February 15, 2018
On opposite sides of the world, two nations are reexamining the way they tax e-commerce transactions.
In the U.S., the United States Supreme Court has decided to revisit a 1992 decision in which it ruled that states can only collect taxes from online sellers if they have a physical presence in that state. As e-commerce exploded in the years since the decision, states began to understand the possible revenue they were forgoing for all purchases delivered to consumers who lived there. At the same time, brick-and-mortar retailers, who have to assess state taxes on every purchase according to local statutes, have been railing against the law for years, saying that online retailers enjoy an unfair competitive advantage.
According to the U.S. Government Accountability Office, state and local governments could have collected between $8 and $13 billion in 2017. Depending on the court’s ruling, expected in June, e-commerce merchants may have a much more complicated tax calculation in the years to come.
In Singapore, a similar process is playing out. Economic observers in Southeast Asia are predicting that the budget that will be delivered by the Ministry of Finance will include a new tax on online vendors aimed at protecting traditional physical retailers.
If Singapore is successful increasing the tax burden on online sellers, experts predict that other Asian countries could follow including Indonesia, Thailand and Malaysia.