Exploring Malaysian E-Commerce Taxation: A Qualitative Insight of Online Businesses

  • Ann Ann Yeo School of Management, Universiti Sains Malaysia, Penang, Malaysia
  • Tan Chin Lim School of Management, Universiti Sains Malaysia, Penang, Malaysia
  • Zubir Azhar School of Management, Universiti Sains Malaysia, Penang, Malaysia
Keywords: E-commerce taxation, C2C, Tax planning, Tax evasion, Permanent establishment, Digital economy

Abstract

Electronic commerce (e-commerce) is mushrooming in today’s digital world across continents. However, this phenomenon seems not reflective of the tax collected, especially from consumer-to-consumer (C2C) online business transactions. Considering this issue, this paper focuses on the area of C2C business transactions. Our aims are to determine the level of understanding of e-commerce taxation of the students who involved in online businesses during their study years, and to gauge their attitude towards implementation of e-commerce taxation in Malaysia by relating to the existing e-commerce tax rules and regulations. Using an exploratory study approach, a total of six interviews were conducted with students on whether or not their online business income was reported to the tax authority. The results suggested that there was a lack of awareness amongst students concerning the compliance of e-commerce taxation. Factors leading to non-compliance included the perceived low chance of getting caught, the insignificant amount of income being generated, and their current “students” status that camouflaged them from being subject to e-commerce tax. Apparently, they perceived that reporting their online business income to tax authority is troublesome, time wastage and pointless. However, majority of them are willing to report their income after their graduation and ready to join the job market for tax planning purposes. This paper concludes that the non-accounting and accounting students appeared to have different perceptions over the e-commerce taxation due to the level of exposure to taxation. An important practical contribution of this paper concerns the proposal of a series of taxation seminars being conducted to promote compliance and to clarify the misunderstanding that might lead to heavy penalty due to tax evasion.

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Published
2019-08-20
How to Cite
Yeo, A. A., Lim, T. C., & Azhar, Z. (2019). Exploring Malaysian E-Commerce Taxation: A Qualitative Insight of Online Businesses. Journal of Contemporary Issues and Thought, 9, 75-85. https://doi.org/10.37134/jcit.vol9.8.2019