Malaysia Contemplating E-Commerce Taxation Strategy

by Mary Swire, Tax-News.com, Hong Kong

27 June 2001

The Malaysian Energy, Communications and Multimedia Ministry has proposed the formulation of a coherent and internationally minded taxation strategy to address the particular problems raised by e-commerce, it was revealed recently.

Its minister, Datuk Amar Leo Moggie, stated that he believed that it was only a matter of time before the international economic order moved towards the adoption of a global e-commerce tax system, with fair and equitable levies on all countries. ' Without such strategy, governments will no longer be able to control the tax implications of multi-million dollar transactions outside their physical boundaries,' he told reporters last week.

In expectation of that glorious day, however, Mr Leo Moggie wants to make Malaysia an internationally viable contender in the e-commerce race, and this will involve the establishment of a Malaysian e-business strategy. The executive director of PWC Malaysia, Khoo Chuan Keat, is in agreement with the minister, although he cautioned that: 'Left as an afterthought, tax considerations can hamper decision making, increase risk and reduce profitability.' Mr Chuan Keat observed that many countries were worried about being the first to enact new legislation, fearing that potential investors might be put off.

He also noted that the impact of globalisation and e-commerce would be one of the driving forces behind remodelling the basis of global tax distribution. However, he cautioned that a global system would require a change of mindset, and would have to be accepted by all participating countries: 'In order for a global tax system to be successfully implemented, there must be consensual acceptance by all countries, particularly the richer and more developed nations which are likely to bear the heaviest burden.'

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