SINGAPORE said on Thursday it will commit to the sweeping international tax reform led by the Organisation for Economic Co-operation and Development (OECD) to weed out tax avoidance by global corporations.
The reform - known as base erosion and profit shifting (BEPS) - has been in the works for more than two years, and in February, an inclusive framework was adopted such that jurisdictions outside the OECD and the G-20 can implement BEPS.
In a statement, Deputy Prime Minister, Coordinating Minister for Economic and Social Policies and Minister for Finance Tharman Shanmugaratnam said: "Singapore is committed to working with the international community to counter artificial shifting of profits, and continues to welcome substantive economic activities.
"We will be actively involved with the OECD and G-20 in ensuring the consistent implementation of the BEPS standards across all jurisdictions, so as to ensure a level playing field."
This means large corporations would be expected to file a report that breaks down - for each tax jurisdiction where they do business - the amount of revenue, profit and income tax paid, the staff count, as well as describe the business activities each entity engages in.
Singapore will implement this for large companies that have ultimate parent entities in Singapore, and that have a group turnover of more than 750 million euros (S$1.1 billion), in keeping with guidelines. This will apply for the financial years beginning on, or after, Jan 1, 2017.
Singapore will commit to the BEPS package, and in particular, to the four minimum standards: countering harmful tax practices, preventing treaty abuse, transfer pricing documentation and enhancing dispute resolution.
The standards, among other things, are meant to ensure countries' tax regimes do not encourage an artificial shifting of profits, as represented by the lack of substantial economic value created from tax incentives.
In Singapore's case, economic value is demonstrated through job creation, and having multinational companies adhere to a minimum turnover, and local business spending.
The global tax-revenue loss, conservatively estimated at between US$100 billion and US$240 billion annually, comes in essence as multinational enterprises artificially depress their profits in countries where taxes are high, and correspondingly lift their profits in low-tax jurisdictions.
The recommendations put strong pressure on large global corporations to stop abusing tax loopholes created by different regimes around the world, experts have said.