Yeah Kim Leng, a professor at Sunway University’s Business School, said taxing online businesses would also create a level playing field.

He said this was because conventional businesses are at a disadvantage compared with online businesses when it comes to taxes.

“Conventional businesses pay the goods and services tax (GST) and corporate tax at domestic rates whereas tech giants are able to choose the country with the lowest tax rates.

“Certain online businesses are already subject to local taxes such as the GST. The government should widen the scope to include technology companies domiciled in other countries but doing online business and trading here,” Yeah said.

He added that this would require more cooperation among governments.

“There needs to be a global effort as to how such technology corporations can be taxed in a borderless world, so as to create a ‘level playing field’ for all countries and not just between online and brick-and-mortar businesses,” he told FMT.

Yeah was responding to the finance ministry’s move to conduct a detailed study on the proposed taxation on giant technology companies and social media platforms such as Google and Facebook.

Second Finance Minister Johari Abdul Ghani said the study was done out of necessity, and to seek the best taxation mechanism and model.

“It is also aimed at monitoring a comprehensive review of online business taxation being made by the Organisation for Economic Cooperation and Development (OECD),” he said at the Dewan Rakyat on Monday.

Yeah said the situation was such that most technology giants paid a very low tax on their profits or escaped paying any tax altogether.

“Online business is growing and it will become another important avenue for the government to broaden its tax base.”

However, he also warned of a negative impact of such taxation, saying consumers would have to shoulder the burden of the consumption tax.

Putrajaya studying proposal to tax tech giants like Google, Facebook