Shop Online? You May Have to Pay More Taxes

Online shoppers may have to pay more taxes on goods ordered from overseas sites in the future, if countries adopt recommendations by the Organisation for Economic Co-operation and Development (OECD).

In Singapore, imported items bought online by locally based consumers are exempted from Good and Services Tax (GST), except for dutiable products, if the total cost amounts to S$400 or less. Hence, many online shoppers try to spread out their purchases to avoid paying tax. 

On Monday (5 Oct), the OECD called governments worldwide to increase efforts to collect tax revenue missed out from cross-border e-commerce transactions. Although no specific tax rules have been developed for the digital economy, the OECD said that administrators should consider meeting the challenges with other actions recommended in the overall plan.

About 55 percent of the estimated S$4.5 billion generated in e-commerce revenue locally in 2013 involved cross-border transactions, according to data from Spire Research and Consulting. This represents an estimated tax revenue impact of S$100 million to S$175 million for Singapore in the year, said Spire.

The rise of e-commerce, increasingly dominated by overseas retailers, has resulted in more outflows of money from Singapore as well as a loss of tax revenue. Local businesses are also at a competitive disadvantage.

In general, online overseas retailers are not taxed here on income generated from Singapore consumers. However, local stores and businesses have to pay income tax on revenue earned.

The OECD reforms will impact both online consumers and merchants, said Mr Kor Bing Keong, partner for Indirect Tax – GST at EY Singapore.

“Based on the trend around the world, countries such as Norway, South Korea and member states of European Union have already taken steps to collect GST or VAT on the digital economy, and other countries such as Australia and New Zealand have announced their intention to do so. It would appear that the additional tax to be collected is not insignificant,” he said.

He added that it “would certainly mean additional administrative work and compliance costs as online merchants may be required to register for GST or VAT in more than one country arising from legislative changes introduced to collect GST or VAT on the digital economy.”

Would you think twice about online shopping if you have to pay GST? 

Source: “E-shoppers may have to pay more taxes for goods from overseas”, (Channel NewsAsia, 7 October 2015)

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