THE announcement that the government would start taxing individuals doing business online next year is a step in the right direction. It is about time the authorities sorted out the situation and resolved a basic fairness issue in the retail industry. It is a question of levelling the playing field and ensuring that businesses are registered and regulated. Granted, this is a hotly debated subject in many circles, but there is no reason, in this digital age, for online companies to avoid paying taxes that their brick-and-mortar competitors cough up for. It is no secret that shopping patterns are altering, and more and more consumers are turning to the Internet to check prices and look for deals on their smartphones even as they survey products in stores. It seems sensible and logical to amend the current tax policy to better reflect business patterns.
The onus is on the Inland Revenue Board (IRB) to come up with a mechanism of levying taxes on online businesses. Indeed, the board is said to be doing a thorough evaluation of the subject, in response to a request from the Finance Ministry. At the same time, the government would like online businesses to register with the Companies Commission of Malaysia in a move to track their earnings. The challenge for policymakers is to anticipate the future in the light of technology changing the way people conduct their personal and professional lives. Tax-wise, these offer new sources of revenue that the IRB must be alert to.
But, will the tax collection exercise be worth the money, time and effort spent on it? As online shopping continues to grow in popularity, the point at which this becomes worthwhile will emerge. And, the government believes it has, as the takings from many online enterprises are taxable. It is a matter of addressing the lost opportunity for revenue to the government. Losing a big amount of income because people like the convenience, choice and cost of online shopping is a concern each country must deal with. What are other countries doing about this? Perhaps IRB officials have asked themselves this question and are studying the online tax frameworks adopted by foreign governments. Most, if not all countries, tax online products on the same basis as products sold via traditional channels.
Some say IRB should tax only businesses that exceed a certain level of profits that it should carefully determine. Malaysian Muslim Consumers Association president Nadzim Johan hopes the government will show compassion to small businesses. Start-ups and small sellers offer Malaysian consumers new products and specialty items that they cannot find on the shelves of popular hypermarkets and department stores. Online entrepreneurs range from college students to housewives, who see their ventures as alternative sources of income to offset the rising cost of living in Malaysia. How will the new tax regime hurt small businesses and consumers? What will happen to them when the government eventually introduces it? Will it lead to increased prices of their merchandise as entrepreneurs shift the tax to consumers? IRB has to consider these questions and more. The Internet creates new challenges for business and government, and we are sorely in need of smart solutions that will benefit everybody.