Non-tax strengths will prevail

THIS WEEK'S TOPIC: How do you see Singapore's proposed METR affecting the Republic's international competitiveness? The Global Anti-Base Erosion (GloBE) rules under Pillar 2 of Base Erosion and Profit Shifting (BEPS) 2.0 propose a global minimum effective tax rate of 15 per cent for multinational enterprise (MNE) groups with annual global revenues of 750 million euros (S$1.1 billion) or more. In response, Singapore is looking at a Minimum Effective Tax Rate (METR) which tops up the effective tax rate of MNE groups in Singapore to 15 per cent.

Lawrence Loh Director, Centre for Governance and Sustainability NUS Business School The new global minimum effective tax will change the dynamics of international competitiveness towards a non-tax dimension. Investment decisions across borders will take a more qualitative bent anchored on a host of "hygiene" and "motivating" factors. These will holistically encompass both soft skill sets and hard infrastructures of the host location as well as broader considerations such as political stability and policy consistency. Singapore will now have to re-design a whole new package of pull factors to continue to attract global investments. Actually, having purely lower effective taxes to lure international businesses is probably an unsustainable selling point as they can relocate at the slightest lower rates offered elsewhere.

Cheung Pui Yuen Chief executive officer Deloitte Singapore Several countries are looking at different forms of GloBE-compliant domestic minimum tax to avoid ceding revenue to other countries when the 15 per cent global minimum tax takes effect in 2023. This is why Singapore is right to consider introducing an METR such that any top-up tax paid by MNEs on profits arising from their Singapore operations are paid into Singapore's coffers, rather than elsewhere. To retain Singapore's competitiveness, it becomes imperative for MNEs to improve productivity and address rising business costs.

Max Loh Managing partner, Singapore and Brunei EY The proposed METR works to ensure that Singapore aligns with the principles of the BEPS framework while addressing significant tax leakage. While BEPS 2.0 may reduce the scope for tax competition, it does not lessen the global competition for foreign direct investments - which must be the country's imperative focus. Tax is but one key lever in Singapore's overall attractiveness as an investment destination. Its numerous other enduring strengths - such as political nous, robust infrastructure and financial and legal systems, a highly skilled workforce coupled with other non-tax incentives - are the main draw for foreign investors seeking growth in the region. How Singapore can cleverly implement the METR such that it continues to be seen as bringing value to multinational enterprises is key - it's an opportunity to be even more distinctive in the BEPS 2.0 future.

Ong Pang Thye Managing partner KPMG in Singapore Moving forward, the competition across countries as choice destinations for MNEs won't just be about tax. The global minimum tax has levelled the playing field, as every other country will soon start charging at least 15 per cent for their minimum effective tax rate or its equivalent. Hence, Singapore's early announcement of the METR as well as its intention to consult businesses is strategic - as it gives companies some certainty to their tax position while enabling them to provide perspectives on policy development and the compliance aspect of the rules. Ultimately, companies will be seeking a low-risk business environment and the best location to help expand their business. Singapore's consultative approach on issues that impact MNEs' bottom line, together with other attributes such as Singapore's track record, efficiency and reliability, strong rule of law and extended ecosystem, will prove attractive and be a game changer in the long run.

Jeffery Tan Group general counsel and chief sustainability officer Jardine Cycle & Carriage With the global adoption of a minimum effective tax rate, the issue of tax becomes a 'hygiene factor'. The initiative essentially frees countries to compete on other aspects that make for a compelling case for MNE groups to be in Singapore: Whether this is in the area of Singapore's infrastructure development, digital and travel connectivity or something as fundamental as the qualifications, expertise and capabilities of the workforce here, as well as its drive, hunger and motivation. All in all, a global minimum tax is a good thing, as it would encourage the Republic to remain on the leading edge of a highly competitive global landscape.

Victor Mills Chief executive Singapore International Chamber of Commerce Given the GloBE is a global agreement, the competitiveness of tax regimes around the world will all be impacted. That is the price for achieving more progressive taxation and a fairer distribution of tax revenue. The new global minimum effective tax rate will only apply to the largest MNEs with an annual turnover of 750 million euros and above. In Singapore, this means 1,800 businesses. While taxation is always a consideration for investors, it is not the only one. Far more important are easy access to markets, finance and talent; the rule of law, enforceability of contracts, the quality of life and political stability. Singapore has always scored high on these essentials and must continue to do so.

