According to Budget 2019, all imported services, including online ones like software, music, videos and digital advertising, will be levied with a service tax starting Jan 1, 2020.
The government’s reason for the move is to level the playing field for local content producers like graphic designers or game developers.
International Game Developers Association Malaysia chapter coordinator Shawn Beck, 31, said it would not have much effect on local game studios as the Malaysian market for premium paid games was rather small.
He said that whether the game was locally made or not, in the end it would likely be distributed through the same international platforms like Steam or a mobile app store.
“Taxing software would definitely hurt a lot of studios. Although there are cheaper or free options out there, studios already subscribed to services critical to their pipeline will feel the pinch for sure,” said Beck, who also runs indie game company Weyrdworks Studios.
Game studio Kurechii’s founder P’ng Yi Wei, 28, agreed that the tax would not have much of an impact on local game developer’s sales as Malaysians were not the primary market for locally made games that tended to be in the indie genre.
He said Malaysian gamers mostly played mainstream multiplayer games such as Dota 2 and PlayerUnknown’s Battlegrounds. These games include in-game purchases which have to be bought through the platforms.
“Just think of it this way – will making foreign movies more expensive make us want to watch local movies?” P’ng said, adding that there would need to be enough high-quality local games first to sway the market.
Pikom chairman Ganesh Kumar Bangah urged the government to implement this measure in consultation with the respective industries.
Meanwhile, Netflix and Spotify declined to comment on the government’s announcement to impose service tax on digital services by foreign providers.
Online gaming distribution platform Steam user Pete Yang, 32, felt that the move would encourage more people to turn to piracy.
“Popular video game titles are not cheap. After conversion rates, it can cost up to RM200. It’s already easy for some users to pirate games instead of buying original versions,” he said.
Dentist Aimee Lee, 29, said younger users who were more Internet-savvy would not feel the need to cancel their current subscription services despite the upcoming tax levy.
“It’s a smart move by the government because young people no longer subscribe to satellite TV and cannot live without online services,” she said.
Spotify user Zaki Anwar, 29, said the upcoming tax levy would not make him want to cancel his subscription.
“We’re past the stage of downloading music. I’m paying for the convenience of streaming and I can listen to any song I want easily. Plus, I see it as a way of supporting my favourite artistes through legal means,” he said.
Sentiment on social media has also been generally negative, with most users expressing annoyance that the digital tax may end up pushing the price increase on to consumers.