How will Singapore face the wave of global tax competition?

SINGAPORE is facing intensifying tax competition. Globalisation amidst slow global economic growth has given rise to greater competition for investment dollars among countries and those seeking to incentivise local businesses to create jobs in their own countries.

Major global economies such as the United States, United Kingdom and Japan have looked to corporate tax reforms to boost competitiveness. The United States is considering reforms that may lower their 35 per cent corporate tax rate to as low as 15 per cent while the United Kingdom has announced plans to move their corporate tax rate to 17 per cent from 2020. Last year, Japan has also brought forward its planned corporate tax rate cut to below 30 per cent, a year ahead of schedule.

This puts pressure on trade-dependent economies where similar moves were already being introduced. Luxembourg will lower their corporate tax rate to 18 per cent from 2018, while certain cantons in Switzerland are looking to reduce their overall corporate tax rates to between 12 and 14 per cent. Hungary has committed to a corporate tax rate of 9 per cent from 2017 (the lowest corporate tax rate in the European Union).