PDA tax: Users up in arms

PETALING JAYA: Malaysian technology enthusiasts and industry players alike were baffled by the Customs Department's decision to impose a 10% sales tax on handheld computers with wireless connectivity, saying it would not only be a blow against the market but also against the Government's plan to increase the people's access to ICT.

The Star reported on Oct 28 that Customs was going to impose a 10% sales tax of personal digital assistants (PDAs) with WiFi or Bluetooth features, by reclassifying the popular devices under the 8525.20 900 tariff code which generally covers telecommunications devices.

PCs and notebooks with WiFi or Bluetooth features were however not affected by the reclassification.

PDA vendors had already been informed. Hewlett-Packard Sales (Malaysia) Sdn Bhd, which sells the market-dominating iPAQ range of PDAs, said it was appealing the move.

The company also said sales were going to be affected because the price-differential would have to be passed on to consumers.

Other companies and enduser contacted by In.Tech last week concurred.

"This will definitely affect sales -- it may cause people to shy away from buying PDAs," said Lim Swee Cheong, advisor to the MTCS Group, which owns IT Planet, the Apple Experience Centre and several other computer stores nationwide.

"I thought that the government's policy was to encourage IT-literacy. They are taking a step backwards by implementing such a measure.

"I hope that they'll look seriously into the matter," he added.

The Malaysian Government abolished the sales tax and import duty on all computers and related accessories in 1996, in a move to make information and communications technology (ICT) more accessible to the ordinary Malaysian.

The Customs Dept's decision also seems at odds with Prime Minister Datuk Seri Abdullah Ahmad Badawi's call to lower the entry-point for Malaysians to adopt ICT, as a way to bridge the "digital divide," the socioeconomic gap between those with access to ICT and those without.

“ICT should not be elitist, but should touch the lives of every individual,” Abdullah said at the 8th annual meeting of the Multimedia Super Corridor's International Advisory Panel in Cyberjaya in September.

Indeed, the theme of the IAP meeting was ICT for All.

"The prices of high-end PDAs are already too prohibitive," said 29-year-old engineer Louis Yong Chen Cherng.

"This tax will only limit ICT to the wealthy, and that's not something the majority of Malaysians want, is it?" he added.

What's the diff?

The tax was a popular topic of conversation at watering holes and WiFi hotspots across the country, while online forums were on fire, especially at the popular MyPDACafe (www.mypdacafe.com).

Users were especially puzzled over what they saw as a bias against handheld devices.

“This 10% tax just doesn’t make sense," 22-year-old Lim Sheng Cai, a project manager who's been using a PDA for the last three years, told In.Tech.

"The handheld is supposed to be a portable replacement for a PC -- if they want to tax handhelds with WiFi and Bluetooth, why not tax notebooks with the same features as well?" he said.

Lim said that just because a device has wireless connectivity does not mean that it's a telecommunications device.

"WiFi and Bluetooth are just wireless versions of the traditional wired networking which hooks up computers to share files, etc.

"If they want to tax devices with wireless LAN (local area network) technologies, they might as well also start taxing products with wired LAN," he said.

"Why stop there? How about taxing flashlights because they can be used to communicate wirelessly via Morse code," he said.

"The tax will only encourage users to buy from neighbouring countries where PDAs will be cheaper," argued MyPDACafe regular Khairulyadi Mahadi, a 34-year-old IT officer in the agriculture sector.

Ch'ng Oon Chen, a 32-year-old systems analyst who's been using handhelds since 2000, said, “I think this tax undermines the Government's effort to develop ICT in the country.

"Just because a handheld has a form factor different from that of a notebook, they want to slap a tax on it -- even though internally and functionally, they are practically identical,” he said.

"Why are they singling out PDAs? How about Intel Centrino-based laptops," asked Aloysius Teoh, a 25-year-old project engineer.

"With the 10% tax, I'll have less of a reason to buy a WiFi-enabled PDA. I think this measure may discourage existing PDA users who are planning to upgrade, as well as newcomers," he told In.Tech.

"I don't think there's a strong argument behind the ruling. It sounds as if it was thought up by people who don't really use or understand the technology.

"It's strange how the Government is trying to encourage ICT use, but suddenly decides to introduce this new tax. It's not like wireless networking just came out," added Teoh.

This is not the first time the Customs Department has raised the ire of handheld users. In 1999, it slapped a 10% sales tax on Palm computers, saying they were electronic organisers and therefore not eligible for the 1996 tax abolition on computers.

However, it was pointed out that IBM Corp's WorkPad -- with the same operating system and features -- was not taxed.

The Palm-only tax was finally lifted the following year.