Dileep Nair Independent director Thakral Corporation Limited Singapore competes for international investments but never purely on lower tax rates. Companies should look upon taxes as paying their fair share for doing business in the country. Having a global minimum effective tax rate, in fact, prevents a 'race to the bottom'. Singapore is attractive to companies because of our excellent infrastructure, skilled labour force, political stability and our proximity to growing Asian markets. We will, of course, have to work hard at keeping a business ecosystem that promotes growth and development. Key is arresting rising costs of doing business and issues of labour or talent shortage. Though top in Asia, we currently rank fifth amongst the world's most competitive economies. I'm confident this will give a spur to the government to enhance our competitiveness.

Charles Ferguson General manager, Asia Pacific Globalization Partners Singapore's stable government, skilled labour force with a focused work ethic, top-of-the-line infrastructure, and longstanding pro-business market, will continue to preserve the city-state's position as a preferred hub for MNEs, even as we evolve our tax regime and policies. Global companies building a presence in Singapore do not only gain guaranteed access to excellent hub facilities and exceptional education infrastructure; Singapore's trail-blazing reputation in the region likewise attracts talent and investment. Before a new corporate tax regime is instituted in Singapore, it is my hope that the government will further gather thoughts and ideas from the enterprise community as to how this will be rolled out and how businesses can best be supported.

Yean Cheong Executive director SGTech Tax incentives used to make a difference in Singapore's early years. Many multinational corporations (MNCs) now choose Singapore as a springboard into the high-growth region due to its political stability, transparent and rules-based business environment, and neutrality amid rising geopolitical tension. Singapore's draw is that of a hyper-connected ecosystem that enables businesses to undertake high-value functions, grow and access the region. A vital aspect of this ecosystem is the excellent collaboration among the public and private sectors and non-governmental organisations such as industry associations and civic organisations. If we focus on strengthening the ecosystem and our talent pool, I am confident our little red dot will continue to attract the best firms from around the world.

Joanne Wong VP, International Markets LogRhythm Since independence, tax incentives have been crucial in helping Singapore capture foreign investments, setting a strong case for MNEs to set up business here. As the country accelerates efforts to mature its nascent digital economy, additional tax revenue from the proposed METR will go a long way in availing funds to build the right digital infrastructure needed, and develop a well-equipped local talent pool. These factors will boost Singapore's attractiveness as a global business hub in the long run. To maintain the country's competitiveness in the short term, regulators would need to progressively introduce the tax hike to mitigate the impact on businesses, especially given the current economic landscape. With a cautious approach, the METR has the potential to enable sustainable growth of the economy - making Singapore an even more attractive proposition for investors.

Helen Ng Chief executive officer Lock+Store Apart from our attractive tax regime, international companies are attracted to Singapore because of our proximity to key Asian markets, stable government and world-class talent. However, our attractive tax policies have been the key incentive attracting MNCs to do business here. The proposed METR would definitely hurt our international competitiveness. We should consider ourselves fortunate that the global minimum corporate tax rate is not higher.

Moray Armstrong Managing director CBRE Singapore Given that tax incentives - along with grants and other schemes - have been a major tool in the government's arsenal to attract foreign investments, the proposed METR could momentarily dent Singapore's international competitiveness. Consideration of METR is, however, necessary for Singapore to adjust our corporate tax system to avoid ceding revenue to other countries. Nonetheless, there are many other areas which we can tap to offset the impact. For instance, in the midst of attracting global talent, we also need to upskill our local talent, and build on our world ranking as the most connected country. It is necessary that we continue to innovate, and push on as the leader of digital infrastructure in Asia. We had laid good foundations in being consistently ranked among the global top two for ease of doing business, with strong rule of law and business-friendly policies. While there will no doubt be greater competition, we believe Singapore's resilience and tenacity will shine through.

