Tax incentives for foreign investors: How effective? 

ONE major way by which the Singapore Economic Development Board (EDB) seeks to attract foreign investors is the Pioneer Certificate Incentive. This exempts businesses that introduce substantially more advanced technology, skillsets, or know-how from corporate tax or taxes them at a concessionary rate of 5 or 10 per cent for five years. The Pioneer rate is a large discount relative to the normal corporate tax rate of 17 per cent.

After the pioneer period, a business may get the Development and Expansion Incentive for additional investments. This scheme provides tax concessions similar to those of the Pioneer Incentive.

Any tax concession imposes a loss of revenue. As Singaporeans know very well, losses of one source of revenue must be made up in other ways. This year, the Goods and Services Tax (GST) rose to 8 per cent, and is scheduled to rise again next year to 9 per cent.