This has been a contention from this writer for a long time, Silicon Valley tech start-ups create apps for global use, and stream back all they revenue to headquarters without paying any tax from the the country they extract the profits from.
New economy by these unicorns are raking in billion from their apps, the likes of Google and Facebook are mining advertising dollars all over the planet including Malaysia direct them to tax havens in Cayman Islands and escape paying any form of business taxes. Facebook paid RM25,000 in taxes in UK for 2014, despite pocketing millions in sales. Google chooses Bermuda as its hideout. Revenue boards need to come up with laws to bind these corporations who incorporate a small office in the country with mostly reporting operation loses and get tax exemption, while channeling millions back from sales of their services which often is difficult to keep track on. These companies do not contribute to the nations physical growth, monies from the uncollected taxes cant be used to build schools or hospitals- they pay in their own respective registered place of set-up, thus benefiting that country.
While we should not prevent or ban such disruptive innovation from entering our country, a balance can be struck with proper law in place, that will benefit the citizens and not scare these companies away. Millions are being spent on online shopping with not a single of these sites having office in Malaysia, which means they are not taxable and loses for local tax paying shops that might end up shutting down their operation, a double whammy. There needs to be a way to tax online spending at these places before we see empty malls and vacant retail spaces.
Under the new proposed governments plan, both Uber and GrabCar will be regulated where drivers will need to have a drivers card, the 25% share of their profit which they hand over the the ride hailing apps will now be taxable. Drivers will be exempted. Taxi owners and drivers meanwhile will have their industry deregulated making them more competitive against these new players. A solution that we see as a win-win for all.
Tech disruptors have been competing often in not-so level field, often subsidising their services with venture capital money and chasing for scale rather than profitability, an unfair advantage over brick and mortar businesses who rely on proper P&L, using their own savings. Many of these unicorns although rated billion dollar in valuation, have yet to make profits and are on continues losses even after years of in operation, but yet investors trust in their business model.
SPAD, has called a spade a spade for now, but will the service providers abide to the ruling and open up their books for annual audit is another process all together, and how if they were to report loses every year.
