Singapore - A Positive Response to Digital Economy (GST)

During the SMU-TA Centre for Excellence in Taxation Conference on August 17, Ms. Indranee Rajah, Senior Minister of State for Law and Finance, announced the state’s resolution on revising its Goods and Services Tax (GST) of digital economy and future policy orientation.

Providing a Stable and Growth-Oriented Business Environment

Digitalization changes both ways of conducting business and consumption habits of the public, impacting all aspects of governance. In this case, conventional notions of taxation are challenged, and Singapore is learning how to adjust its GST system to ensure a level playing field between their local businesses which are GST-registered, and foreign-based ones which are not.

Divergence of tax treatment on digital economy among jurisdictions gives rise to unilateral tax measures with great uncertainties in the global business environment. Thus, Singapore is committed to providing a stable business environment by upholding international principles and participating in international efforts, including internationally-agreed standards for both exchange of information for tax purposes and combating BEPS. However, taxation is not supposed to be a barrier to economic activities but to be growth-oriented. Costs to apply new rules on economic operators have been recognized and Singapore is taking several proactive measures to help bring upfront tax certainty to the business.

Three Principles on Taxation of Digital Economy

The boundaries between digital economy and traditional economy are blurred by digitalization, and even brick-and-mortar businesses have increased their digital sales. On tackling the taxation of the digital economy, three high-level principles were identified by Singapore:

  1. Tax certainty for businesses: to provide tax certainty and minimize the regulatory and compliance burden;  
  2. Tax neutrality between traditional and digital business models: there should be fairness in terms of the taxes paid by businesses regardless of their extent of digitalization;
  3. International consensus: there should be fairness in terms of the taxes paid by businesses regardless of their extent of digitalization.

Sources:  IRAS.Gov.Sg, Straitstimes

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