SINGAPORE - Although Singapore ranks as one of the easiest places to do business in Asia, its accounting and tax sector stands to benefit from greater digitisation, according to a report released on Friday (Sept 20) by administrative services firm TMF Group.
For one, the city-state has yet to make it compulsory to submit tax invoices electronically. This is in contrast to almost half (46 per cent) of Asia-Pacific markets and two-thirds of markets in North and South America which have made it a requirement, the report stated.
Electronic invoicing is often used as a tool to combat tax evasion. Although it is becoming more commonplace in Singapore, there is still a lack of legislation deeming it compulsory, which means a significant number of companies still process their invoices manually, said the report.
TMF's Global Business Complexity Index (Accounting & Tax) report analyses key accounting and tax practices across 76 jurisdictions worldwide, to determine the level of complexity faced by multinational businesses as they look to understand and operate in other countries. It is the first in a new series of three studies, developed based on statistically weighted data and qualitative research by local market experts.
Singapore outshone its regional peers in terms of adhering to international accounting standards, a trend seen in only 21 per cent of markets in Asia-Pacific.
According to the report, the Republic's transition from local to International Financial Reporting Standards (IFRS), also known as Singapore Financial Reporting Standards (SFRS), highlights this trend of increasing convergence in industry standards in order to cut financial reporting costs for entities reporting in multiple jurisdictions and foster stability in Singapore's financial system.
Singapore also imposes hefty fines for non-compliance to accounting and tax standards. It is among the 83 per cent of global markets to do so. These penalties deter corruption and have helped promote a trusted business environment for international investment in Singapore, TMF said.
However, the city-state could do more in terms of digitisation. Aside from electronic tax invoicing, adopting new technologies such as artificial intelligence (AI), blockchain and cloud computing will enable faster and more accurate processing of reports, TMF suggested.
Its analysis showed that data will drive digital development in the global accounting and tax sector. Australian and Spanish tax authorities have started using AI and virtual assistants to help answer tax questions, while India and Canada have implemented methods to pre-populate their forms for goods and services tax and personal income tax. Meanwhile, China has announced its intention to use blockchain technology for tax invoicing, TMF said.
Kim Leng Siaw, managing director of Singapore at TMF, said that when expanding to new territories, companies may need to shift from business practices, which includes adapting to evolving accounting and tax processes.
"Singapore has done well by having robust and evolving accounting and tax policies, and we are confident that the sector's pace of digitisation will pick up in time to come, as more companies embrace technology," Ms Kim said.