Multiple Streams Analysis on the Tax Treatment of Digital Assets in Malaysia and Singapore: Understanding the Policy Through Agenda-Setting

Abstract

The evolving technology of digitalization is paving the way for emerging financial channels through which the economy interacts with society, one of which is channels is the formation of digital assets (DAs). Within the ASEAN bloc, Malaysia and Singapore are the frontrunners in digital transformation among their regional peers, and they provide a fertile foundation for assessing the existing tax treatment of DAs and their implications for regional integration.

This study applies Kingdon’s Multiple Streams Framework (MSF) to analyze how the problem, policy, and politics streams converged to shape the tax treatment of DA across the regional bloc. To assess it, the study utilizes Stake’s multiple case study approach, drawing from official documents, policy papers, and institutional guidelines issued by the central bank (e.g., Bank Negara Malaysia, Monetary Authority of Singapore), tax authorities and regulators (e.g., Inland Revenue Board of Malaysia, Inland Revenue Authority of Singapore), as well as securities commissions (e.g., Securities Commission Malaysia). This study also considered secondary academic, policy, and industry perspectives to understand their respective insights on DA regulation.

Based on the gathered data, the findings indicate that while both Malaysia and Singapore share a common British law heritage and an income-based tax system, their approaches to DA tax treatment differ. Malaysia employs a broad, interpretive “badges of trade” approach under the Malaysian Income Tax Act 1967, which affords flexibility but introduces case-by-case uncertainty. In contrast with Singapore, it adopts a functional classification system that distinguishes between payment, utility, and security tokens, providing greater clarity and predictability. In indirect taxation, Malaysia imposes Sales and Services Tax (SST) on DA-related activities and transactions, whereas Singapore exempts qualifying digital payment tokens from Goods and Services Tax (GST).

The study can be drawn about the situation of Malaysia and Singapore regarding the DA regulation. The study identified that DA classification ambiguity, compliance risks, and global pressures shaped the problem stream; stakeholder proposals and institutional guidance shaped the policy stream; and political determination, agency leadership, and ASEAN commitments shaped the politics stream. The coupling of these streams opened policy windows for DA reform in both AMS, with regulatory agencies serving as policy entrepreneurs. This comparative analysis provides insights into how Malaysia and Singapore’s DA tax frameworks can inform ASEAN’s ongoing efforts toward tax harmonization and collaboration.