TAXMAN LOOMS OVER SINGAPORE

Feb 19 budget rollout may feature GST hike and other tax options

SINGAPORE

SPECULATION is buzzing that the Singapore government will raise the Goods and Services Tax (GST) in its February 19 budget rollout. But GST probably won’t be the whole story.

Authorities have several other options to increase taxes, or at least signal that they’re needed in the coming years, as the city state grapples with rising health and retirement costs as the population ages rapidly.

Here are a few other measures to watch as the budget is announced:

E-commerce

Economies in the region are just starting to tackle the sticky issue of how to help level the playing field between brick-and-mortar retail and online vendors through a tax on the latter.

While Malaysia, Thailand and Indonesia all have been brainstorming this kind of levy, Singapore may have to move faster, said Chua Hak Bin, a senior economist at Maybank Kim Eng Research in Singapore. That’s because any increase in the GST would give online retailers an even bigger unfair advantage, he said.

Online shoppers in Singapore generally aren’t taxed for their purchases if they don’t exceed S$400 (RM1,192), said Indranee Rajah, senior minister of state for law and finance. Given how quickly online vendors are changing the way people shop, such a tax change should have been achieved “probably yesterday”, she said.

Estate tax

Singapore removed the tax on assets for people who died after February 15, 2008, and it’s possible the government may seek to reinstate the estate duty at some point, said Vishnu Varathan, head of economics and strategy at Mizuho Bank in Singapore. The levy fits the government’s goal of broadening the tax base and ensuring that the fees are equitable.

Personal income, corporate taxes

Income tax rates in Singapore are among the lowest in the world, and there may be room to adjust those without threatening the city state’s competitiveness.

The tax rate for top earners, at 22 per cent, compares favorably with a 30 per cent average across Asia and 34, 35 and 36 per cent in Latin America, Europe and North America, according to compiled data.

On the corporate side, Singapore ranks No. 2 in the world in the World Bank’s ease-of-doing business index, including a No. 7 ranking in the “paying taxes” sub-category. The overall ranking is three spots higher than rival Hong Kong.

But with tax competition heating up across the world, it’s unlikely Singapore will move in the opposite direction.

Finance Minister Heng Swee Keat, in response to a question on the United States tax cuts, gave no hints of possible adjustments.

Virtual currencies

Officials like Ravi Menon, managing director of the Monetary Authority of Singapore, have been careful not to cast a judging eye on the hype around cryptocurrencies, instead clarifying that while there may be investment risk, the authorities won’t regulate them beyond signs of illicit financing.

But Ernst & Young LLP is looking for more clarity on how to treat virtual currencies in tax terms. Singapore’s Inland Revenue Authority needs to address whether the currencies be treated as a commodity for tax purposes, or as a commodity derivative, “given the proposed statutory definition that it is a digital representation of value where the underlying asset is a virtual commodity,” said Amy Ang, a partner and financial services tax leader at Ernst & Young Solutions. Bloomberg