Chia Swee How, executive director of Deloitte Malaysia, said there would be challenges in collecting the tax.
For instance, he asked if foreign suppliers of e-services and e-products would be compelled to register for the service tax locally.
“From an operational perspective, how will the government roll the service tax out to the foreign e-product and e-service suppliers?
“Say they don’t have a presence in Malaysia, how would the government then get the foreigner to register for service tax in Malaysia and then collect the service tax from them?”
Speaking to FMT after his presentation at a Real Estate and Housing Developers’ Association’s (Rehda) Budget 2019 event, Chia said most of the companies targeted by the service tax might only have a support service company in Malaysia, with their core company based elsewhere.
“Having a physical presence does make it easier, but a lot of these online companies or platforms, they are based elsewhere.
“They could have a support service company in Malaysia, but the core company that owns the platform, for example, Lazada, is not really based in Malaysia,” he said.
Chia also said there was the question of whether the digital service tax would be transferred to the consumer in the form of a customs charge.
If so, he warned that it might make it tedious for locals to acquire foreign digital products and services or make digital transactions.
Chia said making either the seller or the buyer responsible for the service tax would be a significant challenge, which was also why the government had set for it to take off one year from now.
Earlier in his presentation, he said: “We will need to wait for the bill to see how they are planning to collect the digital service tax.”
The digital tax, effective Jan 1, 2020, will affect digital products and services from foreign suppliers, including software, music, video, and digital advertising.
Finance Minister Lim Guan Eng announced in his budget 2019 speech that foreign digital service providers would be required to register with customs, and apply and remit the relevant service taxes.