KUCHING: As-commerce is growing Malaysia, the Federal government needs to find ways on how to help the growth of online business before talking about taxing online businesses.
Sarawak Patriots Association (SPA) president Datuk John Lau in view of the recent statement by Prime Minister Tun Dr Mahathir Mohamad, said paying online business tax is a very complicated process.
“For instance, an individual currently working is starting an online business. This group of people would like to have a second income to subsidy their current income as they do not earn enough to bring food to the table with current salary.
“Thus, they believe starting an online business may help. But everyone knows that all things are difficult in the beginning.
“It would be better for the government to insist that all online business providers must have a local presence and all Malaysia revenue should be capture through their local office, so that the appropriate business taxes can be applied. No need for any new tax every other month,” he pointed out.
He said people are suffering from economy stress; it will be good for the federal government to find out how they can help citizens of Malaysia.
In case the Federal government would like to proceed with the online business tax, considerations need to be given to the territorial basis of taxation that tax is imposed on the income, which is accruing in or derived from Malaysia or received in Malaysia from outside Malaysia.
“However, there exists some difficulty in applying this principle to online business as it deals with electronic borderless transactions and not to the trade of physical goods and services. It eventually comes down to whether the e-merchant is trading in Malaysia or with Malaysia,” he stressed.
He said if an e-merchant is not a Malaysia tax resident then they should not be subject to tax in Malaysia on income derived from an e-transaction with a Malaysia customer, unless the transaction is carried out through a permanent establishment in Malaysia.
“Similarly, an e-merchant who is a Malaysia tax resident can avoid taxation in foreign jurisdictions by not establishing a permanent establishment in those jurisdictions. In this context, it is important to understand what constitutes a permanent establishment and what doesn’t,” he said.
SPA is now concerned on how will the government track online businesses? Is this the prelude to a great firewall project in Malaysia whereby all the internet traffic will be captured and analysed automatically by the government? Can the people really trust civil servants with such authority when personal data continues to leak out so easily.
On June 23, Tun Dr Mahathir Mohamad has proposed the Asean countries tax online businesses.
He said the online business had affected the conventional businesses.
