ROME - Singapore will be in for tougher competition when new rules on a minimum global corporate tax are implemented, said Prime Minister Lee Hsien Loong on Sunday (Oct 31).
Specifically, the decision will impact how the country attracts investments. This is because tax incentives - along with grants and other schemes - are a major tool in the Economic Development Board's arsenal.
"We will have to see how those will have to be modified," PM Lee said in an interview with Singapore media at the end of this year's Group of 20 (G-20) Leaders' Summit.
"We will also have to see how we can continue to attract investments to come to Singapore in order to create jobs, and in order to keep ourselves competitive."
During the summit, leaders of the world's largest economies backed a proposal to establish a global minimum effective tax rate of 15 per cent by 2023.
The move is aimed at getting large multinational firms to pay their fair share of taxes, rather than routing profits through low-tax jurisdictions, with the goal of creating a "more stable and fairer international tax system".
PM Lee described it as an effort by countries to come together to be able to have a united front in improving the bargaining position against such companies, which have very considerable pulling power.
Asked for his thoughts on the scheme, PM Lee said he believes the move will not cause the dynamic to fundamentally change.
Countries will "find other ways to make themselves attractive" to get their investments and the projects they want, he said.
The Prime Minister also noted that attracting new investments to Singapore is not just about economic competitiveness. Instead, there are strategic and security considerations at play.
He gave the example of how the G-20 leaders discussed supply chain resilience - in other words, ensuring that a country is not held hostage when its main supplier turns unfriendly or if its supply lines are impacted.
"That means you are no longer just talking about jobs and economic value, but about security and safety," PM Lee said. "How much is that worth? What do we do when other countries act like that?
"I foresee there will be tougher competition for us. But we will take it in our stride."
PM Lee was also asked for his take on the United Nations climate change talks, or COP 26, which opened on Sunday in Glasgow and were high up on the G-20's agenda this year.
At the close of the G-20 summit, world leaders had agreed to pursue efforts to limit global warming to 1.5 deg C above pre-industrial levels.
Countries in the grouping of the world's major economies - which Singapore is not a member of but has been invited to as a guest - account for about 60 per cent of the world's population and an estimated 80 per cent of global greenhouse gas emissions.
PM Lee noted that existing tensions - for instance, those that exist between major powers such as the United States and China - get reflected in discussions and make them more challenging.
"In principle, when you are talking about something like climate change, where there is shared interest in an area of cooperation, you should be in a problem-solving mode, even though there is competition, other issues or rivalry," he said.
"But inevitably, the competition, rivalry and mood seep into the cooperative part and make things more difficult to settle. But nevertheless, they were able to set a communique and tee up for COP26," he added.
"I hope that there will be progress made, but I expect that it will be difficult to do."
Apart from great power rivalry, there are also "quite deep differences" in views between developed and developing countries on the subject, PM Lee noted.
"Some of it has evolved as China has shifted its position, but other countries have not shifted their position so much," he said.
"And they feel that this problem was created by the developed countries and you have to make good for me if you want me to do my part now," he said. "That is going to be a very difficult conversation for some time."