PAYING tax to the country is a must and duty of every responsible citizen so as to enable the country to spend for the benefit of rakyat. While for those employed it’s deducted from their salaries, for business owners the income declaration depends on their honesty.
In view of escalating cost of living, many are now turning to e-commerce for additional source of income, but are these businesses, some of which are reaping a handful income fulfilling their tax obligation or required to do so?
The Malaysian Reserve has reported that the Inland Revenue Board (IRB) was keeping a close eye on e-commerce business owners.
For this purpose, the Sept 2017 report said, IRB collaborated with government agencies like the Companies Commission of Malaysia (SSM) and the Royal Malaysian Customs Department.
According IRB director of e-commerce division Abdul Aziz Kechik, individuals and companies involved in e-commerce activities could be taxed under the Income Tax Act 1967.
The Capilary blog in its article titled “Ecommerce in Malaysia: Growth, Trends & Opportunities” on June 2020, revealed Malaysia’s e-commerce market in 2020 was worth US$4.3 bil, and it was expected to double to US$8.1 bil by 2024; at 14% compound annual growth rate (CAGR).
The article also stated that 40% of e-commerce orders in Malaysia were cross-border orders from American and Chinese webshops.
Meanwhile, Focus Malaysia in a Jan 2017 report, expected Malaysia’s e-commerce activities to be worth RM114 bil in 2020 from just RM68.3 bil in 2015.
This, it said, could further add to the tax revenue and authorities could potentially net billions in additional revenue through taxing a wider range of digital businesses.
The article foresaw the Customs Department to earn RM2 bil in GST alone (abolished under the Pakatan Harapan government), while the IRB to collect another RM3 bil in additional taxes.
Towards this direction, the report added that the Companies Commission of Malaysia (CCM) was already making it mandatory for all e-commerce businesses to register with it, failing which they would face action and still be liable to the taxman.
A special task force had been set up to work on relevant issues, including new legislation, the article noted.
Meanwhile, the portal opengovasia.com in June last year, quoted former prime minister Mahathir Mohammad as saying less tax was obtained from businesses as online stores had forced many shops to cease operations and that the tax from online businesses went to the country where the products were generated.
He further remarked that taxation would assist governments in gauging the amount of profit being made by online businesses.
In connection to that, Soya cincau, in a recent report (Sept 9) stated that the Ministry of Communications and Multimedia had refuted an earlier statement by Deputy Communications and Multimedia Minister Zahidi Zainul Abidin that an e-commerce service tax was in the planning stage.
He was reported as saying that the plan to introduce an e-commerce service tax was to find new sources of income to improve communications security to prevent scams and cyber threats.
Malaysia currently imposes a 6% service tax only on foreign digital-based services such as Netflix, Spotify, Airbnb and Google.
The move was made in Budget 2019 and came into effect on Jan 1, this year. – Sept 27, 2020
