PUTRAJAYA: Malaysia should impose tax on tech and social networking giants such as Google and Facebook considering the profit they make through digital advertising platforms in the country, says the Malaysian Association of Tax Accountants (MATA).
MATA president, Datuk Abd Aziz Abu Bakar, said based on the principles of tax justice, the companies should be taxed but the implementation of the mechanism must be thoroughly studied and reviewed first.
He said many factors have to be taken into account, including regulations as well as the mechanism implementation to ensure that the process is thorough. He said other countries had previously launched bids to tax the companies but ultimately lost their legal bid due to a lack of justification.
“We need a strong mechanism and regulations, which needs to be studied thoroughly. It is not impossible to impose tax on both companies, but I don’t think it can be implemented in the near future. Studying this will take time as there are many technical issues which need to be resolved,” he said.
Ab Aziz said all matters related to tax must be referred to the Income Tax Act 1967.
“When the Act was designed, at the time there were no online businesses, digital concepts and social media. As such, changes must be made, especially in terms of technicality and implementation. This will take time,” he told NSTP.
He was commenting on a proposal by Star Media Group Berhad managing director and chief executive officer Datuk Seri Wong Chun Wai that the government should impose tax on Google and Facebook as both companies control nearly 70 per cent of digital advertisements in Malaysia.
Wong had suggested this to Deputy Prime Minister Datuk Seri Dr Ahmad Zahid Hamidi at a talk session with senior editors and publication permit holders on Tuesday. In response, Zahid said he would raise the matter in the cabinet.
Abd Aziz said it was also important to determine Google and Facebook’s income in order to ease the taxation process.
“I understand that Google and Facebook have no permanent establishment in the country. A company or entity that can be imposed with tax in Malaysia must have a permanent establishment here.
“The companies do have its branches in the country and the business community in Malaysia pays them for digital advertising, but we are still not sure in terms of what their income is. Do they get royalty? Do the transactions happen in Malaysia or not?
MATA president, Datuk Abd Aziz Abu Bakar, said based on the principles of tax justice, Google and Facebook should be taxed but the implementation of the mechanism must be thoroughly studied and reviewed first. (File pix)
“That’s why we need an in-depth study to ensure that the tax implementation mechanism will benefit the country and its people. Perhaps we can refer to Vietnam since they have already implemented this,” he said.
Meanwhile, the Inland Revenue Board (IRB) said there are no specific provisions relating to tax on digital advertising.
IRB chief executive officer Datuk Seri Sabin Samitah said the issue of digital advertising payments would be determined based on the facts of a case as well as the Income Tax Act 1967.
“It will be judged on the facts of its own case in determining whether a transaction is royalty or service payment, and whether it is subject to withholding tax or other income categories,” he said in a statement
“Any taxpayer with a specific question on the issue of digital advertisements can refer directly to the IRB Tax Policy Department,” he said. © New Straits Times Press (M) Bhd