectivity, to improve human capital through better curricula and life-long learning opportunities, as well as to safeguard future digital tax revenues.

Amiruddin said the country's ecosystem is in place but Malaysia needs to create a dynamic ecosystem in terms of internet connectivity, specifically on the fixed broadband for businesses and households, in order to enhance the digital economy, going forward.

“We need to double the speed with half the price. When this happens, we expect more companies to come on the bandwagon and use digital transactions. 

“I’m sure we will be able to move in such way,” he said.