Rumors have been abounding that goods and services tax (GST) will be raised when the yearly budget is released on February 19. However, in all likelihood, other taxes will be raised as well. Due to the rising costs of healthcare and retirement because of a quickly aging population, the government is in need of higher taxes from other sectors.
For example, just like other Southeast Asian countries, Singapore is now dealing with how to regulate taxes on online establishments, in comparison with taxation on actual retail stores. Maybank Kim Eng Research senior economist, Chua Hak Bin, says that Singapore needs to act on this quickly, since increasing goods and services tax would increase the advantages online retailers have over brick and mortar stores even further.
An economist from United Overseas Bank Ltd. in Singapore, Francis Tan, agrees with the need for taxes on online stores, considering that the number of Singapore’s online shoppers grows by double digits yearly. Indranee Rajah, Senior Minister of State for Law and Finance, has said that the law concerning taxes on online shopping is overdue, since online shopping habits are changing rapidly. At present, if online purchases are less than S$400, these purchases are tax-free.
The second sector that may see an increase in taxes is estate tax. While taxes on the assets of people who passed away after February 15, 2008, were removed, these estate taxes might still be reinstated, according to the head of economics and strategy at Mizuho Bank Ltd., Vishnu Varathan. This is because this particular tax is in sync with the government’s push toward making sure all fees are equitable, as well as broadening the tax base.
Aside from a levy on online stores and estate tax, the government may yet increase corporate and personal income taxes. Singaporeans currently enjoy income tax rates that are among the lowest around the globe. With only 22 percent income taxes on the highest wage earners in the country, this rate is relatively low, when compared to 34 to 36 percent in Europe, Latin America, and North America, as well as 30 to 34 percent for the rest of Asia. It’s possible that Singapore’s taxes will increase without lowering competitiveness.
The country also ranks number two in the World Bank’s category of ease-of-doing business index. It is also number seven in the sub-category of“paying taxes,” three slots ahead of Hong Kong, the country’s competitor.
However, as the US lowers its own tax rates, and with global tax competition on the rise, higher income and corporate taxes are still uncertain. “There is increasing competition in the global arena. We must continue to develop and strengthen our competitive advantages, by maintaining our pro-business environment and building on our connectivity to the global markets and our strong links” to Southeast Asia and Asian economies, said Finance Minister Heng Swee Keat.
Mr. Heng has been silent on whether corporate or personal income taxes will be raised.
The fourth sector that may see a rise in taxes this year is digital currency. The managing director of the Monetary Authority, Ravi Menon, has only said so far that government regulations on cryptocurrencies are currently related to illegal financing, warning that these currencies do carry an investment risk. Other agencies are looking toward how to impose taxes on these digital currencies. A partner and financial services tax leader at Ernst & Young Solutions, Amy Ang, says that the Inland Revenue Authority must determine whether cryptocurrencies should be considered a commodity to be taxed or a commodity derivative, “given the proposed statutory definition that it is a digital representation of value where the underlying asset is a virtual commodity.”