Across the globe indirect VAT/GST rules are being amended to ensure that foreign digital suppliers become liable for the collection and remittance of these taxes.
This pace of change, from a taxation perspective, is rapid. In the first half of 2017 alone Russia, Serbia, Taiwan, India, and Australia all amended their indirect taxation laws (or in India’s case introduced a whole new system).
The Organisation for Economic Co-Operation and Development (OECD) has already approved the destination-based principle in Action 1 of its Base Erosion and Profit Shifting (BEPS) report.
Malaysia looks set to become the latest tax jurisdiction to seek a levelling of the playing field between traditional and digital businesses by amending their GST system to tax foreign-supplied digital services.
In mid-September 2017 Royal Malaysian Customs Department director-general Datuk Seri Subromaniam Tholasy told reporters after a GST conference in Malaysia that:
“We are amending a few of the tax laws, especially with regard to the GST to collect taxes from foreign companies that offer digital services in Malaysia.
Digital disruption has laid waste to numerous traditional industries, from the ramifications of internet publishing on the print media to the effects of the Uber and AirBnB models on the car travel and lodging sectors.
An increasingly connected (and smartphone-obsessed) population expects this disruption. Today, consumption is all about the now economy. It is now easier than ever, thanks to infrastructural advances in broadband and WiFi, for consumers to access digital content from anywhere in the world.