E-commerce tax may level playing field, say local retailers

Singapore could join other countries such as Australia and South Korea in levying GST on foreign companies that sell goods and services to their residents online.
Singapore could join other countries such as Australia and South Korea in levying GST on foreign companies that sell goods and services to their residents online. PHOTO: ST FILE

Snapping up that deal from a website overseas may soon be costlier, if plans to subject lower-value imports to the goods and services tax (GST) come to pass.

Now, goods purchases totalling less than $400 and digital services such as music downloads from e-commerce firms based abroad are exempt from the 7 per cent GST.

But Singapore could join other countries such as Australia and South Korea in levying GST on foreign companies that sell goods and services to their residents online.

The Ministry of Finance said in response to queries that the current goods concession recognises that the cost of ensuring compliance could outweigh revenue collected.

But "as cross-border transactions have grown in recent years, we are studying the exception for purchases of imported goods below $400", the ministry said, adding that relevant stakeholders are being consulted.

Internet sales in Singapore amounted to $1.5 billion last year, nearly triple the amount from 2011, according to market research firm Euromonitor International.

  • $1.5b

    Value of Internet sales in Singapore last year, nearly triple the amount from 2011, according to market research firm Euromonitor International.

Senior Minister of State for Law and Finance Indranee Rajah told Bloomberg last Tuesday that e-commerce will likely come under the local tax regime soon to keep it up to date and further diversify Singapore's tax base.

The move, first mooted during this year's Budget by Finance Minister Heng Swee Keat, has heartened local retailers, who said that this will help to level the playing field.

E-commerce platforms Lazada, Qoo10 and eBay said that they have been consulted by the Inland Revenue Authority of Singapore, and provided feedback on potential challenges with marketplace collection models, for instance. Amazon did not respond to queries.

Qoo10's Singapore country manager Hyun Wook Cho told The Sunday Times that about 70 per cent of the site's transactions here involve local merchants, and thus are already subject to GST.

"Cross-border merchants may have to go through more steps and generally, the price may rise because of this... but we don't think it will have a significant impact on overall e-commerce," said Mr Cho.

Wing Tai Retail, which operates 96 stores here under brands such as Uniqlo, adidas and Topshop, said it supports removing tax exemptions for imported online purchases.

"Overseas e-commerce vendors have (an) unfair advantage... Singapore's implementation of this practice is following the global market practices so as to align a level playing field for bricks-and-mortar and local businesses," said its executive director Helen Khoo.

Still, local retailers may not see an immediate benefit as bigger vendors may absorb the GST for the first several months, and price is not the sole reason that shoppers buy from overseas sites, she said.

Mr Pang Fu Wei, managing director of baby supplies store Mothercare, said: "Singapore retailers have not been able to offer as competitive prices as international retailers; we don't have the volume to bring down cost prices like Amazon...

"This definitely helps to level the playing field for us - 7 per cent is a lot to any retailer."

Associate Professor Simon Poh of the department of accounting at the National University of Singapore Business School said: "It is important to stress that while the Government wants to tax foreign operators, it must be on the same rules."

Only Singapore companies with an annual taxable turnover of more than $1 million are required to be GST-registered, for example, and the same should apply to overseas companies, he said.

 
A version of this article appeared in the print edition of The Sunday Times on November 26, 2017, with the headline 'E-commerce tax may level playing field, say local retailers'. Print Edition | Subscribe