https://www.channelnewsasia.com/new...mum-rates-impact-singapore-tax-haven-14606908
POTENTIAL CONCERNS BY SINGAPORE
Back home in Singapore, the proposed US corporate tax hike will affect Singapore companies operating in US who have to cope with higher tax bills.
Although the proposed US minimum tax of 21 per cent is likely to encounter strong opposition from other countries, these talks will ignite a new momentum towards agreement on the consensus-based global minimum tax proposed by OECD under Pillar Two of BEPS 2.0.
Exactly what this minimum rate is eventually will affect Singapore’s corporate tax revenue base, and more so the higher this minimum rate is.
Other investment hub locations such as Hong Kong, Ireland and Switzerland will be similarly impacted.
In fact, a global minimum rate of 21 per cent proposed by the US will be disastrous for Singapore given its current corporate tax rate of 17 per cent.
US-based multinational corporations, and for that matter, all multinational corporations currently based in Singapore may no longer find Singapore as attractive as before.
At its worst, it may lead to some global companies relocating to their home country.
Besides depleting host countries’ corporate tax revenue collection, such a move could see retrenchments and a hollowing out of their key industries.
If a lower global minimum tax rate of say 10 per cent is accepted, the damage to Singapore will be subdued but will not be zero given that there are certain privileged sectors in Singapore that enjoy either full tax exemption or a lower tax rates than 10 per cent, such as the financial and maritime industries.
SINGAPORE’S ATTRACTIVENESS FOR INVESTMENTS MUST GO BEYOND TAX FACTORS
The Singapore Government had indicated it stands ready to act once the outcome of the discussions under BEPS 2.0 are clear.
Deputy Prime Minister Heng Swee Keat did not mince his words when he warned at Budget 2021 that should there be major changes in international rules, Singapore will have to make adjustments to our corporate tax system, albeit in consultation with the industry.
Singapore will have to continue its relentless efforts to attract inbound investments by focusing on non-tax factors.
The good news is, we are not starting from scratch. In deciding to establish a long-term presence in Singapore, global companies have alluded to many factors including Singapore’s strategic geographical location, global connectivity, political stability, pro-business environment and diverse talent pool.
In view of these shifting sands on the global tax regime, the Singapore Government must continue to sell Singapore as an attractive investment hub holistically, beyond the appeal of our tax regime.
Simon Poh is Associate Professor (Practice) of the Department of Accounting at NUS Business School. The opinions expressed are those of the writer and do not represent the views and opinions of NUS.
POTENTIAL CONCERNS BY SINGAPORE
Back home in Singapore, the proposed US corporate tax hike will affect Singapore companies operating in US who have to cope with higher tax bills.
Although the proposed US minimum tax of 21 per cent is likely to encounter strong opposition from other countries, these talks will ignite a new momentum towards agreement on the consensus-based global minimum tax proposed by OECD under Pillar Two of BEPS 2.0.
Exactly what this minimum rate is eventually will affect Singapore’s corporate tax revenue base, and more so the higher this minimum rate is.
Other investment hub locations such as Hong Kong, Ireland and Switzerland will be similarly impacted.
In fact, a global minimum rate of 21 per cent proposed by the US will be disastrous for Singapore given its current corporate tax rate of 17 per cent.
US-based multinational corporations, and for that matter, all multinational corporations currently based in Singapore may no longer find Singapore as attractive as before.
At its worst, it may lead to some global companies relocating to their home country.
Besides depleting host countries’ corporate tax revenue collection, such a move could see retrenchments and a hollowing out of their key industries.
If a lower global minimum tax rate of say 10 per cent is accepted, the damage to Singapore will be subdued but will not be zero given that there are certain privileged sectors in Singapore that enjoy either full tax exemption or a lower tax rates than 10 per cent, such as the financial and maritime industries.
SINGAPORE’S ATTRACTIVENESS FOR INVESTMENTS MUST GO BEYOND TAX FACTORS
The Singapore Government had indicated it stands ready to act once the outcome of the discussions under BEPS 2.0 are clear.
Deputy Prime Minister Heng Swee Keat did not mince his words when he warned at Budget 2021 that should there be major changes in international rules, Singapore will have to make adjustments to our corporate tax system, albeit in consultation with the industry.
Singapore will have to continue its relentless efforts to attract inbound investments by focusing on non-tax factors.
The good news is, we are not starting from scratch. In deciding to establish a long-term presence in Singapore, global companies have alluded to many factors including Singapore’s strategic geographical location, global connectivity, political stability, pro-business environment and diverse talent pool.
In view of these shifting sands on the global tax regime, the Singapore Government must continue to sell Singapore as an attractive investment hub holistically, beyond the appeal of our tax regime.
Simon Poh is Associate Professor (Practice) of the Department of Accounting at NUS Business School. The opinions expressed are those of the writer and do not represent the views and opinions of NUS.
