As more people play or shop online, some experts have said Singapore should start imposing Goods and Services Tax (GST) on such transactions, since the online market is worth nearly S$5 billion a year. A tax on the digital economy is being considered by many countries, although enforcement could be tricky.
Online games generated almost US$250 million (S$345 million) of revenue in Singapore in 2015. It is forecast to grow by nearly 9 per cent per annum. Much of online services is not taxed, due to the difficulty in tracking such digital transactions, but this could change in the near future, as tax authorities around the world look more closely at such activity.
Mr Robert Tsang, indirect tax leader at Deloitte Southeast Asia and Asia Pacific, said: “For services, this is a developing and moving target, so across the region, you see more and more governments become specifically concerned (about) online services, particularly with gaming. So Japan and Korea in the last year have issued special rules that require a business that is not in the countries to become a registered taxpayer and account for taxes, if the final customer is actually in those countries.
“So if you have a Japanese individual who is gaming, playing games, and is paying for that service to say a US business, that US business, since Oct 1 last year, is supposed to be accounting for consumption tax on those revenues.
“So these we see as being trends that are gradually growing, right across Asia Pacific. Japan is not the only example. Korea, from Jul 1 last year, started to have similar rules around mobile games. And no doubt here in Singapore, the IRAS (Inland Revenue Authority of Singapore) is looking very carefully at what these other countries are doing.
“Japan and Korea are not on their own, Australia, New Zealand, a couple of other countries, including our neighbours, Malaysia, are looking very carefully at how they should be fashioning their rules.”
Experts said that tax rules are still in relatively nascent stages of development, and there are questions about how they can be effectively enforced.
To make tax collection on Internet sales more effective, experts said Singapore could require large online retailers to collect GST from Singapore residents on its behalf. The Government could also work with delivery firms to track purchases from smaller online retailers.
First seen and source: ChannelNewsAsia