Singapore’s e-commerce tax could become a reference for Malaysia

The island republic expects to broaden the existing GST scope to include digital purchases and charging online consumers


Malaysia can emulate Singapore’s plans in dealing with e-commerce tax as the latter plans to levy Internet-based businesses that are flourishing across the world.

Singapore plans to introduce e-commerce tax scheme in its Budget 2018 proposal, the first for the republic.

The island republic is expected to broaden the existing Goods and Services Tax (GST) scope to include digital purchases and charging online consumers with the same 7% GST that is imposed on shoppers at traditional stores.

Axcelasia Inc executive chairman Dr Veerinderjeet Singh (picture) said Malaysia will have a useful reference if Singapore proceeds with its e-commerce tax plan.

“Most countries are talking about bringing online transactions under the GST umbrella, but the issue is in its implementation. I don’t think Singapore will have a total solution with the new tax structure, but it is an important first step that has to be taken,” Veerinderjeet told The Malaysian Reserve.

Governments in South-East Asia have been grappling to create a level playing field for online and brick-and mortar retailers.

At present, none of the region’s biggest economies have a levy structure for e-commerce despite the unprecedented growth of online retailing in recent years.

BMI Research projects e-commerce to hit US$64.8 billion (RM254.28 billion) in 2021 from US$37.7 billion. Credit Suisse Group AG estimates that online shopping growth could outpace traditional retailers by six to 10 times over the next few years, according to a Bloomberg report.

Online purchases in Singapore under S$400 (RM1,188.24) have so far been exempted from GST, but that is likely to change after Senior Minister of State for Law and Finance Indranee Rajah named e-commerce as an area that would allow Singapore to expand its tax base.

Veerinderjeet said any e-commerce tax should apply across the board, and should not be limited to just large online retailers.

“It cannot be discriminatory by charging GST on just the big businesses, but there will be a threshold. You can look at what the total sales is in the country, see if it crosses a certain point and charge based on that.

“The tax should apply to all businesses but not below a certain transaction threshold. That way it is fair,” he said.

However, Veerinderjeet said the main challenge in regulating a tax plan for the e-commerce industry is the enforcement.

“The problem with foreign online companies is they will charge 6% GST on customers for the purchase and delivery, but how will the Customs collect that amount when they don’t have offices in the country? “How do you regulate that? And if they miss a few payments, how will you impose a penalty on them?” Veerinderjeet said.

Countries such as Australia, New Zealand and Japan have already put some of their digital tax laws in force, but not without some hiccups.

In Australia, plans to impose a 10% GST on low-value online goods have been postponed by a year, following complaints from e-commerce giants like Inc, eBay Inc and Alibaba Group Holding Ltd that they needed more time to put their respective tax collection systems in place.

Despite a delay on that front, the so-called “Netflix tax” — which applies the GST to all digital products and services supplied into Australia — has come into effect on July 1, 2017.