“Buy your stuff online,” they said. “It’s cheaper,” they said. Oh not anymore. Maybe, that is. The Organisation for Economic Cooperation and Development (OECD) are calling on governments around the world to adopt recommendations that would mean that online shoppers may have to pay more taxes on goods they order from overseas sites in the future.
How it works in Singapore is that Goods and Services Tax (GST) need not be paid for imported items bought online by locally based consumers, except for dutiable products which includes alcohol, tobacco products, and vehicles — if the cost (including insurance and freight charges) totals up to S$400 or less. This is why many online shoppers spread out their purchases to avoid paying tax.
The OECD hopes that other countries will step up to collect tax revenue they are missing out on from cross-border e-commerce transactions. The set of recommendations aim to battle offshore tax avoidance through base erosion and profit shifting (BEPS), which is the negative effect of multinational companies’ tax avoidance strategies on national tax bases.
The report from the OECD said that because the digital economy is increasingly becoming the economy itself, it would be difficult, if not impossible, to ring-fence the digital economy from the rest of the economy for tax purposes. It added that some business models to be examined from a tax perspective include several varieties of e-commerce, app stores, online advertising, cloud computing, high-speed trading and online payment services.
Retail e-commerce in Singapore has enjoyed a dramatic rise since 2010 and has brought in billions in revenue for the country. At the moment, the e-commerce landscape is dominated by overseas merchants, resulting in more money flowing out of the country than in, as well as putting local businesses at a competitive disadvantage.
Perhaps it is time to #supportlocal and start buying from local e-commerce sites that have already paid taxes?
The article was first published by Vulcan Post. Vulcan Post is all about living life with a digital edge, up and coming startups, and people who inspire conversations. Find us at VulcanPost.com
Listen to our podcast, where we have in-depth discussions on finance topics that matter to you.