It imposed the 7% GST on cross-border digital services.
In order to even the playing field between local and foreign digital service providers, Singapore included the implementation of a Goods and Services Tax (GST) for foreign digital services in its Budget 2018 policies.
Previously, Singapore consumers only paid the 7% GST on local digital services. Now, they will also pay taxes for cross-border downloadable digital content, subscription-based media, software programs: software, drivers, website filters, and electronic data management services.
Rob Koepp, Economist Corporate Network director, cited a study from AlphaBeta before the implementation of the digital GST that said Singapore is the only government that comes out as having all positive marks in terms of tax policy ranking.
“One of the main things to look out for is not having these special taxes that discriminate against the digital sector. Every other economy has an issue with that. Singapore is the only one that does pretty well with that,” he told Singapore Business Review.
The study by AlphaBeta evaluated India, Indonesia, Japan, and Vietnam as countries where special taxes discriminated the digital sector.
If you're gonna start taxing foreign companies in a way that's discriminatory then you're exposing these companies to things like double taxation or you're gonna encourage foreign governments to tax your company as they try to go global,” Koepp said.
He noted that Singapore started out as a country that avoided taxation of the digital economy, like the US. “But then you start to say, we need to roll out the same taxes we have elsewhere onto the digital sphere. That's very hard to disagree with.”
However, he added that Singapore, unlike some other governments, tends to be “very good” at giving people a heads up. “There's over a year to prepare for this. I haven't heard of anyone saying I'm gonna pull out of Singapore, I'm gonna lose a lot from Singapore because of this. We'll have to see,” he said.
Moreover, Koepp does not see that digital GST should pull down Singapore’s status. “So far, the way tax rates in Singapore are applied, they all score very well,” he said. “I do not see the GST really detracting from that ranking, but I would advise that the government and companies should monitor and if there is a notice.”
Other countries could look to Singapore in implementing their tax policies. It has an “interesting” position due to its small size and population but disproportionate influence.
“It could consider maybe taking even more leadership in what it's doing because other countries are struggling to understand how to develop that in Singapore. Hopefully, others can learn from that positive experience,” Koepp said.
Do you know more about this story? Contact us anonymously through this link.