Malaysian Officials Cite Huge Tax Hole In Push For Online Reform

June 27, 2022
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Cabinet officials headlining Malaysia’s push for a regulated online gambling market have again publicly called for reform, warning that the current prohibition strips government coffers of 2bn ringgit ($454m) in annual tax revenue.

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Cabinet officials headlining Malaysia’s push for a regulated online gambling market have again publicly called for reform, warning that the current prohibition strips government coffers of 2bn ringgit ($454m) in annual tax revenue.

Communications and multimedia deputy minister Zahidi Zainul Abidin and minister for parliament and law Wan Junaidi told The Star newspaper last Wednesday (June 22) that updating archaic legislation to regulate online gambling is crucial to Malaysia’s consolidated revenue.

“These taxes can be used to solve many problems ... issues with roads, drains and others, but the government is unable to do so because it does not have a [legislative] mechanism,” said Junaidi, whose portfolio falls within the Prime Minister’s Department.

Prime Minister Ismail Sabri Yaakob on June 17 said his department’s legal affairs division would review numerous outdated laws, citing the Common Gaming Houses Act 1953 as one of the most “irrelevant or somewhat backward”.

Zahidi, whose televised comments in April 2020 signalled new support for reform, said in his latest comments that the finance ministry is preparing draft amendments to the Common Gaming Houses Act 1953.

Zahidi had told parliament in November last year, after 18 months of silence, that the finance ministry had received a proposal from elsewhere in government to amend the act.

However, Junaidi said his department contacted the finance ministry two months ago and offered to amend the gaming law on its behalf. Legal affairs officials are still waiting for the ministry’s green light, he said.

“In principle, the law is under MOF’s jurisdiction, but we cannot amend it unless we are given the power to do so,” he said.

Despite the lack of clarity on authorship of the amendments, Zahidi’s latest intervention suggests the government intends to proceed with a policy of considerable sensitivity in the majority-Muslim nation, driven for the most part by economic wreckage left by the coronavirus pandemic and the failure to curb the flourishing illegal market.

The government is exploring how to best tax the industry, Zahidi said, with online “betting” and operator “gift offers” to fall under any regulatory umbrella.

Legalisation would only apply to gamblers who are non-Muslim citizens, Zahidi has said, but it remains unclear if Malaysian Muslims will be permitted to own, operate and staff online gambling companies.

Meanwhile, gaming law experts have cited a recent Malaysian High Court decision to argue that existing law does not criminalise online gambling operators, possibly offering the government more urgent grounds to reboot gaming legislation.

Sri Sarguna Raj and Lau Kok Keng, lawyers with the Rajah & Tann network of law firms, wrote on May 18 that the court’s ruling in the case “Public Prosecutor v Multi Electrical Supply & Services & 105 Others" appears to “suggest that online gambling is not illegal in Malaysia".

This is "due to the absence of express provisions or laws regulating online gambling in Malaysia".

“The Court refused to read into section 4B [gaming machine offences] of the [Common Gaming Houses Act] anything which would suggest that it can be used to establish the offence of online gambling.

“The Court further stated that it is not the duty of the court to fill in the blanks in the law when the legislators have yet to rise to the task.”

The lawyers noted that the High Court did not assess the potential illegality of online gambling under the Betting Act 1953, because the public prosecutor did not cite it.

With this decision “as a precedent, it is unlikely that the enforcement agencies can still continue using the existing … provisions to combat online gambling activities and apprehend individuals involved therein”, they wrote.

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