SINGAPORE - With the move to implement a global minimum tax, Singapore as a small economy must work harder than ever to attract and retain investments.
In addition to adjusting its corporate tax system, it will continue to partner both multinational and local companies here to grow their businesses and create new links to access global markets, said Second Minister for Finance and National Development Indranee Rajah on Friday (Sept 3).
Speaking at the virtual Tax Academy Signature Conference on the theme of "Taxes and Investments in the Post-Pandemic World", Ms Indranee said international consensus around the discussion to revise international tax rules and increase the taxes paid by multinational enterprises, also known as Base Erosion and Profit Shifting or BEPS 2.0, is rapidly solidifying.
She added that the momentum to achieve a global consensus by the end of the year seems strong.
The Group of 20 (G-20) recently endorsed a statement on a two-pillar solution to address tax challenges arising from the digitalisation of the economy.
The proposed solution includes introducing a global minimum effective corporate tax rate of at least 15 per cent.
Ms Indranee, who is also Minister in the Prime Minister’s Office, said Singapore has been fully engaged in the BEPS discussions, and has also swiftly and proactively updated its corporate tax system in line with international tax developments.
"If and when a consensus is fully reached, Singapore will adjust our corporate tax system as needed, in consultation with the industry. "
Any adjustments to Singapore's tax system, she added, will be guided by three principles: Singapore will abide by internationally agreed standards, it will safeguard its taxing rights, and it will seek to minimise the compliance burden for businesses.
As the scope for tax competition narrows, the post-BEPS 2.0 environment would increasingly be a competition between overarching economic ecosystems, said Ms Indranee. She added that ultimately, the best response is to continue strengthening the Republic's overall competitiveness.
Although Singapore saw a fall in foreign direct investment last year, it managed to attract $17.2 billion of commitments in fixed asset investments, a 12-year high. The pent-up demand for investments post-Covid-19 is an example of opportunity being seized, she said.
"Singapore's overall competitiveness is not, and never has been, based on tax factors alone.
"We have built and will continue to build strong non-tax advantages, including our strategic geographical location and connectivity, excellent physical and digital infrastructure, rule of law, robust intellectual property protection regime, a skilled workforce, and our open and friendly business environment."
She added that post-BEPS 2.0, Singapore as a small economy will have to work harder than ever to attract and retain investment.
"But we are no strangers to hard work and meeting challenges," noted Ms Indranee.
This year's Budget announced a $24 billion package over the next three years to help businesses and workers adapt to a post-Covid-19 world.
All 23 of Singapore's Industry Transformation Maps (ITMs) are also being refreshed, to spur restructuring and transformation and develop new growth ideas.
The ITMs were launched in 2016 as road maps to drive transformation for 23 industries across manufacturing, built environment, trade and connectivity, essential domestic services, modern services and lifestyle.
Besides adjusting its corporate tax system, Singapore will continue to partner both multinational enterprises and local companies here - to transform and grow their businesses regionally and globally, as well as to create new links to access global markets, Ms Indranee said.
"I am confident that together - workers, industry, academia, and the Government - Singapore will be able to strengthen existing advantages, build new ones and seek new opportunities, to ensure Singapore's continued economic success and a good future for our people."