Tax payment digitalisation sees 20 per cent reduction in cheque volumes

Move towards tax payment digitalisation sees DBS and IRAS working towards Singapore’s target to be cheque-free by 2025

By: Phoenix Lee/

In line with Singapore’s Smart Nation agenda, DBS Bank announced in October 2019, that it is collaborating with the Inland Revenue Authority of Singapore (IRAS) towards tax payment digitalisation and collections via PayNow to encourage more businesses to go cheque-free.

IRAS first introduced PayNow as an option for businesses to receive Wage Credit Scheme(WCS) payouts in March, resulting in a 20 per cent reduction in cheque volumes to-date. Before the implementation of PayNow, about half of WCS-eligible businesses, many of which are small and medium-sized enterprises (SMEs), chose to receive their payouts via cheques.

Under the WCS introduced in Budget 2013 and extended in Budget 2015, the Government co-funded 40% of wage increases from 2013-2015 and 20% of wage increases from 2016-2017 given to Singapore Citizen employees who earned a gross monthly wage of up to $4,000. Only employers are eligible for the co-funding. In Budget 2018, it was announced that the WCS would be extended for three more years (2018, 2019 and 202) to support businesses embarking on transformation efforts and encourage sharing of productivity gains with workers. Government co-funding was maintained at 20% in 2018. Subsequently, the co-funding ratio stepped down to 15% in 2019 and 10% in 2020. All other qualifying conditions will be unchanged.

Ms Ang Sor Tjing, Director of IRAS’ Revenue and Payment Management Branch said, “Implementing PayNow for the disbursement of the scheme’s payouts helps encourage businesses, many of which comprise SMEs, to go chequeless and transition towards digital payments. As part of IRAS’ digitalisation drive, we are also working with DBS to expand the use of PayNow to more services for the convenience of businesses and individuals.”

Mr Raof Latiff, Group Head of Digital, Institutional Banking Group, DBS Bank said, “Acceptance of digital transactions among individuals in Singapore has been well established. To bring Singapore’s digital agenda to fruition, it is critical to encourage SMEs to get on board the digital payments train as they represent 99 per cent of businesses locally. Partnering with statutory boards like IRAS is one of the key ways to encourage this shift, with them leading the way by digitalising payments and collections channels across their suite of services.”

For the next phase in tax payment digitalisation, both parties are working together to leverage DBS’ APIs (application programming interface) to digitalise IRAS’ stamp duty services.

Currently, most taxpayers tend to pay for conveyancing stamp duty via cheques and have to wait several days for the cheque to be cleared before a stamp duty certificate is issued. (Conveyancing stamp duty refers to taxes relating to the purchase of a property.) However, with DBS’ Direct Debit Authorisation (DDA) API, taxpayers can set up a GIRO account online, and make payment for their stamp duty and receive a stamp certificate through IRAS’ e-Stamping Portal instantly.

In addition, with a transfer limit of SGD200,000 per transaction, the DBS DDA solution also enables IRAS to digitalise payments for the majority of conveyancing stamp duty transactions. This new DDA e-payment option for conveyancing stamp duty will be launched in November, and more details can be found on the IRAS website closer to the launch date.

“Besides stamp duty payments, with cashless payments gaining momentum in Singapore, taxpayers are encouraged to use cashless or electronic payment modes such as GIRO and online banking to fulfil their other tax obligations,” said Ms Ang.

DBS continues to see traction from SMEs in the adoption of PayNow

DBS currently banks more than one in two SMEs in Singapore and continues to see healthy interest from the segment to digitalise their businesses.

Since PayNow was launched to corporates in August last year, DBS has seen a steady increase in SMEs adopting the digital payment collections solution, with the bank holding close to 40 per cent of the market share by registrations to date. From a transactions perspective, DBS’ corporate clients contribute to more than half of PayNow Corporate receipts in Singapore, with volumes from the bank’s SME customers growing threefold to date.

This was mainly driven by healthy take-up of the bank’s PayNow-integrated QR payment solution, DBS MAX, which led to a doubling in digital payment and collection transactions by SMEs since the solution was launched in November 2018.

“Singapore has continued to show steady progress in the adoption of digital payments on the back of the government’s continuous push to become a Smart Nation. However, in order to fulfil Singapore’s ambition to go chequeless by 2025, we need to continue to innovate and explore new ways to help ease businesses, especially SMEs, into the digital future, while providing them the support they need to face the challenges ahead,” said Mr Latiff.

To this end, DBS has invested more than 100 hours this year in customer workshops to educate business owners on the benefits of digital payment solutions such as DBS MAX, and targets to ramp up the adoption of DBS MAX among its SME clients by five times by end 2020.

Mr Paul Ho, chief mortgage officer at iCompareLoan, said, “the move towards tax payment digitalisation is a good one. The property and loans industries are being massively disrupted by technology and Singapore has to keep up or we will lose our relevance in a rapidly changing world.”