Singapore's goods and services tax

Abstract

The Goods and Services Tax (GST) is implemented in Singapore on 1 April 1994.

The GST is charged at a single low rate of 3% and it applies to almost all goods and

services. The government has no intention of changing this GST rate for at least five

years after full implementation of the GST.

The current GST system shifts the tax incidence away from income-based to

consumption-based system. It is a modified version of similar Value-Added Tax

systems in other countries. Thus, its impacts on Singapore are expected to be different

from these countries. A comparison of the GST system between Singapore and its

closely modelled counterpart - New Zealand, is made and the Singapore system is

found to be more complex than the New Zealand GST system. This is due to certain

unique features that exist in Singapore.

The objective of this report is to study the post-implementation effects of GST in

Singapore. GST has a once and for all impact on general price level. GST also

promotes capital formation and growth, and the competitiveness of domestically

produced goods. Nevertheless, it also increases administrative costs with regard to the

collection of GST revenue.

Due to the retail slump, particular reference is made to the retail industry to examme

whether GST will further aggravate the competitive retail environment. GST has no or minimal impact on retail prices. GST is found to have insignificant impact on the sales

and profit margin ofthe retail industry.

Lastly, a case analysis on a company within the retail sector is conducted to analyse the

impacts and related problems of GST. This is discussed in particular to the three

implementation phases of GST -implementation as well as the three departments most

affected by the new tax system.