SINGAPORE - It is too early to say how the global corporate tax rule changes proposed by the Group of Seven (G-7) will impact Singapore, but the Republic's overall competitiveness has never been based on taxation alone, Finance Minister Lawrence Wong said on Tuesday (June 8).
In a Facebook post, Mr Wong also said that Singapore will change its corporate tax system after a global consensus is reached on the new international rules. Any tax changes would be in close consultation with businesses and tax professionals here, he added.
Before that, Singapore will be participating in the broader debate on the proposed tax changes in international forums, said Mr Wong.
G-7 finance ministers reached a landmark accord last Saturday backing the creation of a global minimum corporate tax rate of at least 15 per cent, an agreement that may go on to form the basis of a worldwide deal.
Major economies are aiming to discourage multinationals from shifting profits - and tax revenues - to low-tax countries regardless of where their sales are made.
Details are still being worked out, and the issue will be discussed among G-7 leaders meeting this weekend as well as by Group of 20 (G-20) finance ministers next month.
"Singapore is not a G-20 member, but we have been invited to attend, and I look forward to sharing our views then, and contributing to the broader debate," said Mr Wong.
He said that while it is clear that international rules for corporate taxation will change, and all jurisdictions will need to adjust their tax systems and rules accordingly, it is too early now to say how it would impact Singapore.
However, three things will not change for Singapore, the minister said.
"First, we will continue to support a multilateral consensus-based solution that is anchored on sound economic principles, promotes tax certainty, and ensures a level playing field across all jurisdictions.".
Second, as and when a global consensus is reached on the above framework, the Ministry of Finance and the Inland Revenue Authority of Singapore will make any necessary changes to Singapore's corporate tax system, in close consultation with businesses and tax professionals, said Mr Wong.
"Third, our overall competitiveness has never been based on taxation alone. It's about ensuring a conducive environment for businesses and entrepreneurs to thrive."
The finance chief stressed that the new rules should not inadvertently weaken the incentives for businesses to invest and innovate. Otherwise, countries will all be worse off, fighting over their share of a shrinking revenue pie, he said.
He also noted that trust, reliability and integrity are ultimately what makes Singapore an attractive place for substantial economic activities.
"We will continue to strengthen these attributes, to create good jobs and opportunities for all Singaporeans."
As for the revenue impact on Singapore of any global tax rule changes, it will depend on the parameters being set, the rules to be made, and crucially, how different governments and businesses respond to them, Mr Wong said.
The minister said the G-7 proposals will be further discussed at other international platforms. One of them is the Organisation for Economic Cooperation and Development-led Inclusive Framework on Base Erosion and Profit Shifting in which Singapore is already involved.
Financial experts believe that beyond an attractive tax regime, Singapore's strength derives from its stable political environment, trustworthy legal framework and connectivity to regional and global economies.
Mr Ajay Kumar Sanganeria, partner and head of tax at accounting firm KPMG, said; "Singapore's strategic geographic location, regional and global connectivity and a business environment based on a strong rule of law are critical ingredients to attracting global businesses."
However, he said the financial impact of these proposed rules is not easy to calculate, even for individual multinationals, given complex taxpayer facts and circumstances.
Ms Liew Li Mei, international tax leader at Deloitte, said Singapore offers a proven track record of being stable and predictable and if it continues to do that, multinational companies will continue to operate from Singapore even after their tax incentives expire.
"It is therefore imperative that Singapore continues to strengthen its attractiveness for inbound investments – global connectivity, political stability, pro-business environment, diverse talent pool and importantly, the innovative and resilient spirit of Singapore – to ensure that we remain one of the top choice investment destinations."