THE value-added tax (VAT) system in Singapore is ranked the fourth most friendly in the world, a survey has found.
Based on the preliminary results of the inaugural Indirect Tax/GST international survey, KPMG said that a net balance of 4 per cent of respondents said it was easy to do business in Singapore from a VAT perspective, after the United Kingdom (10 per cent), Netherlands (6 per cent), Finland (5 per cent) and Switzerland (5 per cent).
Luxembourg shared the same place with Singapore, with a net score of 4 per cent.
The study, which will be released in the third quarter, polled some senior finance professionals in over 500 large corporations in 22 countries, and ranks several markets in order of VAT friendliness.
The study also found that 50 per cent of global finance directors rated errors in GST/VAT compliance as the top global tax risk for their organisation, significantly ahead of corporate tax risks (38 per cent).
Plus, 82 per cent of global businesses estimated that their total annual VAT was between US$200 million and US$1 billion.
Another key finding is that complex GST/VAT legislation is the No 1 issue for two-thirds of the respondents in the next five years.
This is followed by compliance obligations (55 per cent) and threat of penalties (45 per cent).
Also, investment in training and technology are considered key priorities for effective VAT management. For example, 66 per cent of global businesses believed that their organisations need to invest in training to raise employee awareness of VAT, while 42 per cent believed that investment should be made in improved VAT systems and technology.
Said Lam Kok Shang, head of indirect tax at KPMG: 'As the cost of getting GST wrong is so material, it makes sense that errors in GST compliance have now been identified as the biggest tax risk for these businesses. This is quite a shift in attitudes away from the traditional focus on corporate and income taxes.'
KPMG added that its research has shown that businesses are now more aware of the scale of their global GST risks and obligations, even though 'there is still a gap between awareness and actually investing in effectively managing the issues on a global basis'.
The auditing firm said that if businesses want to adequately deal with the challenges which GST/VAT is expected to present over the next five years, they will need to seriously engage and invest in areas such as employee GST awareness training, GST systems and technology, additional internal resources and relationship building with tax authorities and regulators.
'There are also significant opportunities which more effective global management of GST can produce for businesses,' said Mr Lam, but awareness of those opportunities appears to be fairly low for now.
This article was first published in The Business Times on May 21, 2008
