Delivered in Parliament on 3 November 2020
Mr Speaker, it has been said that in this world, nothing can be said to be certain, except death and taxes. And of all the forms of taxation in the market, the Goods and Services Tax or GST, being a broad-based consumption tax is perhaps one that is most inescapable to the everyday person.
In the context of Singapore, the GST is now one of the largest contributors to our operating revenues at S$11.2 billion in FY2019, behind corporate income tax at S$16.8 billion and personal income tax at S$12.2 billion respectively. While GST revenues were initially estimated at S$11.27 billion in FY2020, this has since been revised to S$9.69 billion or a 14% reduction, given the impact of the current economic slowdown.
Particularly against this backdrop, I agree in principle that strengthening measures to enhance the Comptroller of GST’s powers to safeguard public monies, and minimise the loss of public revenues is of utmost importance. The introduction of measures to counter
Missing Trader Fraud, and counteract tax avoidance arrangements in the GST (Amendment) Bill is thus timely. In the EU, it is estimated that the losses from VAT fraud amounts to 60 billion Euros annually. To this end, I would like to ask what is the Ministry’s assessment of the estimated annual losses in Singapore due to Missing Trader Fraud?
In addition, I am also concerned about the potential impact of the amendments on SMEs, who are already facing resource constraints. Section 20 subsections (2D) to (2F) specify the conditions to which a taxable person should have known that the supply made to the taxable person, was part of an arrangement to cause loss of public revenue.
This includes whether the circumstances are such that there was a reasonable risk of the supply being part of a fraudulent arrangement, and hence whether or not the taxable person took reasonable steps to ascertain this. However, even if the taxable person had taken reasonable steps and arrived at a wrong conclusion, it does not spare the taxable person from being taken that he “should have known” that the arrangement was fraudulent.
This could thus be potentially onerous on companies, especially for smaller companies who may not have the same capabilities to conduct extensive due diligence as compared to larger companies with economies of scale. Codification of what “the reasonable person” or “reasonable steps” mean, would thus be critical for SMEs to not fall afoul of the new requirements.
Yet while we’re looking to address the loss of public revenues via Missing Trader Fraud with this amendment, I would also like to ask the Minister, what has been the progress of the Government’s study on an e-commerce tax? In Budget 2018, I note Finance Minister Heng Swee Keat’s announcement that the Government will introduce GST on imported services with effect from 1 January 2020, or what we commonly call a “Netflix tax”. This is to make sure that our tax system remains fair and resilient in a digital economy.
For the import of goods, I noted Minister Heng’s then remarks that, and I quote, “For the import of goods, there are international discussions on how GST can apply. We will review this before deciding on the measure to take.” Unquote.
The OECD has since endorsed new rules and frameworks for the collection of taxes on online sales of goods in March 2019. Meanwhile, Covid-19 has resulted in dual impacts to the retail sector in Singapore: first an acceleration in the already rapid growth of the e- commerce market, where online sales represented 10.9% of the latest retail sales value in August, having reached a high of 24.5% in May 2020. And secondly the continued struggle of bricks-and-mortar retailers amid an uneven playing field.
As we look to support SME retailers with the rental relief framework, while providing support to employment via the JSS, it is perhaps now timely to look into addressing a growing source of tax leakage due to overseas online retailers, and correct a key imbalance faced by tax-paying retailers in Singapore. More broadly, the liquidation of Robinsons, after more than 162 years of operations in Singapore is perhaps a grim reminder of the state of the retail landscape in Singapore today, and how more needs to be done to address the various costs of doing business.
Mr Speaker to conclude, I support the bill and believe we are rightly concerned about the loss of public revenues as a result of Missing Trader Fraud and tax avoidance agreements. But the changing economic and retail landscape is perhaps a timely reminder of our need to continue addressing other forms of GST leakage, and exploring other forms of revenue sources, before looking to an eventual GST hike to raise tax revenues. Thank you.