Frankie Chia Managing partner BDO LLP The imposition of a METR would drive investors to broaden their considerations and build pathways for more sustainable competition. Nonetheless, MNEs will remain attracted to Singapore's stable political climate, infrastructure, trade networks and safe living environment as key non-tax advantages. Investment funds are excluded from the scope of the METR and the funds sector will remain a key area of growth for Singapore as a leading financial hub. Singapore may even benefit from aligning with the BEPS 2.0 initiative as it could improve the Republic's reputation and global standing as an advanced economy.

Lam Yi Young Chief executive officer Singapore Business Federation The GloBE rules affect not just Singapore but other countries as well. While there may be some impact from a proposed METR on the taxes that MNEs will have to pay here, Singapore's competitiveness is not built on tax alone. What makes us competitive and attractive to businesses includes our strong business ecosystem, our connectivity and familiarity with the region, and the certainty of governance and government policies. I am confident that Singapore will remain a competitive and compelling business destination.

Mark Billington Managing director international ICAEW Singapore's recent announcement of a proposed METR is a good step to address the fair taxation of multinationals and the issue of profit shifting in our digital economy. A fair, transparent and balanced mechanism for a METR could deliver major revenue gains for Singapore. The new coordinated system should protect Singapore's economy and international competitiveness by ensuring that it takes a fair cut of tax revenue. This is crucial given its small, domestic market and extent of activities conducted on its turf as a global business hub. Beyond Singapore, the global minimum effective tax regime could have merits for the South-east Asian region such as helping nascent markets in Asia finance more resilient, inclusive and sustainable recoveries.

Maren Schweizer Chief executive officer Schweizer World Group We need new tools to attract investment and stay ahead of competitors as a global minimum tax weighs on Singapore's tax incentives, which have long been the core of our nation's strategy of attracting large-scale investments to drive economic growth and job creation. A proposed Singapore METR will not lead to an exodus of MNEs from the island-state as the Republic's competitiveness goes beyond tax incentives, with a set of non-tax factors such as ease of doing business, central location in Asean, connectivity to Asia-Pacific markets, various free trade agreements, the rule of law and a skilled talent base. It's important to consider packaging grants and non-tax benefits along with tax incentives to continue to attract and anchor a range of high-growth businesses in target markets and sectors and enable established enterprises to accelerate their digital and sustainability transformation.

John Butler MD APAC & MENA Linesight Over the years, global companies have chosen Singapore as their hub location with investments due to many non-tax policies including Singapore's strategic geographical location, global connectivity, political stability, pro-business environment, and diverse talent pool. I believe there is a silver lining for Singapore in introducing a METR: That Singapore could render support to multinationals in the form of grants and other incentives that are not taxable. Such incentives could be effective in getting multinationals to commit to Singapore's economic goals, including the attractiveness of collaborating with small and mid-sized enterprises, or elevating the local talent pool through training tied to employment.

Asheesh Chanda Founder and CEO Kristal.AI The Singapore government takes pride in its efficiency with government expenditure taking up only 8 per cent of gross domestic product. The Covid-19 pandemic, however, forced us to dip into the reserves to fund recovery efforts. So it's only fair to expect MNCs to give back to the society that nurtured their success. Low tax has made international financial centres such as Hong Kong and Dubai. Singapore will continue to lead as a global hub. International businesses will benefit from our world-class talent pool, global connectivity, pro-business ecosystem - and above all, forward-looking policies especially for fintechs and wealth managers. Singapore will continue to thrive as the world's gateway to Asia.

Lim Soon Hock Managing director PLAN-B ICAG Singapore is not the only country subscribing to the GloBE rules. All things being equal, Singapore must continue to offer other comparative advantages such as political stability, being a proven international hub for trade and services, a well-educated and skilled workforce, as well as management with a global mindset, and a pro-business government, to prevent the nation's international competitiveness being diminished. This way, the country will continue to attract foreign investments. Tax is one of several key considerations for global companies to set up shop in Singapore. There is the larger consideration of value-add, which all the other comparative advantages collectively will bring, and likely to compensate for any increase in taxes which these companies will have to pay.

