PETALING JAYA: Prices payable by consumers for streaming services and digital advertisements are set to increase at the beginning of March when a two per cent sales and service tax (SST) hike comes into force, says an economist.
“It will affect prices offered by streaming companies, and typically, these are not small companies,” Center for Market Education CEO Carmelo Ferlito said.
“The cost of subscriptions is usually around the same in different countries as they use a common denominator, like (the US dollar) for example.
“For companies that operate in different countries, the local taxes are added to the base price,” he added.
Ferlito said it would be too complicated for international companies to absorb taxes in some countries just to keep their service at a certain price point.
This is why he expects prices for streaming and other digital services to rise.
In a notice on its digital tax website, MySToDS, the customs department announced that the tax rate levied on digital services will be raised from 6% to 8% on March 1. The increase follows an SST hike announced by Prime Minister Anwar Ibrahim at the tabling of the national budget in October last year.
The digital tax which came into force on Jan 1, 2020, saw a 6% levy imposed on imported online services, including software, music, video and digital advertising.
At the time, The Star reported that 126 foreign digital services, including Google, Netflix, Spotify and Airbnb, had registered with the customs department to collect and remit the tax.
Veerinderjeet Singh, vice-chair of the ICC Global Tax Commission, said in theory the tax would only see a marginal price increase equivalent to the additional 2% levied on consumers. However, he said, in some cases, the cumulative effect of the tax may see companies also raise their prices.
“That is the domino effect that the service tax has, because it is imposed on various types of services, and some companies use multiple services,” he said.
Veerinderjeet said traders and companies may also raise their prices due to rising production and other costs.
“They are facing increases right now as inflation and supply chain effects have caused all other costs to increase,” he told FMT.
