Singapore stands to lose if proposed changes to global tax rules come to pass, Deputy Prime Minister Heng Swee Keat said yesterday.

"Hub economies with small markets like Singapore stand to lose corporate income tax revenue if new rules are adopted," he said.

"This is because the new rules allocate taxes to where the customers are, rather than where the underlying economic activity is conducted."

Mr Heng added: "Businesses are highly mobile in today's global economy. Companies, especially multinationals, have the flexibility to relocate their businesses out of Singapore to elsewhere. Singaporeans may lose their jobs."

The base erosion and profit shifting (Beps) proposals, mooted by the Organisation for Economic Cooperation and Development, could mean that a Singapore-based company selling its services in the United States would pay most of its taxes there.

The changes are aimed at stopping large firms from shifting profits to low-tax places.

Yesterday, Workers' Party chief Pritam Singh (Aljunied GRC) asked for an update on Beps discussions, which Singapore has been taking part in.

He also asked about the potential impact of Beps developments on Singapore's tax policies.

Mr Heng replied that Finance Ministry officials have been "very involved" in international discussions on Beps.

"Some of these discussions are confidential in nature. Some of them have been made public. But I assure Mr Singh that hub economies would have to bear some negative impact from this exercise, for the reasons I mentioned," he said.

"Where do you tax the activity - where the consumers are? Or where the underlying economic activities are? With that change in principle alone, you can work out what the effects will be for us as a hub economy."

Linette Lai