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.