- Companies pay an extra 10% withholding tax plus fees to foreign cloud providers
- Cloud-First will be part of the National Agenda, starting with the public sector
INTERNET Alliance (IA), a not-for-profit organisation that facilitates about 85% of Malaysia's active Internet scene, lauds the Cloud-First strategy for government agencies and public sector to boost the digital economy.
Announced by the Prime Minister before the upcoming Budget 2018, Cloud-First would become part of the National Agenda, starting with the public sector.
The Cloud-First strategy fundamentally involves the adoption of cloud for government agencies to rapidly deliver innovative public-sector services without incurring high levels of capital expenditure to invest in the IT infrastructure such as data centres, services and storage.
IA president of IA Chan Kee Siak (pic, right) says, "We at IA, are thrilled that the government recognises how the cloud is fundamental to digital transformation. The cloud has become a powerful and cost-efficient method to deliver ICT solutions and services to support the economy.
“Therefore, prioritising government agencies to adopt cloud-based ICT solutions, sets a strong example of how to free from the high costs of initial equipment investments."
Call to lower or exempt withholding tax
At the same time, Chan calls on the government to consider lowering or exempting withholding tax for local organisations wanting to adopt cloud or other digital services.
He says that currently, Malaysian companies and organisations which want to adopt cloud technologies or deploy digital services by foreign vendors - have to pay an additional 10% withholding tax on top of the fees they already have to pay to foreign cloud providers.
“Some common instances of Malaysian companies incurring this additional 10% withholding tax are when a) Advertising with Google and Facebook b) Subscribing to overseas’ Software-as-a-Services (SaaS) and/or foreign cloud services such as Amazon Web Services (AWS) and Alibaba Cloud c) Purchasing software licenses.
If the Cloud-First strategy is to be a successful National Agenda, there should be economic incentive to boost it too.
Therefore, IA highly suggests that by lowering or even abolishing this additional withholding tax for Malaysian businesses, they will feel incentivised to accelerate their adoption of cloud-based services and digital services.
Buy more local cloud services
Chan also encourages local government agencies and businesses to engage services from Malaysian cloud providers, be it Software-as-a-Service (SaaS) or Infrastructure-as-a-Service (IaaS) cloud models.
Together with the implementation of strategic taxation policies such as reducing or abolishing this withholding tax, encouraging public agencies to adopt a ‘Buy-Local’ mentality will also collectively boost the Cloud-First strategy towards a higher rate of success under the National Agenda."
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