Lawrence wong, Minister for Education of Singapore

Last week, the Group of Seven (G7) advanced economies announced that they have come to a preliminary agreement to set a global minimum corporate tax rate of 15 percent.The proposal will next go to the OCED (Organisation for Economic Co-operation and Development) and G20 countries for further discussion.For some time now, the major economies have been aiming to prevent multinational companies from shifting profits to low-tax territories regardless of where their sales are made.Recently, income from intangible sources like intellectual property, software, drug patents have shifted to these jurisdictions, allowing companies to avoid paying higher taxes in their traditional home countries.Although, it is some time yet before a global corporate tax pact is reached, experts generally agree that low-tax jurisdictions like Singapore, may see their attractiveness to global MNCs (multi-national corporations) impacted should such a global rate be implemented.Although Singapore's headline corporate tax rate is 17 per cent, the effective tax rate is lower. After taking into consideration various incentives and concessionary rates that selected industries enjoy, the rate is significantly lower than 15 per cent for some sectors.As details have yet to be worked out, it remains to be seen how such indirect tax benefits will be affected by the new proposed global tax rule.Over the years, Singapore has been attracting investments from targeted businesses from the technology, finance, biomed, and maritime sectors which are among of some that enjoy preferential tax rates if certain qualifying conditions are met.Banks and technology companies like Apple, Google, Facebook, Bytedance and Microsoft have set-up regional headquarters in the city state.It is estimated that more than 7,000 Indian companies have established a presence in Singapore since the year 2000. Notable Indian companies such as Mahindra, Tata and Reliance have long had a significant presence in the country. Adani Group just announced the setting up a of regional headquarters in Singapore.Singapore's attractiveness to foreign companies is not just down to financial incentives like a favourable tax rates and benefits, it has other strengths as well.Singapore is number two in the World Bank ease of doing business index and was number one for ten years prior to 2017 before relinquishing its position to New Zealand.Indeed, it is easy to start a company in Singapore. Besides sound infrastructure and an efficient bureaucracy, it has a strong legal system and robust intellectual property protection. Furthermore, there are no restrictions on foreign ownership for most companies, and there are no currency controls.Singapore has an extensive network of tax treaties with other countries (including a tax treaty with India) that helps Singapore companies doing international business avoid double taxation of their income.In addition, Singapore has excellent connectivity to the rest of Asia and has a thriving business and tech eco-system. Singapore is the gateway for Indian companies aiming to expand their trade and investments into the Association of Southeast Asian Nations (ASEAN), as it is an international financial centre and a shipping and aviation hub for the Asia-Pacific.It has in recent years attracted many Indian tech entrepreneurs to its shores due to pro-growth and innovation friendly policies. For start-ups, there are many grants, tax incentives and in-kind assistance schemes.Within certain preferred sectors, the government can also subsidise the labour costs of a new business. These benefits are available to local as well as foreign-owned businesses.Using its status as a financial hub, Singapore has nurtured and grown the venture funding community to become one of the top venues in Asia for start-up funding.If the major economies of the world do reach an agreement to set a minimum global corporate tax rate, Singapore will have to make some adjustments to its corporate tax structure.Singapore's Finance Minister, Lawrence Wong said in a Facebook post that "it is too early to say" what the impact would be. He further added that the Singapore government would make any necessary changes to the corporate tax system "when a global consensus is reached.""The new rules should not inadvertently weaken the incentives for businesses to invest and innovate," Wong continued. "Otherwise, countries will all be worse off, fighting over our share of a shrinking revenue pie.""Regardless of what this global minimum rate eventually is, Singapore's corporate tax revenue base will be affected," said Simon Poh, professor of accounting at the National University of Singapore Business School. "Should this significantly reduced minimum rate of 15 per cent be passed, the impact on Singapore will be somewhat reduced, but it will still be substantial."The professor however added, "There may yet be a silver lining to the global minimum tax rate proposal." This is because "Singapore could well benefit from the exodus of companies from tax havens such as the British Virgin Islands, Cayman Islands, Bermuda and Vanuatu, that do not levy taxes at all, assuming that the other comparative advantages they may offer as an attractive location are assessed to be fewer than Singapore.""Many global companies have, over the years, chosen Singapore as their investment location due to many optimal non-tax policies including its strategic geographical location, global connectivity, political stability, pro-business environment and diverse talent pool - to name a few. Moreover, Singapore may continue to explore other strategies to attract more multinationals to its shores."( With inputs from ANI )Disclaimer: This post has been auto-published from an agency feed without any modifications to the text and has not been reviewed by an editor

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