Week in Review: The certainty of taxes

By A. Asohan March 22, 2013

There are two certainties in life – death, and in Malaysia, taxes on e-commerce
The reaction to the e–commerce tax is indicative of the industry maturing

Week in Review: The certainty of taxes THE technology ecosystem was packed again this week with some major developments, from the high-end policy-making side of things to the other end of the spectrum as some web companies sealed strategic deals.

On the tactical side, start-ups such as Werebits (with its Chopink loyalty app) and Soft Space (with its mobile micro-payment solution) announced important customer deals. Carlist.my secured a US$13.5-million strategic investment from Australia’s carsales.com Ltd while Singapore-based travel start-up TripZilla made its foray into Malaysia as the first step in its regional play.

Established dotcom MOL Global, just a week after its subsidiary MOL AccessPortal made strategic investments in Turkey, announced that its MOL Indonesia subsidiary had acquired that country’s leading payment services provider AyoPay.

These on-the-ground activities were somewhat overshadowed by developments in the corridors of power, so to speak, which will have long-terms effects on the ecosystem. Malaysian Prime Minister Datuk Seri Najib Tun Razak made what some people called his ‘State of the Union’ address, unveiling the annual report of his Economic Transformation Program (ETP) which seeks to transform Malaysia into a high-income economy.

The impressive achievements Najib claimed were somewhat marred by less-than-stellar developments in the tech space; while some analysts questioned how the Government was reporting its numbers.

But the good news was the move to impose taxes on e-commerce businesses.

No, you can stop your sputtering and gasping in disbelief. How can taxes be good, right?

They may not, depending on your perspective, but they are one of the two certainties of life. It was just a matter of time before e-commerce was taxed, after all, with some developed nations already doing so or about to.

The Inland Revenue Board (IRB) of Malaysia has come up with its guidelines on how income derived from e-commerce is to be taxed. The Government previously indicated that it wanted to enforce these guidelines by July 1, but the looming general election may see some delay.

Why I say “good news” is that there has been very little knee-jerk reaction this week to this development. When Digital News Asia ran its story the week before, we knew that it would be breaking news for many e-commerce companies, especially the start-ups, and truth to tell, I expected some emotional reaction in the veins of “Oh no, they’re going to kill e-commerce in Malaysia!! Let’s all move to Singapore!”

Instead, online at least, there has been very little backlash over the past week. There were one or two “oh, woe is me” posts on Facebook and Twitter, but generally the discussion has been restrained, with most people seeking more information. It’s as if most e-commerce players have been steeling themselves for this inevitability for some time.

Of course, I am only going by online chatter. It may be that our barbers, coffee-shop owners and taxi drivers have been getting an earful of hot-blooded feedback, but I doubt it.

I have nothing against taxes, as long as the proceeds are used for the good of society, and the Government is open and transparent about how it disburses all our money (but that is a discussion for a different day).

So why do I think this is good news? Well, the lack of an emotional reaction to the news shows a growing maturity in the dotcom and start-up space. We’ve moved beyond talk of radical businesses and into the realm where e-commerce is just regular business delivered via other means.

Perhaps I am being unduly optimistic here, but I believe that this is an indication that e-commerce has truly arrived in Malaysia.

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