Tighter tax rules on booze and other buys
New duty-free limits target travellers, but watchers still holding out for e-tail GST
The expansion of goods and services tax (GST) to cross-border shipments worth less than S$400 was missing from the Budget for the second year in a row. Fiscal hawks had hoped for such a levy on Monday, especially with a "Netflix tax" on foreign online services unveiled last year.
Instead, Finance Minister Heng Swee Keat rolled out tighter tax and duty measures on liquor and overseas purchases entering Singapore.
This was part of his "differentiated fiscal strategy", involving public debt for major infrastructure investments and recurrent revenues, like taxes, for recurrent spending in areas such as healthcare, education and security.
Mr Heng also reaffirmed on Monday that GST will go up by two points between 2021 and 2025, with relief measures such as voucher schemes for lower-income folks and seniors.
Standard Chartered economist Jonathan Koh told The Business Times that the minister still has leeway to make only modest tax increases, as the use of debt to fund infrastructure "takes out a huge chunk of expenditure". GST should cover the rest of spending, especially after the rate is bumped up to 9 per cent, Mr Koh said.
With GST hogging the limelight, Yeo Kai Eng, indirect tax services leader at Ernst & Young Solutions, noted that further tweaks to the income tax regime had been unlikely, after moves in previous years' Budgets.
The personal income tax rate was raised for top earners in the 2015 Budget, and the amount of relief that can be claimed was capped the next year.
Corporate and personal income taxes are the top two sources of government operating revenues. GST, the third-largest, is expected to yield some S$11.69 billion in FY2019 - up by 3.5 per cent on the previous year.
The changes announced by Mr Heng will see travellers get less GST relief on goods bought abroad, from today. Those who were out of the country for fewer than 48 hours can bring in S$100 worth of goods GST-free, down from S$150 before, while those who were away for longer can bring in S$500 of goods, from S$600.
The duty-free allowance for spirits, wine and beer drops to two litres on April 1, from three litres now. A one-litre cap on spirits remains.
EY's Mr Yeo called the move "a very targeted adjustment for now", in line with plans to cater GST relief to lower- and middle-income households.
"The government is trying not to touch ordinary Singaporeans," he said. "Normally, the more affluent would be the ones travelling anyway."
Yet that does not mean that expectations of GST on e-commerce have been shelved. Experts like Deloitte indirect tax leader Richard Mackender said that a delay in such a tax could be on the back of public prudence, as "Singapore is studying the options to make sure that any change can be effectively administered and policed".
How to enforce the new rules is already on some watchers' minds.
Kelvin Law, assistant professor of accounting at Nanyang Technological University's Nanyang Business School, fretted: "Once word of mouth on our strict enforcement gets around among international travellers, they may stop bringing dutiable goods above the limit, and international travellers may even skip Singapore as a destination. Ultimately, this stream of revenue could flatline."
He added: "The focus on consumer goods changes in Budget 2019 seems to pave the way for upcoming GST implementation details on e-commerce, which should have a broader fiscal and societal impact than import relief for international travellers."
Highlights
* GST import relief for travellers away for more than 48 hours cut by S$100 to S$500
* Alcohol duty-free concession down to two litres from April 1