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BUDGET 2017: FISCAL PRUDENCE

Govt looks into levying 'Netflix tax' on digital buys

Tuesday, February 21, 2017 - 05:50

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The government is looking to collect Goods and Services Tax (GST), currently at seven per cent, from digital transactions.

Singapore

THE government is looking to collect Goods and Services Tax (GST), currently at seven per cent, from digital transactions.

This could mean that consumers will have to pay GST on lower-value goods and for e-services such as downloading books, music or videos. At the moment, GST is levied only if goods bought from overseas are worth more than S$400. No GST is currently levied on services.

Countries large and small are reviewing their corporate tax regimes to keep them competitive, Finance Minister Heng Swee Keat said on Monday. "With increasing digital transactions and cross-border trade, some countries have taken steps to adjust their GST system to ensure a level playing field between their local businessess, which are GST-registered, and foreign-based ones, which are not.

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"We are studying how we can do likewise," he said.

In Australia, GST will be imposed from July on e-services. The country's press have dubbed it the Netflix tax.

A consultant said the days of buying much cheaper goods online may be a thing of the past.

Generally speaking, all goods imported into Singapore are subject to GST, except for non-dutiable goods imported by post and worth below S$400.

Singapore GST is also currently not levied on online purchases of services and content from overseas suppliers; these include downloads of media, music and software or online subscriptions, said Koh Soo How, PwC tax partner.

This effectively means that Singapore consumers can save on Singapore GST on purchases by doing their shopping online or overseas. "Essentially, it means that we'll need to prepare ourselves to pay GST on the music and video downloads from overseas and possibly on low-value goods that we purchase from overseas," he said.

A recent Temasek-Google report projected the Singapore e-commerce market to grow to US$5.4 billion by 2025; it has been estimated that more than half of that (55 per cent) comprises cross-border sales, he noted, citing a Payvision study.

Besides the EU countries and South Africa, countries which have introduced or are in the process of introducing such a tax are Japan, South Korea, New Zealand, China, Taiwan and Australia.

Mr Koh said Singapore could impose the GST on e-commerce by lowering the S$400 threshold.

Alternatively, it could effect a GST registration for the overseas vendor or the online platform (which Australia is proposing to do from July), and make the overseas vendor account for the online sales to Singapore consumers. "There is nothing to stop Singapore from doing both, but that would be unusual. I suspect that the government will probably study both options before arriving at a decision," he said.

HIGHLIGHTS

  • Looking to impose GST on foreign-based companies
  • This could bring digital transactions of goods and services into the GST net
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