The dawn of taxation in the digital economy
THE retail sector is a major contributor to the growth of Singapore's economy but the rise of e-commerce, dominated mainly by overseas retailers, has resulted in more money flowing out of the country. As many of the largest online retailers are located outside of Singapore, the products and services escape Singapore domestic GST, and often the goods they sell are brought into the country without any import GST being due.
Figures from the IRAS (Inland Revenue Authority of Singapore) show that the collection of Goods and Services Tax (GST) in Singapore in the financial year ended March 31, 2016 amounted to S$10.3 billion. This represents a modest increase of S$0.1 billion from the financial year ended March 31, 2015. This could be explained in part by the weaker than hoped for domestic and tourist spending due to the anaemic economy, but it is also likely that the modest increase could also be down to the growth in cross-border online transactions.
Singapore has not raised the standard rate of GST since 2007 and given the many uncertainties and challenges facing our current economy, it is unlikely that the government will increase our GST rate in the near term. Therefore, if the government needs to increase GST to increase revenues, the immediate solution more likely lies in expanding the scope of the tax.
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