Singapore’s US$700,000 GST Registration Threshold

1. Singapore’s US$700,000 GST Registration Threshold Tie Wee, TAN Inland Revenue Authority of Singapore

2. Agenda • Hallmarks of S’pore’s GST System • High Registration Threshold • Voluntary Registration • Trends in Taxpayer Profile • In Retrospect • Challenges Anticipated • Meeting the Challenges

3. hallmarks

4. Hallmarks • Introduced in 1994 after extensive consultation • Positioned as a “revenue neutral” tax • Not meant to raise extra revenue • Low tax rate of 3% • Many offsets to alleviate the “regressive” effects on low-income groups

5. Hallmarks • Broad-based tax with few exemptions • Import of goods   • Supplies of goods and services in Singapore • Single tax rate • Relatively high registration threshold of S$1m (≈ US$704,400 in today’s dollar) • ≈ US$597,850 in 1994 dollar  • ≈ S$840,000 in 1994 dollar

6. High registration threshold

7. High Registration Threshold • Low threshold and its attendant problems in other jurisdictions • Cost of collection probably offsets marginal revenue from MSEs • Typically possess rudimentary accounting systems • Exhibit poor record keeping - Leads to audit issues

8. High Registration Threshold • Cost of compliance with GST requirements for MSEs is proportionately higher  • May have to build accounting systems from scratch • Let them choose – Voluntary registration

9. Voluntary Registration

10. Conditions • Remain registered for 2 years • Have intention to make and do make taxable supplies within 2 years • Create electronic banking linkages for GST payments or refunds

11. Conditions • Complete eLearning course online: • http://gstelearning.iras.gov.sg/beforeiregister/player.html • Informs potential applicants of obligations • Analyzes benefits-cost of registration • Principal officer of applicant to attend seminar on "Introduction to GST"

12. Trends in taxpayer profile

13. Trends • ↑ % of Voluntary Registrants • 1994 ≈ 30%  • 2008 ≈ 70% • ↑% of registered businesses = Incentive for non-registered businesses to register • More suppliers are GST-registered = Can claim more input tax • More customers are GST-registered = Advantage over non-registered competitors

14. Trends • Voluntary and compulsory registrants exhibit same level of filing and payment compliance • Education • Mandatory seminars for new registrants • Assistance • Accounting software subsidy • Helplines and other taxpayer services • Enforcement • Dedicated New Registrant Audit Team • Contacts about 15% of the new registrants every year to advise them on the mistakes they have made

15. In retrospect

16. In Retrospect • Good idea to have registered only those traders with better accounting systems • Allowed time for businesses to get used to GST by starting with those better equipped to implement GST • System stability • Over time • Considered increasing the threshold  • Did not consider lowering the threshold

17. challenges

18. Challenge • More MSEs registering as inflation effectively lowers the threshold • Compliance problems with even the micro businesses beginning to register?

19. Meeting the Challenge • Help for MSEs • Accounting software subsidy • Free seminars to help them  • Decide whether to register voluntarily depending on their business circumstances • Most suppliers are registered? Can claim a high percentage of expenses as input tax? • Most customers are registered? Can most customers claim input tax on purchases?

20. Meeting the Challenge • Free seminars to help them [cont] • Comply with GST obligations should they decide to register • Simplification of compliance obligations of MSEs • Shortening of record keeping period from 7 to 5 years

21. conclusion

22. Conclusion • Is the registration threshold a critical factor? • Probably not. So long as MSEs receive all the help they need • Registering the better equipped businesses first certainly eased the introduction of GST in Singapore

23. Thank you!