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THE National Artificial Intelligence Roadmap (AI Roadmap) aims to establish Malaysia as a global leader in AI, with the government and industry players confident that the roadmap provides a robust framework for leveraging the technology to stimulate economic growth. Digital Communications Minister Gobind Singh Deo has highlighted that artificial intelligence is poised to be a transformative force for Malaysia’s industries, public services and economy.
However, discussions with industry stakeholders and Ministry of Finance (MOF) officials revealed that the Malaysian government may be contemplating the introduction of an AI tax. For those unfamiliar, an AI tax is a levy imposed on companies that utilise or develop AI technologies. In my view, Malaysia is not yet in a position to implement such a tax, and doing so could be premature.
The integration of AI into Malaysian industries is still in its early stages. Efforts to accelerate AI adoption are being driven by initiatives such as the Malaysia
AI Roadmap 2021-2025 and the National Industrial Master Plan 2030, which focus on digital transformation and automation.
Introducing an AI tax at this point could place additional financial burdens on companies, particularly smaller firms and start-ups that are still in the process of exploring AI’s potential. The increased costs associated with such a tax might deter businesses from adopting AI technologies, potentially stalling the digital economy’s growth trajectory.
Small and medium-sized enterprises (SMEs), a vital component of Malaysia’s economy, often face resource constraints that limit their ability to quickly adopt advanced technologies like AI. An AI tax could exacerbate these financial pressures, restricting SMEs’ capacity to innovate, compete and grow. Given the government’s goal of democratising AI use and empowering more SMEs to drive economic development, imposing a tax at this stage could hinder progress and widen the technology adoption gap between large corporations and smaller enterprises.
Moreover, Malaysia lacks a comprehensive regulatory framework specifically addressing AI’s ethical, data privacy and security concerns, despite existing legislation such as the Personal Data Protection Act covering certain aspects of AI usage.
Without clear guidelines, an AI tax could create compliance challenges and legal uncertainties for businesses. The introduction of a tax should be preceded by the development of a dedicated regulatory framework addressing these complexities to avoid confusion and compliance difficulties.
The government’s ongoing efforts to bridge the digital divide by promoting digital skills and AI literacy should take precedence over taxation. While AI tax revenues could potentially support such initiatives, the imposition of a tax could prematurely impede AI adoption, especially among less digitally advanced sectors.
Prioritising workforce development and educational initiatives to prepare for AI-driven changes is more critical at this juncture than generating tax revenue.
Malaysia’s aspiration to become a regional leader in the digital economy could also be jeopardised by the AI tax.
The introduction of such a levy might make the country less attractive to foreign investors, especially when neighbouring nations could offer lower AI-related costs. This situation could lead to the diversion of international tech investments away from Malaysia, thus hampering the nation’s ambition to attract global talent, capital and technological innovation in the AI sector.
In the global race for AI supremacy, nations that prematurely impose taxes on AI may find themselves at a disadvantage. Countries with fewer regulatory and financial barriers can attract more investment, talent and technology. By delaying the implementation of an AI tax, Malaysia could maintain its competitive edge, ensuring that it does not unintentionally drive businesses to relocate to more tax-friendly environments.
The government should consider postponing the introduction of an AI tax, should such plans be under consideration for the coming year. It is crucial to allow Malaysia’s AI industry to grow and stabilise, thereby laying the groundwork for the country to become the AI hub of South-East Asia.
As a strategically located nation, Malaysia can leverage its geographical position to bolster AI infrastructure and support neighbouring economies. The focus should be on empowering the local AI ecosystem to thrive and establishing Malaysia as a significant player in the global AI arena, rather than imposing early-stage financial constraints that could stifle progress.
Now is the time for Malaysia to act as an enabler in the AI landscape, fostering growth and innovation while preparing the regulatory and economic environment to support future advancements. Let us allow the AI sector to flourish, setting a strong foundation before considering the introduction of an AI tax.
Source: https://themalaysianreserve.com/2024/11/12/malaysia-not-ready-for-an-ai-tax/