SINGAPORE: With Singapore set to announce a new budget next week, it could likely include a tax on e-commerce services such as Amazon and Lazada, in what could become a region-wide trend of levelling the field for brick and mortar retailers.
With a budget announcement set for 19th February, eight of 12 economists surveyed by Bloomberg say that the city-state’s budget will include a tax on online retail outlets. Another believes that digital transactions could be added to the remit of the goods-and-services tax regime.
Meanwhile, other countries in the region, which have seen an especially rapid development of the internet and online services in recent years, such as Thailand, Indonesia, and Malaysia are considering similar approaches, in an effort to fund extensive infrastructure programs.
A tax on e-commerce could ease “the competition for offline retailers that have been struggling amid the rising popularity of online shopping,” Nainika Singh, a consumer analyst at BMI Research, told Bloomberg. “We are likely to see other Southeast Asian markets follow Singapore’s implementation of this e-commerce tax.”
For companies also, there has been a lack of clarity in this space. Steven Sieker, head of Baker McKenzie’s Asia Pacific tax practice, noted that companies are currently “subject to different e-commerce tax regimes, in some cases none across the Asean region.” He added, in comments to the FT that “the region’s diverse and uncertain legal environment remains a major challenge for many local and foreign companies.”
Singaporean officials admit, as did senior minister of state for law and finance Indranee Rajah, that a tax change should have been made “probably yesterday.” Currently, shoppers do not pay tax on online purchases under S$400.
In Thailand, the country’s revenue department expects the proposed e-commerce levy to triple annual tax revenue to 15%, according to Director General Prasong Poontaneat. The draft policy would tax vendors with a domain registered in Thailand a ceiling rate of 15%
In Indonesia, the search for a level playing field for offline vendors is magnified by a continued struggle to boost revenue. However, it is keen to protect small and medium-sized businesses with a lower levy. Malaysia, in this way, has been mulling a tax regime that would affect foreign providers for some time, though analysts suggest that a 6% levy is most likely, following the Singapore government’s lead.
Sourced from Bloomberg, Financial Times; additional content by WARC staff