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Government Considers to Impose Tax on Online Businesses in Malaysia

Will there be a big impact to the online sellers?

Government Considers to Impose Tax on Online Businesses in Malaysia
Image: South China Morning Post
As we move forward in parallel with the advancements in technology and communication, more and more businesses are shifting towards the digital platform to reach out to their customers. We can see an abundance of Instashops (Instagram shops) and online based businesses mushrooming by the minute. Long gone are the days of physically driving yourself to the mall and spending hours of shopping when you can easily do the same thing in the comfort of your own home. It can arguably be said that most online businesses have benefited in many ways via the e-platform especially when it comes to taxes. In Malaysia, there are currently no tax laws or tax structures for online businesses.

Second Finance Minister, Datuk Johari Abdul Ghani today announced that the government is currently looking into the possibility of implementing a tax system for online businesses to create a level playing field between online and non-online businesses. He told reporters after the opening of National Tax Conference 2016 that these online businesses generate billions of ringgit in revenue but do not pay tax due to the absence of a tax structure for this kind of business.
This isn’t the first time the government has expressed their interest in imposing the new tax system. Earlier in May, the Internal Revenue Board (IRB) has stated that they are currently conducting a study to see the possibility of taxing individuals engaged in digital or online businesses as the income they earn is taxable. They pointed out that local Uber drivers for example, may earn up to RM7, 000 per month and it will be hard for the government to tax them without a proper framework since they have fallen within the tax bracket.
Image: Greater Malaysia
This announcement has caused backlash among online sellers as many of them are only doing it as a part time job or to earn extra pocket money. Some of these online business operators have also expressed that the reason they are partly doing it is because to accept the challenge of the ministers to do a second job especially when the economy is getting tough.

Johari also agreed that imposing such tax may cause a setback to the growth of these mostly small businesses. "If you tax them, you are making them difficult to grow. I think you should not disturb the small businesses who want to do online business," he added.

What do you think will happen if the tax system is fully implemented? How will it benefit the online sellers? Or will there be a big drop in the online market growth? Share your opinions with us in the comment section below.