Double taxation under SST may prompt exit of international firms

KUALA LUMPUR: A public relations consultant has suggested that international marketing communications firms will exit Malaysia if the cost of doing business here rises drastically.

Syed Mohammed Idid, who is chief engagement officer of boutique PR firm Syed Idid Associates, said the potential double taxation against the industry under the Sales and Services Tax (SST) will affect the bottomline of advertising agencies, PR consultancies, creative communications firms and design houses.

“If memory serves me right, some international brands are required to return 25 per cent of the profits generate back (to their headquarters overseas),” Syed Idid wrote in Marketing Magazine.

“How can they build a sustainable business here, unless they move away to cities that are business friendlier, as we have seen a couple of international PR firms exiting Malaysia to service its clients from a nearby location?” he asked.

Syed Idid was commenting on the industry players’ concerns over possible double taxation following the SST implementation on September 1 after a meeting with the Customs Department recently.

Industry representatives at the meeting were shocked to learn that SST would be an exponential tax system, snowballing from one party to another.

Citing an example, they claimed that when a media owner charges an agency the six per cent SST in its invoice, the agency has to then add another six per cent SST on that bill when invoicing its client. Hence, if the original invoice is RM106 to the agency, the agency will bill the client RM112.36 after adding another six per cent SST.

Syed Idid said it was now time for the communications industry be it advertising, PR, media etc to come together and start to review the future and be part of policy building.

“The digital economy will create more new tax regimes that will affect the channels we operate in,” he added.

Source: NST