Ministry of Finance’s practice of imposing tax after duties are added should be reviewed: CASE

The Consumers Association of Singapore (CASE) has been appearing on the news for their activities recently.

First, the consumers interest watchdog targeted petrol companies for raising its petrol prices above the duty rate imposed by the Government after Budget 2015. Shell raised prices by 25 cents per litre for premium petrol and 18 cents for regular petrol — above the 20 cents and 15 cents imposed by the government, respectively.

CASE demanded the petrol companies send them a letter explaining their reasons for the price hikes and if they were not deemed satisfactory, CASE would send in a complaint to the Ministry of Trade and Industry.

Now, their eye is on the Government itself, specifically the way Goods & Service Tax (GST) is calculated.

Currently, products like petrol, cigarettes and cars have duty added before GST, meaning the duty tax is also being taxed.

According to CASE executive director Seah Seng Choon, imposing GST on duty tax is equivalent to double taxation, and has called for a review on this policy.

Taxception, anyone?

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CASE wants GST to be calculated before the duty is imposed so as to not place an extra burden on consumers.

The Ministry of Finance mentioned that the duties imposed are part of the final price of the dutiable item, and as such is taxable by GST as well.

As if to rub the issue into everyone’s faces, they claimed that the practice was standard in other countries too.

Right, but chewing gum is common in other countries too. Why is it banned here then?

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Should GST be calculated before duties are imposed?

The issue is highly subjective and that makes CASE’s task harder. Because duties are imposed on a country-to-country basis, ministries can decide for themselves if they want to add GST to the duties. If “taxception” occurs, consumers are made to pay extra for what CASE argues “is not goods and service”.

Here’s exactly how much you have to pay if GST is added to duties:

Assuming a litre of non-premium petrol has a wholesale price of 55 cents a litre and the oil company has a gross profit margin of 80 cents on the litre, the GST of 7 per cent at this point would work out to be 9.45 cents.

But if the GST is calculated after the petrol duty of 56 cents is added, the tax comes up to 13.37 cents – more than 40 per cent higher.

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True, GST would be even more complicated to calculate if the tax was added pre-duties. However, the consumer ends up paying more than they should, and this is something that CASE as an organisation does not stand for.

Keep in mind that duties on cigarettes, alcohol, cars and petrol are already there to dissuade people from buying them. Adding GST to the duties only increase taxpayer revenue.

One can argue that the taxes eventually go back to initiatives such as the Budget and social spending, but as a whole, consumers are being punished more than they should, especially car-owners for whom having a car is a necessity.

Should the Ministry of Finance stop practicing “taxception”?


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Featured image via VK35 via Wikipedia Commons
With references from MyPaper