The Dark Side of E-Commerce in Malaysia – International Sellers Evading Tax

The rise of e-commerce platforms like Shopee and Lazada has revolutionized the way Malaysians shop. However, recent revelations have cast a shadow over these platforms, potentially uncovering illegal business activities that not only flout Malaysian laws but also lead to significant revenue losses for the government. This article delves into these illegal practices and the entities involved, namely Shopee, Lazada, and Monmar Sdn Bhd.

Illegal Import Activities

A recent complaint on the @edisisiasatmy Telegram group highlights how Shopee and Lazada are facilitating foreign merchants, particularly from China and Hong Kong, in selling electronic goods such as mobile phones, computers, and accessories reportedly without the necessary SIRIM certification. Under the Communications and Multimedia Act (CMA) 1998 and other related regulations, importing electronic goods into Malaysia requires a SIRIM permit. These permits are only issued to Malaysian companies or individuals residing in Malaysia.

Shopee and Lazada’s Role

Despite the stringent regulations, Shopee and Lazada allow foreign merchants to sell electronic goods on their platforms. These goods are shipped to Shopee and Lazada warehouses in China and Hong Kong, from where the platforms manage the logistics to Malaysia. This arrangement effectively bypasses Malaysian customs regulations, allowing these merchants to allegedly smuggle electronics into the country without the required permits and evade taxes.

Shopee and Lazada have significant financial incentives to support these foreign merchants. They earn larger commissions from foreign sellers compared to local ones, driving them to prioritize these merchants even if it means breaking the law. Another issue that was highlighted is that for returns / refunds, particularly after finding out that the purchased item is from China and not from a local seller as allegedly claimed, it was rejected by Shopee with the reason that it doesn’t adhere to their policy despite the evidence, as seen in the picture above.

Financial Implications

The illegal importation and sale of electronic goods result in massive revenue losses for the Malaysian government. Sales that evade taxes are essentially acts of money laundering. The government loses hundreds of millions, if not billions, of ringgit annually. Furthermore, Shopee and Lazada, being Singaporean companies, profit from these illegal activities, benefiting Singapore rather than Malaysia. We’re not badmouthing Singapore by any means because if the platforms were from other countries, then those countries would stand to benefit instead.

Furthermore, it harms local sellers who adhere to the rules and regulations that have been set. To simplify the issue, these local sellers will price their goods at higher prices in order to be able to make a profit but for international sellers that can evade taxes, they have the freedom to set their goods at noticeably lower prices and still profit as their costs will be lower. We can’t blame customers for it either as they wouldn’t be aware of it and it’s natural to go for the ones that are priced lower in order to save money, even if it’s a minor amount.

The Case of Monmar Sdn Bhd

Monmar Sdn Bhd, a significant player in this illegal trade, operates by using a Malaysian company to purportedly import goods falsely declared as low-value items like cups, while actually selling high-value electronics. This merchant’s sales reach hundreds of millions annually through Shopee and Lazada, yet it declares RM0 sales in the Companies Commission of Malaysia (SSM). The profits earned in Malaysia are laundered back to China, causing further financial losses to the Malaysian government.

The illegal activities reportedly facilitated by Shopee, Lazada, and Monmar Sdn Bhd highlight a significant loophole in Malaysia’s e-commerce regulations. These practices not only give a disadvantage to local merchants but also lead to substantial financial losses for the Malaysian government. If true, there is an urgent need for the government to take stringent actions against these entities to ensure compliance with Malaysian laws and protect the interests of local businesses and the economy.

The Malaysian government must address these issues promptly and enforce the laws to prevent further revenue losses and illegal activities on e-commerce platforms.

Pokdepinion: It’s certainly a tricky situation, and while one might not want to blame the e-commerce giants themselves, it doesn’t change the fact that these things happen on their platforms so they are liable to some degree.