Is it high time for Singapore to review its digital commerce income tax?

EY says in its Singapore Budget 2018 wishlist that this will protect its tax revenue base neutrality.

Accounting and professional services firm EY called on the government to work on improving its tax treaty network and providing clarity on digital-related taxation in order to promote Singapore as the region’s business hub.

In its Wishlist for Singapore Budget 2018, the firm notes that Singapore’s treaty network needs to be accelerated by including new countries like the US and updating older tax treaties with traditional trade partners like Australia, Indonesia and Philippines to maintain tax competitiveness.

Moreover, EY urges the government to consider imposing a digital levy in its review of the taxation of digital commerce income.

“To protect Singapore’s tax revenue base neutrality, the government needs to review the taxation of digital commerce income. This includes possibly imposing a digital levy on goods and services imported into or consumed in Singapore, if refining the withholding tax rules and activating the GST reverse charge mechanism are not effective in addressing this or levelling the playing field,” said Ernst & Young Solutions LLP Tax Services Partner Chia Seng Chye.

EY also notes that further clarity from the IRAS is necessary in the tax treatment of virtual currencies so that prospective funds trading in such currencies may be set up and managed in Singapore to boost its economic competitiveness.

Moreover, Singapore is best-placed to lead the harmonisation of tax treatment within ASEAN to promote greater cross-border capital flow as it chairs the committee in 2018.

“The government may consider adopting a consistent definition of tax concepts such as permanent establishment and characterisation of software payments, and proposing common tax administration standards such as those in relation to transfer pricing. This would help to grow the intra-ASEAN market and position ASEAN as an integrated community for foreign investments,” said Ernst & Young Solutions LLP Head of Tax Services Chung-Sim Siew Moon.