PETALING JAYA: Apart from the goods and services tax (GST), imposing a 15% minimum tax rate on the digital economy will help boost the government’s revenue stream, says tax experts.
The Finance Ministry said in a pre-budget statement recently that discussions are being held with the Organisation for Economic Co-operation and Development (OECD) on a global minimum tax rate of 15% on the digital economy.
Dr Shankaran Nambiar said the move, under an international scheme involving 137 countries, was an attempt to ensure that top multinational enterprises or MNEs (as defined by the OECD) do not evade or under-pay taxes.
“As such, Malaysia seems to be keen – as part of a global effort – on helping to prevent the race to the bottom as far as tax collection from the huge multinational companies are concerned,” said the Malaysian Institute of Economic Research (Mier) senior research fellow.
This tax only applies to MNEs with a revenue of €750 million.
“So it will not matter to most Malaysian companies,” he added.
Thannees Tax Consulting Services Sdn Bhd managing director SM Thanneermalai said it was not bad to tax the digital economy.
He said many businesses had become a part of the digital economy and taxes were not being paid in the country where the sales were being done.
He said this tax system will apply to foreign service providers as local companies already have a registered tax presence.
Thenesh Kannaa, a partner at TraTax said taxing the digital economy is in line with international practices, and promotes neutrality.
“At present, if someone walks into a store to purchase (say) RM50 of an imported product, the price may be inclusive of import duty and sales tax.
“But if the consumer purchases the same product via an online platform, it may be delivered to the doorstep without any import duty or sales tax due to exemption on low value consignment,” he said.
“This means the tax treatment is not neutral, giving a tax disadvantage for enterprises operating in Malaysia,” he said.
Finance Minister Tengku Datuk Seri Zafrul Tengku Abdul Aziz recently said that the government needs to make efforts to broaden its revenue base.
He noted the national revenue collection as a percentage of the gross domestic product (GDP) last year was relatively low at 15.1% compared with other countries in the region such as Singapore, Thailand and the Philippines. Tax revenue, meanwhile, stood at 11.2% of the GDP.
On how the government can increase its revenue stream and boost its coffers, Dr Nambiar said the government can look at prosperity taxes, inheritance tax as well as taxes on carbonated and sugary drinks.
Aside from additional taxes, he said taxation on the system must also be improved for efficiency while monitoring must be intensified.
Thanneermalai, on the other hand, said the government could also look into capital gains tax as well as the taxing of cryptocurrency.
“There is a lot of money that is going through that has not been taxed in the crypto world,” he said.
Besides that, he said enforcement against the shadow economy and tax dodgers is also another option.
“There are still many taxpayers who are not filing their returns on time, and who are not paying the right taxes.
“There is a shadow economy which the tax authorities should be more focused on going after,” he said, adding that the shadow economy, worth billions, could bring in tax revenue to the tune of billions of ringgit.
He noted that boosting tax revenue will also boil down to high compliance and enforcement.
Former finance minister Lim Guan Eng said in 2019 that the shadow economy was estimated to be around 21% of the GDP with the 2018 economy at RM1.45 trillion.