SINGAPORE: Speculation is buzzing that the Singapore government will raise the goods and services tax in its Feb 19 budget rollout. But GST probably won’t be the whole story. Authorities have several other options to increase taxes, or at least signal that they’re needed in the coming years, as the city state grapples with rising health and retirement costs as the population ages rapidly. Economies in the region are just starting to tackle the sticky issue of how to help level the playing field between brick-and-mortar retail and online vendors through a tax on the latter.
While Malaysia, Thailand and Indonesia all have been brainstorming this kind of levy, Singapore may have to move faster, said Chua Hak Bin, a senior economist at Maybank Kim Eng Research in Singapore. That’s because any increase in the GST would give online retailers an even bigger unfair advantage, he said. Francis Tan, an economist at United Overseas Bank Ltd in Singapore, sees the same urgency for an e-commerce levy. Singapore removed the tax on assets for people who died after Feb 15, 2008, and it’s possible the government may seek to reinstate the estate duty at some point, said Vishnu Varathan, head of economics and strategy at Mizuho Bank Ltd in Singapore. The levy fits the government’s goal of broadening the tax base and ensuring that the fees are equitable. Income tax rates in Singapore are among the lowest in the world, and there may be room to adjust those without threatening the city state’s competitiveness. The tax rate for top earners, at 22%, compares favorably to a 30% average across Asia and 34%, 35% and 36% in Latin America, Europe and North America, according to data compiled by tax and financial advisory firm KPMG LLP. On the corporate side, Singapore ranks No. 2 in the world in the World Bank’s ease-of-doing business index, including a No. 7 ranking in the “paying taxes” sub-category. The overall ranking is three spots higher than rival Hong Kong. But with tax competition heating up across the world as the U.S. lowers rates, it’s unlikely Singapore will move in the opposite direction. Finance Minister Heng Swee Keat, in response to a question on the U.S. tax cuts this week, gave no hints of possible adjustments.