Amidst the furore over the unjustifiable GST increase, a little known new tax has been imposed in the recent Budget. The “imported digital services tax” is a GST on all online purchases including the downloading of Google and Apple applications. Although the Singapore government did not give a projection how much revenue will be, Temasek Holdings earlier in 2016 estimated the e-commence market will grow to S$7.5 billion by 2026. A 9% GST tax on this generates at least S$600 million in tax revenue.
Unfortunately, the Singapore government has been short-sighted on the impact of taxing online purchases. Already the most expensive country in the world, Singaporeans will no longer be able to find any bargains online. The new tax will require overseas suppliers to register for GST with the Singapore government, inflating business administrative costs and end-product pricing. Foreign businesses will be incurring higher risks when entering Singapore’s market, and as a result overseas online products and services may ban online sale to Singapore’s 5.7 million population market to avoid compliance costs.
The e-commence tax will also price Singapore out in South East Asia, as none of it’s neighbours is doing it.
Despite reporting a S$9.6 billion surplus, speculations have been rife that the Singapore government is actually running a deficit which is why it has been aggressively raising taxes in the past year. A look at the official expenditures revealed that the government has been spendthrift, with some ministries and statutory boards posting double digit jump in spending. Many Singaporeans also believe the Prime Minister, who is expected to step down by 2020, is trying to “leech” as much tax revenue as possible in order to cover up the undisclosed losses of GIC and Temasek Holdings, where he is Chairman of the former and his wife sits as CEO of the latter sovereign wealth fund company.