How E-Commerce Tax Might Affect Consumers and How to Reduce Its Impact

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How E-Commerce Tax Might Affect Consumers and How to Reduce Its Impact

Ahead of the Singapore government’s budget announcement in February, there has been much talk of rise in GST. Currently, consumers in Singapore are exempt from paying GST when they purchase less than S$400 worth of goods online from overseas vendors. It is widely believed that this exemption will be wiped out in the new budget as the government attempts to increase tax income base. Here, we briefly discuss how large of an impact this may have on consumers in Singapore, and what they could do to minimize the impact of e-commerce tax.

Vast Majority of Goods Sold Online in Singapore Are Sold From Overseas

According to ValuePenguin’s study of two of the largest e-commerce platforms in Singapore, it seems that vast majority of goods sold on these digital marketplaces will be affected by a possible e-commerce tax. are imported from overseas. We collected data on the number of listings by price range and country of origin for 20 of Qoo10’s listing categories and 15 of Lazada’s categories. We found that items costing S$400 or less represented about 97% of Qoo10’s listings, while they comprised 99.5% of Lazada’s listings.

Not only that, vendors in China, HK, Korea and the US comprised anywhere between 70% and 95% of all listings on these platforms. This dominance of imported goods was prevalent across all shopping categories from fashion, electronics to beauty and health goods. On Qoo10, for example, more than 90% of fashion goods were sold by vendors from China, HK, Korea and the US, while 77% of skincare product were sold by the vendors in the same countries. In contrast, vendors categorised as domestic were responsible for only about 2.4% of listings on Qoo10.

Same analysis of Lazada yielded similar results, with vendors from China, HK and Korea comprising 53% to 94% of listings on the platform. As we’ve seen before, vendors categorised as domestic were responsible for an even smaller portion of 0.4% of listings on Lazada.

What Can Consumers Do to Reduce the Impact of E-Commerce Tax?

It seems crystal clear that a new e-commerce tax will impact almost all of online purchases in Singapore. Unfortunately, there really aren’t many ways (if any) of avoiding the impact of a potential e-commerce tax, if the government decides to do away with the GST relief on imported goods. This is especially true if each e-commerce platform becomes responsible for charge the GST at checkout. But, there are still certain things that people can do to reduce the impact to some extent.

One easy, but temporary method would be to pre-purchase anything you know you will need ahead of time. While this is merely a one-time solution that won’t work for everyone, consumers have been known to “pull forward” their consumption ahead of GST hikes in other countries. For example, sales tax hikes in Japan in the last several years have known to lead to temporary increase in consumption before the hike and sharp decline after the tax was instituted.

For those who may not yet have a credit card that is optimised for shopping rewards, an e-commerce hike might be a good catalyst for considering getting one that provides decent amount of rebate on online shopping. For example, DBS Live Fresh Card provides up to 10% rebate on online spending, while OCBC Titanium Rewards Credit Card and Citi Rewards Card both provide 4 miles on shopping expenses, making them ideal candidates to help reduce the impact of an e-commerce tax. For example, if an 8% GST were to be imposed on online shopping (assuming that GST itself rises), a 10% rebate would actually more than offset the impact of GST, while a 4% return (since 1 mile is roughly worth S$0.01) would offset more than half of the impact of e-commerce tax.

The article How E-Commerce Tax Might Affect Consumers and How to Reduce Its Impact originally appeared on ValuePenguin.

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Source: ValuePen