Connecting The Dots Of Digital Economic Governance

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WE are living in an undeniable digital era, where nearly every aspect of our daily life has undergone a radical transformation. The way we communicate, connect, and shop is now defined by unprecedented convenience, yet this shift also presents complex regulatory challenges.
The physical boundaries that once governed commerce have been effectively erased, a phenomenon clearly demonstrated when the world was forced online during the COVID-19 pandemic.
Since that inflection point, the move towards digital platforms has become permanent across all sectors. Going back to the history of the digital economy in Malaysia, the nation began implementing infrastructure for digital commerce in the late 1990s.
The subsequent growth of e-commerce has been continually spurred by government initiatives aimed at enhancing both implementation and connectivity. Currently, the government continues to foster the e-commerce sector through the National E-Commerce Strategic Roadmap (NeSR) 2.0 (2021–2025).
This roadmap is strategically built on three key pillars, namely, fostering dynamic market dynamics, ensuring infrastructure and technology readiness, and strengthening government policy and regulation. The development of the e-commerce sector has significantly contributed to Malaysia’s Gross Domestic Product (GDP).
In response to this rapid evolution of online businesses, a comprehensive set of legislation and regulations has been gazetted to govern their conduct.
Malaysia possesses a robust suite of laws, including the Digital Signature Act 1997, the Communications and Multimedia Act 1998, the Electronic Commerce Act 2006, the Personal Data Protection Act 2010, and the Consumer Protection Act 1999.
In the context of fiscal governance, the Income Tax Act 1967, Sales Tax Act 2018, and the Service Tax 2018 are the governing laws. This brings us to a crucial question: Are we heading down the right path?
Are the existing tax acts, specifically the Income Tax Act 1967, Sales Tax Act 2018, and Service Tax 2018, fully equipped to address the nuanced taxation issues emerging from a challenging and fast-evolving e-commerce market?
The debate essentially boils down to market efficiency versus fiscal equity. While the classic economic ideology of laissez-faire advocates for minimal government intervention to prioritise efficiency and growth, the reality of a modern economy, particularly the digital economy, requires a functional legal framework.
The introduction of law aims not to distort the market ecosystem, but to govern and support it, ensuring that digital growth contributes fairly to public welfare through taxation.
The exponential growth of e-commerce should be encouraged, but this growth must be balanced with the preservation of market integrity and the society’s need for a reasonable share of tax revenue.
The e-invoicing mechanism, slated for implementation in Malaysia in 2025, represents a significant step forward. While the concept is not new, it has been successfully implemented in countries like Denmark (2005), Sweden (2008), and Norway (2011).
The goal here is clear that is to enhance tax compliance, improve audit efficiency, and ultimately reduce the costs of compliance for businesses.
Despite the various governmental efforts and the introduction of new measures like e-invoicing, the journey toward comprehensive digital economic governance remains ongoing.
Ultimately, these dots of digital growth, legal framework, and fiscal policy, must be securely connected to achieve a better, more equitable distributive outcome for the nation. 
Hal Lai Keong and Associate Professor Dr. Noor Sharoja Sapiei are from the Faculty of Business and Economics, Universiti Malaya.
The views expressed are solely of the author and do not necessarily reflect those of  MMKtT.
- Focus Malaysia.

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