Chia Ngiang Hong President Real Estate Developers' Association of Singapore (REDAS) The impact of the proposed METR on Singapore's international competitiveness is likely to be manageable and unlikely to lead to an exodus of MNEs. The initiative should help shift competition to be based more on sound business fundamentals rather than on low tax rates. Though a low/concessionary tax rate helps but Singapore has many other strong attributes such as stable political environment, strategic geographical location, excellent infrastructure, highly educated and skilled manpower, pro-business policies and sound financial and legal systems to enhance its competitiveness. Moreover, Singapore is strengthening many of these distinctive advantages including bolstering our social compact, helping businesses and workers to upgrade and transform, and supporting new businesses in the tech, digital and green sectors. Government can also explore other non-tax strategies to support MNEs doing businesses in Singapore.

Eryk Lee Chief executive officer AAM Advisory Singapore's international competitiveness stems from more than just low tax rates alone. There are a lot of other pro-business factors that make Singapore attractive - for example, political and policy stability, excellent infrastructure, availability of world class talent pool, investment-friendly policies, support for an open and competitive market, etc. A lot of these factors are more important than a low tax regime and we need to continue to excel in these areas.

Daniel Leung Country manager ACCA Singapore Singapore's international competitiveness is also demonstrated by its non-tax strengths such as excellent infrastructure, stability, strategic location and a skilled workforce. Therefore the proposed METR may not pose a significant adverse impact if further incentives, currently considered by the government in consultation with the industry, continue to enhance the city-state's attractiveness to foreign companies and investment. In addition, Singapore also serves as a gateway to Asean and is party to numerous free trade and economic partnership agreements with major economies. In the decade ahead, it is important for Singapore to further improve its international competitiveness by further raising the productivity of its workforce and enhancing the mobility of talent, both internally and across borders.

Sanjay Rohatgi SVP and GM, APAC NetApp With the government's investments in digital capabilities and innovation as a key thrust in Budget 2022, NetApp is confident that Singapore's leading hub status for data flows will be strengthened. These measures will build on the country's strong momentum in its enablement of cloud operations, artificial intelligence solutions, and fintech. These capabilities will enable chief investment officers and chief technology officers here to further unlock the fullest potential of data across their enterprises and maximise their competitive edge in Singapore and the world. Beyond tax factors, NetApp believes that with the government's commitment to innovate and partner with MNCs, Singapore will continue to soar and become the global city that it aspires to be.

Toby Koh Group MD Ademco Security Group Singapore's proposed METR will not hurt its competitiveness especially since the global tax pact was agreed by most countries across the world, representing over 90 per cent of global gross domestic product. The benefits of using Singapore for business are clear, from political stability to the strong legal and financial framework, as well as robust infrastructure and quality of living, and the talent of our residents. Singapore's total effective tax rate for corporates and individuals is attractive. Our government is pro-business and has consistently evolved policies to keep the business engine humming smoothly. MNEs will undoubtedly continue to invest in Singapore.

Daryl Ho Managing director WE Communications Businesses in Singapore are regarded as stabilisers in society during times of uncertainty, showed a 2021 Brands in Motion study by WE Communications. Today, around half of the top 100 global companies have already chosen to set up regional headquarters here - a testament to Singapore's strong compact between the government and businesses. If and when Singapore's METR comes into force, WE believes that this compact will be further strengthened, as more businesses will step up to shoulder more of the country's growing fiscal obligations in the coming years and in the process, play a bigger role in Singapore's next growth chapter.

Zaheer Merchant Director - corporate affairs QI Group of Companies Assuming equal global implementation and acceptance (by treaty or otherwise), I presently don't see the GloBE rules impacting Singapore's competitiveness. A proposed METR combines the two elements of GloBE into one formulary apportionment rule to be applied inwardly, outwardly and, critically, fairly. A MNE's real presence (and therefore real activity and contribution) in Singapore merits consideration, allowing for domestic tax rates to be apportioned to undertaxed profits above or below the minimum rate. It allows flexibility in dealing between multinational and domestic entities, and their treatment for tax purposes. A METR can also create basis for more tax relocation programmes to Singapore, which benefits an economy overall (leaving aside core/non-core inflationary pressures). If we will have a global application of tax laws envisaged by the Organisation for Economic Co-operation and Development and G-20, we're well placed.

READ MORE: BEPS 2.0 unlikely to hurt competitiveness, may net Singapore gains in tax revenue

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