IRAS wants bloggers to declare sponsored items: 2 reasons why that may be impractical

This article was originally on at: IRAS Wants Bloggers To Declare Sponsored Items: 2 Reasons Why That May Be Impractical

It is tax season in Singapore right now. This is the time of the year when eligible income earners scramble to file their taxes or risk paying a penalty should one under-declare or forget to declare, whichever the case may be.

If you've been keeping up with local news lately, our taxmen has caused much distress for our Singaporean social media darlings who make tons of money and receive more than enough products to last a lifetime doing the fun and ostensibly glamorous things that they do, by sending them a memo regarding declaration of sponsored items received.

Without favouring any side, here are two reasons why this requirement may be impractical.

1. There are just too many loopholes

It doesn't take a prodigy to realise that there are simply too many loopholes out there to render IRAS' efforts in tracking down tax returns 100 per cent foolproof.

According to IRAS' FAQ for social media influencers, they've made clear that the income somebody "received from social media marketing activities such as blogging, YouTubing, etc. will be assessed as self-employed income once it is ascertained that you are carrying on a trade or business".

Well, does this mean that IRAS will be working hard to keep tabs on who is active on social media making a living out of it and who's not?

Seriously, there are so many small-time bloggers and Instagrammers across the globe and in Singapore - how is it even possible to track down every single one of these bloggers or "social media influencers" regardless of their popularity and/or outreach?

Good luck to whoever's been tasked to trawl the internet and various social media platforms where such marketing activities are carried out!

Besides, many social media influencers attend events, invites, overseas trips and receive all sorts of perks and products provided to them by brands' own initiatives, how are they supposed to remember which ones they've been to, how much a meal at a fancy gastropub costs, how much a limited edition jacket or a swanky hotel room costs, etc?

5 tax deductions you should know about

  • There are a number of tax deductions Singaporeans may not know about for the Year of Assessment 2016, which will go some way in reducing your taxable income.
  • There are a handful of typical tax deductions that most Singaporeans would probably know about.
  • Parent Relief is to subsidise maintenance of your parents, grandparents and even your in-laws.
  • Spouse Relief, for those with spouses who are handicapped or whose annual income does not exceed $4,000.
  • Child Relief, to help support your children under 16 years old or who are full-time students.
  • If you take public transport to meet clients and your employer doesn't fully reimburse you for your travel expenses, you can actually claim your transport costs as employment expenses.
  • For example, if you take a taxi to visit clients and have a meal with them, and it costs $150 but your employer only reimburses $100, you can actually deduct $50 off your annual income as employment expenses.
  • The question to ask is, is it worth the hassle to claim these expenses? IRAS expects you to keep complete and proper records of all expenses incurred for 5 years.
  • Rent payments earned from your property is subject to income tax, but certain expenses like mortgage interest, property tax and fire insurance can be claimed to help reduce the taxable income.
  • Donations, in cash and kind, may make you eligible for tax deductions, though it'll need to be to an approved Institution of Public Character.
  • The Parenthood Tax Rebate is given to encourage Singaporeans to have more children.The more children you have, the higher the tax rebate.
  • Note that this is a one-time tax rebate per child and should be claimed in the child's year of birth or year of adoption.
  • Reducing your taxable income is especially important if you're on the border of a tax bracket, as it may mean the difference between paying more and less tax.

2. Inefficiency is not cool

As though keeping up with making money and surviving in Singapore isn't tough enough already, this clause that's recently in the spotlight is set to create a lot more inefficiencies. And inefficiencies are bad because there are costs and opportunity costs involved.

Not only does the taxman and his squad need to spend sizeable amounts of time and energy tracking down bloggers and ensuring that whatever is being declared is accurate, busy social media influencers have to set aside time to slowly scour through the back of their heads (or emails, messages, calls, skype conversations and what have you) recalling how much each taxable sponsored item costs.

Will this be a case of a tax law that costs more to enforce than what it can bring in in terms of tax revenue?

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