GST everywhere you travel

There is a trend that GST (Good and Services Tax) or Value-Added Tax will be implemented throughout Asia Pacific.

Tomorrow (1st July), Singapore businesses will switch from 5% to 7% GST, a 2% tax hike. Comparing Asia Pacific countries to European Union (EU), you will find that the majority of governments in the Asia Pacific region that impose GST or VAT do so at comparatively low rates between 5 to 12.5% (with the exception of China), and on average at a rate far below the norm in the EU where rates range from 15 to 25%.

VAT and GST are the two of the fastest growing taxes globally with no less than 140 countries operating a VAT/GST system, reflecting a global trend by governments to focus on the certainty of revenues from indirect taxes.

When Singapore first introduced GST in 1994, the tax was responsible for approximately 11% of government tax revenue, in the last financial year, that proportion had nearly double to around 20%. This trend is set to increase with the impending GST hike by 2%. As a consequence, the corporate income tax is to be reduced from 20 to 18% to keep Singapore competitive.

Similarly in China, the recent corporate tax reforms in China are expected to shift the tax revenue collection profile even further towards indirect taxes which already accounts for two-thirds of China's tax revenue.

GST/VAT around the region (as at 1st July 2007)

China - introduced in 1994 - 17%
Pakistan - introduced in 1990 - 15%
Bangladesh - introduced in 1991 - 15%
New Zealand - introduced in 1986 - 12.5%
India - introduced in 2005 - 12.5%
Philippines - introduced in 1988 - 12%
South Korea - introduced in 1976 - 10%
Indonesia - introduced in 1985 - 10%
Cambodia - introduced in 1999 - 10%
Vietnam - introduced in 1999 - 10%
Australia - introduced in 2000 - 10%
Thailand - introduced in 1992 - 7%
Singapore - introduced in 1994 - 7%
Taiwan - introduced in 1985 - 5%
Japan - introduced in 1989 - 5%

Currently there are no GST in Malaysia and Hong Kong, but Malaysia is expected to reduce direct taxes in preparation for the introduction of GST soon. Laos will introduce VAT in 2008.