Thursday, November 09, 2006

To pay IRAS/GST for service?

The front page of Business Times today presented a proposal for companies to pay for official GST help.

What is the pricing?
For advance GST guidance, $525 for each query of initial 4 hours plus $131.25 per subsequent hour. Please double the charges for express service.

Why charge?
My initial response is why. Are companies or their representative in the form of tax agent or untrained accounting staff abusing GST administration with excessive superfluous queries? Does this move contribute to higher business costs? How does GST administration justify the proposed pricing? Are there similar models operated by other government agencies or statutory boards or corporatised entities? What is/are the objectives and roles of IRAS in relation to the the "bigger picture"? How will the new pricing model contribute to that bigger picture?

Why don't charge?
I humbly drawed on my experience in the property development. The architect submits plans to the various government entities for guidance and approvals for the intended development. Relevant fees are payable. You have to pay for the use of Court facilities too. Should the same be acceptable for GST's official guidance?

There maybe some justifications.
  • Firstly, there is a need for a pricing mechanism to allocate resources efficiently as resources within IRAS/GST administration is finite too (just like everywhere else).
  • Secondly, the businesses of today are relatively complex as they traverse across national boundaries. Such business would require some level of certainty in the form of official guidance to avoid resource-sapping effort trying to recover from skirmishes with law. They want to focus on doing business. Thus the “small” sum payable for that peace of mind is definitely worthwhile.

Does it increase the costs of doing business in Singapore?
Some of these companies may be paying their tax agents for advice already. As the fees are applicable to advance (and not normal) queries, I presume such queries would only be relevant to bigger and complex companies. The fees thus would be relatively nominal.

Is there a possibility that IRAS/GST recycle official guidances? No two property development applications will ever be the same. So will 2 applications for GST guidances be similar?

Other implications
The fees, when applied, may implicitly provide a check and balance on the performance of the tax agents.

The application of the fees may also change the relationship between IRAS/GST and the enquirer. When a fee is paid for an official guidance, does it imply is a higher level of responsibility? How was it done before? Were there any official guidances given out in the past? Or does IRAS/GST wait until the actual occurrence of the transaction and relevant documents submitted for review before an official judgement is given?

2 comments:

Anonymous said...

It also applies to all other items. Eg cost of air-tickets, trips to Las Vegas, (as in the case of NKF) whether these are tax deductible expenses depends on whether they are business costs or personal expenses. For small amounts, they are negliable, but for material amounts, they are questionable.

Edgar Wong said...

The position of the Editorial team of Business Times said on Nov 8, 2006 is as follows:-

a) As the onus is on the tax payer to get it right, it is duty of the GST not to make it so complicated.

b) As there should be some allocation from the vast collection of GST revenue on its administration, does GST still need more revenue?

c) SMEs could be affected more by the charging model when their needs arise.

d) Publish all general rulings. If possible, include private rulings.