I love how colourful Hokkien slang can be, especially in Singapore. And I’m not referring to the many swear words I learnt in NS. Take “pao toh”, for example which literally translates to “bun knife”. Our earlier article on free parking in Singapore had many readers accusing us of “pao toh”, or having betrayed their secrets. We’ve shared other secrets too, like how you can save GST on online purchases by making sure your order is S$400 or less. That might soon change though.
Wah lau! Who go and “pao toh” about avoiding GST for online purchases this time?
Earlier this month, there was an international call for governments around the world to start collecting tax for online transactions. Considering just how much money is spent by Singaporeans online – in 2013 it was estimated to be almost $2.5 billion – it would mean that the government lost out on tax revenue of about $175 million dollars in 2013 alone. That’s no small sum.
But for you online shoppers who are fretting about a possible rise in costs for online transactions, especially the hardcore ones who visit sites like Amazon, eBay and Taobao more than social media, don’t lose sleep just yet. It seems like any implementation of tax collection will incur substantial administrative costs, and will probably take at least two years to put the necessary changes in place.
Oh, phew! So that means there shouldn’t be any extra costs when I shop online, right?
Unfortunately, it’s not that straightforward. Here are 3 ways your online purchase might incur additional costs.
1. Goods and Services Tax
As we mentioned earlier, all purchases shipped to Singapore from overseas will incur tax unless the value of the item is less than S$400. So to get around this, many savvy online shoppers separate their purchases into different shipments so that they avoid paying GST. However, do note that when Singapore Customs talks about the “value of the item”, they’re not referring to the cost of the item alone. They also refer to the cost of shipping as well as any insurance charges.
Here are two situations to illustrate what I mean:
Say you buy an item online for the equivalent of S$360. However, to ship it to Singapore, it costs S$50. The total value of the item is considered to be S$410, and the 7% GST of $28.70 will be charged.
However, you’re smart and buy the same item via Amazon, which gives free shipping for purchases above 125 USD. You then don’t get charged GST because the total value of the item is still S$360.
2. Foreign Exchange Fee
While the Malaysian Ringgit is low and the Australian Dollar is almost equivalent to the Singapore Dollar, you may think that it’s a great time to buy from these countries. However, it’s important to remember whose exchange rate you’re using when you buy online.
Say you’re using an online service like Paypal to make your transaction. Paypal has many advantages for online shoppers. Because you don’t need to give your credit card details directly to the merchant, your transaction is relatively secure. Furthermore, in the case of fraud or a dispute, Paypal can give you some peace of mind by helping you with the resolution process.
However, Paypal is notorious for charging high international currency exchange rates, approximately 4%. That’s almost twice what MasterCard and Visa charge.
3. Credit Card Transaction Fees
Speaking of MasterCard and Visa, you may be surprised to know that they do charge you a fee for online transactions in another currency. However, depending on which bank your credit card is from the credit card fees work a little differently.
Ultimately, since you’re going to get charged extra for online purchases anyway, it really does make sense to get the best credit card for online transactions. A good credit card for online shopping gives you more rebates and rewards points for any transaction you make online or in a foreign currency.
What other charges for online shopping do you know of? Share them with us.