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Digital tax implementation requires delicate balancing act - Fusionex MD

Last update: 12/09/2019
By Zufazlin Baharuddin

KUALA LUMPUR, Sept 12 -- The implementation of digital tax next year will need a delicate balancing between the needs of the service providers and end users to ensure a smooth transition and avoid confusion among consumers, said a technology industry expert.

Chua Yu Ye, managing director (enterprise and public sector) of international artificial intelligence and big data company Fusionex International, said if the implementation faced shortcomings, it would put the local digital landscape on a less competitive footing compared to other regional markets.

“At this juncture, the government wants to make the local industry more competitive (by taxing foreign players) but with the tax in place, there is a high probability that the additional costs would be passed down to the end users, who would incur higher charges as a result,” he told Bernama.

During the 2019 Budget announcement last year, Finance Minister Lim Guan Eng said the country would be implementing a six per cent service tax on foreign digital services including software, music, video and digital advertising.

Among entertainment services that will be taxed from Jan 1, 2020, are music streaming service Spotify, video streaming site Netflix and game distribution platform Steam.

Asked whether the government should put the new tax on hold for now, he said that he understood the government’s standpoint in implementing it.

“There will be pros and cons to it. However, there are ways to ensure that despite the tax being in place, the government could still maintain the competitiveness edge of digital players, such as by providing tax incentives,” he said.

On the upcoming Budget 2020, Chua said the company hoped that the government could introduce specific incentives to boost the big data and artificial intelligence (AI) segment, which is currently one of the major topics being discussed in the country.

“Besides providing a boost for big data and AI, we also hope the government could further enhance broadband access nationwide and provide certain tax incentives for the technology service providers to ensure a competitive environment for them here compared to other parts of the region,” he added.


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