Malaysia may soon slap GST on foreign OTAs

Malaysia may soon levy Goods and Services Tax (GST) on foreign online travel booking engines, a move welcomed by offline agents eager for a level playing field.

Customs Department Director-General Dato’ Sri Subromaniam Tholasy recently announced that proposals to amend the GST Act would be tabled in Parliament this month.

President of the Malaysian Association of Tour and Travel Agents (MATTA), Tan Kok Liang, commented that if the proposal materialises, it would help level the digital playing field for the association’s members while collecting much needed revenue for the government’s coffer.

“The first online travel agent in Malaysia started operating from a Kuala Lumpur office 19 years ago without a Tour Operating Business and Travel Agency Business (TOBTAB) licence. Today, giant OTAs operating in cyberspace are raking in billions of ringgit in the country without paying corporate tax or GST,” Tan lamented.

“Despite earning money from its consumers in Malaysia, foreign digital platform providers such as Uber, GrabCar, Airbnb, Agoda, Amazon and Google are not being taxed.”

On the other hand, licensed travel agents in Malaysia are subject to regulations under TOBTAB and have had to comply with various laws introduced by a host of government ministries. Tan elaborated that agent costs are higher with GST and net profits lower after paying corporate tax, “while online travel agents are having a field day”.

OTA giants are currently also spared from paying corporate tax. “As long as the Malaysian Communications and Multimedia Commission is not shutting down unlicensed online travel agents, and foreign companies refuse to register with (the commission), no corporate tax would be paid to the Malaysia Inland Revenue Board by giant OTAs.”

He hence further suggested the implementation of double deductions for e-commerce websites for inbound operators where “the profits earned would be ploughed back to the government in the form of corporate tax, on top of the GST”.

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