Should digital downloads, streaming services and online purchases from foreign entities be subject to goods and services tax (GST) in Singapore? How about off-premise cloud computing?
Although the BEPS package is heavily focused on direct or income taxes, Action 1 of the final package (Addressing the Tax Challenges of the Digital Economy) notes that because the digital economy is increasingly becoming the economy itself, it would not be feasible to ring-fence the digital economy from the rest of the economy for tax purposes – and that includes indirect tax, or for Singapore’s purposes, GST.
1. Remove or lower current import relief
One possible option, in relation to instance a) above in a cross-border supply of tangible goods, is clearly the reduction or removal of import relief. Examples of countries which have already moved or are moving towards the lowering or removal of import relief include Australia, Switzerland, and the European Union (EU).
2. Requiring overseas suppliers to register for GST
The removal or reduction in import relief provides a possible solution for cross-border supplies of goods, but how about digital or remote services such as those in instance b), which do not pass through any customs collection points and are contracted directly by the end consumer without the intervention of domestic intermediaries?
3. Activate the reverse charge mechanism
One other measure that Singapore could consider in addressing cross-border supplies of digital services in instance b) above, is activating the reverse charge mechanism under section 14 of the Goods and Services Act. The reverse charge mechanism works by allowing (or sometimes requiring) the customer to account for the tax on supplies received from foreign suppliers (i.e. customers self-account for GST). For obvious reasons, this is not practicable for Business-to-Customer (B2C) situations since private consumers are not required to register and account for GST.
It is unclear at this point, which direction the Government will choose in relation to this issue, but it is clear that the eventual solution(s) would have to strike a balance among multiple objectives, including the efficient collection of tax, minimisation of compliance burdens, promotion of local fair competition (but also free movement of goods and services), and the upholding of the destination principle.
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We live in a digital economy: a virtual environment that has changed the rules of doing business and made disruption the norm. It has put customers, not companies, in charge. And it has transformed workforce dynamics as the “born digital” millennials come to prominence in the workplace.
This age is ripe with opportunity. Organizations can now engage with customers and employees like never before, and the virtual environment holds the potential to drive operational efficiencies, save time and money, and open the exploration of new commercial avenues. When it’s far cheaper to build an app than a manufacturing plant, there are greater returns to be gained for significantly lower investment.
Gartner predicts 41 percent of enterprise revenue will come from digital business by 2020—almost double what the percentage was in 2015 (Gartner, 2016). For the Googles, Ubers, and Facebooks of the world, facing these challenges and realizing and exploiting these opportunities are second nature. But for traditional firms, they’re a whole new world.
This revealed five essential leadership and organizational capabilities: discipline and focus, agility, connectivity, openness and transparency, and empowerment and alignment.
Source: Harvard Business Review, Korn Ferry
By 2035, the “Alibaba economy” could generate about 30% of all the jobs available in China’s digital economy, according to a new report published by management advisory firm Boston Consulting Group.
The just-released study “Year 2035: 400 Million Job Opportunities in the Digital Age” said the e-commerce giant, which has expanded into cloud computing, financial technology, media and entertainment, could account for as many as 122 million of the 415 million total jobs available in China’s digital economy, or 29.4%.
The report looked at the larger impact that technology would have on employment and talent over the coming two decades, estimating that China’s digital economy would make up 48% of the country’s total economy in 2035, accounting for US$16 trillion in spending. In 2015, those numbers were 13% and US$1.4 trillion respectively, and just over 100 million jobs.
In today’s globalised economy, cross-border data flow is fundamental to daily operations in nearly every sector and key to a functional global digital economy.
At an event, hosted by the Japan Business Council in Europe (JBCE) and the EU-Japan Centre for Industrial Cooperation at CeBIT in the German city of Hannover, keynote speakers Kiyoshi Mori of Japan’s ministry for economy, trade and industry (METI), and Andreas Goerdeler of the German federal ministry for economic affairs and energy (BMWi), made the case that digital trade supports growth in business and society.
The session showcased the close EU-Japan relationship and the need for a fair and open framework for global digital trade.
The internet is creating new opportunities for individuals and businesses across the globe today. However, not everyone is benefiting equally. The economic gains or digital dividends associated with the internet often go to those with higher incomes, with the right set of skills or in the suitable enabling environment.
As a result, growing inequalities between and within countries may follow. As the new World Bank regional report Reaping Digital Dividends argues, this not need be the case. If the right set of policies are put in place, digital dividends have the potential to be the driving force of poverty reduction and shared prosperity in the Europe and Central Asia (ECA) region.
The report argues that the main challenge that ECA countries are facing is high aversion to the changes that new technologies may bring. Aversion to change manifests itself in the backlash that sharing economy platforms have suffered in the richer economies of the west, while in the east this aversion is manifested in the fear that more information could disrupt societies. While the report acknowledges that the internet – as most technological changes – may bring disruptions, its potential efficiency gains would overweigh those costs. More
Report – download, launch video