The Consumers Association of Subang and Shah Alam (Cassa) was referring to the 11th Malaysia Plan mid-term review report tabled by the prime minister on Thursday.
“The future is the private sector and the engine of its growth is technology,” Cassa president Jacob George told FMT. “Instead of introducing a system that galvanises both areas, the midterm review proposes we tax them both. How is this encouraging us to contribute to these areas?
“The review is discouraging and negative. I don’t know who provided the brainwork for it, but it certainly seems like Pakatan Harapan is doing the same old thing Putrajaya’s former tenants used to do. I’m saddened.”
He said the government should revamp the civil service and save millions of ringgit instead of “killing the goose laying the golden eggs by coming up with imaginative taxes for an entire demographic”.
He added: “We should be looking to startups and encouraging digitalisation, not taxing everything because we are running short of money due to mismanagement and we need a quick fix. It won’t work.”
He voiced doubt that Putrajaya could formulate a system to fairly tax the digital industry.
The midterm report, prepared by the economic affairs ministry, focuses on plans to realise Vision 2020. It says Putrajaya needs to look for ways of generating revenue, now that the goods and services tax (GST) has been abolished.
The sales and services tax is deemed less extensive than the GST, which was reported as adding RM44 billion to government coffers in 2017.
Jacob also criticised the government for removing the GST, saying Cassa had advised against it and instead recommended a reduction of rate from 6% to 3%.
He claimed that a digital tax would not make up for the shortfall in revenue.
“We are not looking at ways of cutting costs,” he said, adding that one of the ways was to reduce duplication in ministerial functions by cutting down on the number of ministries.
Should Malaysia introduce a tax for the digital sector in its 2019 budget, it will be the second country in Asean after Singapore to do so.
Some economists have said a digital tax will strengthen and expand the government’s revenue base, but they have also spoken of its negative effects on tech giants and e-commerce players.
According to BMI Research calculations, Asean’s online shopping market will generate an estimated RM257.94 billion in 2021. Malaysia’s share of total online retail sales are at 2.7%, indicative of a huge potential for development.