GST and the digital economy - some possible effects

DURING his Budget speech in February, Finance Minister Heng Swee Keat said the government has been studying ways to apply the Goods and Services Tax (GST) to the digital economy. The issue came under the spotlight again recently after Prime Minister Lee Hsien Loong spoke about the need to raise taxes as government spending on investments and social services continues to grow.

Some economists have singled out the ubiquitous GST as the prime platform for future tax increases. If this becomes reality it could only hasten the introduction of GST on the digital economy.

Global trends also suggest that it is inevitable for Singapore to adjust its GST regime to keep pace with the burgeoning digital economy. OECD's Base Erosion and Profit Shifting (BEPS) project discussed the tax challenges raised by the digital economy and provided recommendations to countries on how to address these challenges from a VAT/GST perspective.