S'pore inks pact on corporate tax avoidance

Singapore has signed an international convention to implement measures to clamp down on corporate tax avoidance.

Ms Sim Ann, the Senior Minister of State for Trade and Industry, signed the Multilateral Convention to Implement Tax Treaty Related Measures to Prevent Base Erosion and Profit Shifting at a ceremony in Paris yesterday.

This convention comes at the conclusion of negotiations involving more than 100 countries on a multilateral instrument that will swiftly implement a series of tax-treaty measures to update international tax rules and lessen the opportunity for tax avoidance by multinational enterprises.

Signatories to the multilateral instrument can efficiently update their double taxation agreements (DTAs) to incorporate the updated measures without the need to renegotiate each DTA.

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These measures include minimum standards on preventing treaty abuse and enhancing dispute resolution.

The Ministry of Finance said in a statement yesterday: "Singapore continues to build on its commitment to the principle behind the Base Erosion and Profit Shifting (Beps) project, which is that profits should be attributable to the jurisdiction where the substantial economic activities giving rise to the profits are conducted."

The multilateral instrument seeks to facilitate the implementation of tax treaty-related measures to counter Beps, a practice in which a company that has substantial economic activity in a high-tax jurisdiction instead books its profits in another jurisdiction with a low tax rate so it can pay less in taxes.

Signatories to the multilateral instrument can efficiently update their double taxation agreements (DTAs) to incorporate the updated measures without the need to renegotiate each DTA.

Singapore had participated actively in the ad-hoc group formed under the aegis of the Organisation for Economic Co-operation and Development and Group of 20 to develop the multilateral instrument.

Singapore intends for the multilateral instrument to apply to DTAs with treaty partners that are members of the ad-hoc group, which would put its treaties in line with international standards and increase access to benefits, such as certainty and efficient dispute resolution mechanisms. The agreed changes to each DTA will enter into force after the multilateral instrument has been ratified by Singapore and the treaty partner.

Yasmine Yahya

A version of this article appeared in the print edition of The Straits Times on June 08, 2017, with the headline 'S'pore inks pact on corporate tax avoidance'. Print Edition | Subscribe