Following the handover of political power to the opposition party in the general election of 9 May 2018, Malaysian government is undergoing a significant revamp in its financial management philosophies. As such, Malaysia is about to become the second country in Southeast Asia after Singapore to introduce a tax scheme for the digital sector.
The rationale of the tax is aimed to level the playing field between international and local businesses in the digital sector. Global digital businesses often avoid paying taxes in Malaysia, due to the reason that the companies have no physical presence in the country.
As such, these digital firms declare their profits in the country where their headquarters are based, causing other countries, such as Malaysia to lose potential tax revenue. In addition to this, the Digital Tax can assist to strengthen and expand the government’s revenue base due to its bright outlook in the years to come.