Did you know that since 1 January 2020, Malaysia has imposed a 6% digital tax on imported digital services? This means that any foreign tech company that provides online services such as software, video, music, online advertising, etc are required by law to register with the Royal Malaysian Customs Department and charge the service tax to consumers.
However, the tax is charged on the services offered online that involves payment being made to the foreign company. Effectively, your Facebook Ads, Google Ads or G-Suite services, software subscriptions and more will be taxed.
A spokesperson for Facebook has this to say, “Due to the implementation of service tax in Malaysia for all digital services, Facebook is required to charge a 6% tax on the sale of ads to all advertisers in Malaysia.”
The ones most affected by this tax are likely to be media agencies that buy ads on behalf of their clients as the tax would be passed on to the unhappy client. As with most things, the transition will be jarring in the beginning but as clients get educated and allocate it into their budgets, the digital tax will just be a minor inconvenience as most will still rely on Facebook and Google for their online advertising needs.
As advertisers realise the power of online marketing compared to traditional media, the ad spend will definitely trend upwards, regardless of the tax. The Government of Malaysia stands to collect a substantial amount from this tax that hopefully flows back into the economy. Since global digital businesses enjoy massive profits without taxes in Malaysia, this digital tax is actually good for the country in the long term to collect some revenue from these foreign entities.
As for the man-in-street, you will have to get used to paying more for your Netflix, Spotify or game subscriptions, a small price to pay for the world of convenience at your fingertips, don’t you agree?