Cover image via pixabay & MyCC & https://www.mycc.gov.my/
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Malaysians are paying 8% Service Tax on Foreign Digital Services (SToDS), but the companies behind some of these platforms aren't taxed on the billions they earn locally
The Malaysian Competition Commission (MyCC) estimates nearly RM7 billion flows to just five digital giants annually, costing the country almost RM400 million in lost tax revenue.
MyCC Chief Executive Officer Datuk Iskandar Ismail told SAYS that this staggering figure — drawn from just five platforms — barely scratches the surface, with total losses likely far higher once the full scale of the digital economy is considered.
Iskandar says Malaysia's untaxed losses from the digital economy could be even higher.
Image via MyCC (Provided to SAYS)He said the estimate comes from the commission's 18-month market study into mobile operating and payment systems, e-commerce marketplaces, digital advertising services, and online travel agencies (OTAs).
Almost 20 platforms were scrutinised for practices that could hinder healthy competition and potentially breach the Competition Act 2010.
MyCC scrutinised almost 20 platforms for practices that could hinder healthy competition and potentially breach the Competition Act 2010.
Image via MyCCIskandar said Malaysia's outdated laws cannot impose taxes on digital platforms operating in the country without a physical office or local presence.
"These platforms collect the 8% SToDS from users and pay it to the Customs Department, but their actual revenue remains untaxed.
"Our tax laws need to be revamped because right now we can only tax them if they have physical officers here, which they don't," he said.
Iskandar said the commission's market study also revealed other multiplying effects that, if left unaddressed, could seriously harm the country.
"We need a proper regulatory framework and cannot rely on the platforms to act themselves.
"For example, some platforms do not act when local films are uploaded illegally because they earn money from them.
"If we do not intervene, our local productions could collapse, leaving our future generation exposed only to only international films.
"What sort of influences and values are we passing on to them?," he asked.
The Digital Market Review was launched by Domestic Trade and Cost of Living (KPDN) Minister Datuk Armizan Mohd on 10 February.
Image via MyCC (Provided to SAYS)Iskandar proposed establishing a Central Digital Economy Taskforce (CDET), bringing together all relevant agencies and departments to tackle issues in the digital ecosystem collectively.
"We can take action against some of them, but we do not want others questioning our move, saying it would deter these players from investing in our country.
"We all need to be on the same page, so we must sit down and take action together," he added.
Iskandar said the task force will also align efforts with the ASEAN Digital Masterplan 2025, ensuring the entire region benefits collectively.
"Our country is small, and these giants might not listen to us individually, so CDET will first create a collective voice in Malaysia before we approach the larger bloc," he said.
He added that these behaviours are not unique to Malaysia.
"So far, these companies address issues jurisdiction by jurisdiction.
"If they face problems in Europe, they will only address them in Europe," he said.
