Singapore looking at wider e-commerce levies as one way to diversify tax base: Indranee Rajah

Senior minister of State for Law and Finance Indranee Rajah named e-commerce as one area that would allow Singapore to further diversify its tax base. PHOTO: LIANHE ZAOBAO

SINGAPORE (BLOOMBERG) - Senior Minister of State for Law and Finance Indranee Rajah said the Government is looking at widening levies on e-commerce to broaden its tax base.

In an interview with Bloomberg on Tuesday (Nov 21), Ms Indranee named e-commerce as one area that would allow Singapore to further diversify its tax base.

"You can imagine, 20 years from now, the way people purchase is very different and by that time online platforms will be mainstays, so if that's not part of the tax regime, there's going to be a lot of holes there," she said. This change should have been achieved "probably yesterday".

Currently, online shoppers in Singapore generally aren't taxed for their purchases, so long as the order doesn't exceed S$400, she said.

The process by which Singapore might efficiently tax smaller orders could be complicated, with other countries such as Thailand openly considering such a levy and facing objections.

"Because it's a new area, and you want to have a look at countries that have implemented it and you want to learn from them, it's not something we're going to rush into but it's also not something you can put off for too long," the minister said. "Do your shopping" now, she joked.

Her comments follow Prime Minister Lee Hsien Loong's warning on Sunday that Singapore needs to prepare for tax increases. He said the government expects spending on healthcare, infrastructure, and other social services to keep rising, meaning that "raising taxes is not a matter of whether, but when".

Ms Indranee said the government will ensure its tax system is based on "solid" economic performance and the principle that higher income earners pay more.

"It must be all based on solid economic activity," she said, adding that Singapore's economy is "absolutely" in such a state now.

Singapore's growth probably reached an almost four-year high of 5 per cent in the third quarter, according to a Bloomberg survey ahead of a report due on Thursday. PM Lee said this week that 2017 growth could exceed 3 per cent, higher than previously projected.

Economists have identified the the goods and services tax (GST) as one levy that Singapore could raise, as the city state balances the need for more revenue, maintaining its competitiveness, and concern that a tax increase could crimp household budgets. The GST was last revised in 2007, to 7 per cent from 5 per cent.

Ms Indranee declined to comment on any specific changes to the GST that the government might be considering.

She said Singapore's tax regime is backed by the principles of diverse revenue sources, a progressive system based on income, and economic growth. The GST system has been designed accordingly, she said.

The broad nature of the GST and the "offset packages" that have long been in place to assist lower-income residents with the consumption tax demonstrate how the system meets those principles, she added.

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