Proposed GST on digital services meant for tech behemoths: Johari (Updated)

PETALING JAYA: The proposed amendments to incorporate the digital economy into the Goods and Services Tax (GST) Act was meant to tax major foreign digital platform providers operating in Malaysia, and not small-time online businesses.
Second Finance Minister Datuk Seri Johari Abdul Ghani said the government, for now, did not have the mechanism to impose tax on major foreign companies that provide digital services in Malaysia.
He pointed out companies such as Uber, Airbnb, Grabcar, Amazon and Google, despite earning money from its consumers in Malaysia, were not being taxed.
"The idea is to make sure that we reduce the imbalances between digital and non-digital transactions. They (digital platform providers) take public money and are taking it out (of the country), but they don't pay the tax.
"They create their platform and put it in Malaysia, where everybody uses it. But to tax them is not easy.
"But for small online businesses, no one is stopping you. Go ahead and do your businesses as we are not going to tax you," he told a press conference after attending the Jeffrey Cheah Foundation's Scholarships and Awards Ceremony at Sunway University Campus.
On Sept 19, the Customs Department had said that it was looking to propose the amendments when the Dewan Rakyat reconvenes at the end of this month.
Customs Director-General Datuk Seri Subromaniam Tholasy had said the government would be losing a large source of revenue if it was not able to impose a tax on the digital economy.
Johari said the government needs to find a proper mechanism to impose tax on the digital economy.
He added other advanced and developed countries were also having a hard time imposing tax in their respective digital economies.
"We need a mechanism before we can implement it. No point imposing a law but people do not pay the tax because they are overseas," he added.
Johari said the digital economy contributed around 17% of Malaysia's RM1.3 trillion economic pie, and the government needs to have methods to manage it.
"People make money from this country but they are not paying anything to the country. How are we going to develop our infrastructure?" he said.