Singapore will ensure its tax system is compatible with international norms while managing burden on businesses: Lawrence Wong

SINGAPORE: Singapore will continue to ensure that its tax system is “compatible with international norms while managing the administrative and compliance burden on businesses”, said Finance Minister Lawrence Wong on Tuesday (Jun 8).

This comes after the Group of Seven nations agreed on Saturday to back a minimum global corporation tax rate of at least 15 per cent and put in place measures to ensure taxes were paid in countries where businesses operate.

It is too early to say what the proposed changes will mean for Singapore, said Mr Wong said in a Facebook post.

“What we know for sure is that the international rules for corporate taxation will change, and all jurisdictions will need to adjust their tax systems and rules,” he said.

“As for the revenue impact, it will depend on the parameters being set, the rules to be made, and crucially, how different governments and businesses respond to them,” he added.

READ: What is a global minimum tax and what will it mean?

The G7 comprises the United States, Japan, Germany, Britain, France, Italy and Canada.

Saturday's commitment to a global minimum tax rate would apply to overseas profits.

Governments could still set whatever local corporate tax rate they want, but if companies pay lower rates in a particular country, their home governments could "top-up" their taxes to the minimum rate, eliminating the advantage of shifting profits.

Key details remain to be negotiated over the coming months

“The proposals involve fundamental changes to international tax rules,” said Mr Wong.

“They will mean allocating more taxing rights of the largest and most profitable multinational enterprises to where their customers are; and implementing an internationally-agreed minimum effective corporate tax rate for large multinational enterprises wherever they operate.”

He said that Singapore will “continue to support a multilateral consensus-based solution that is anchored on sound economic principles, promotes tax certainty, and ensures a level playing field across all jurisdictions”.

READ: G7 nations reach historic deal to tax big multinationals

Mr Wong also said that the new rules should not “inadvertently weaken the incentives for businesses to invest and innovate”.

"Otherwise, countries will all be worse off, fighting over our share of a shrinking revenue pie," he said. 

The ministry and the Inland Revenue Authority of Singapore (IRAS) will make the necessary changes to Singapore’s corporate tax system as and when a global consensus is reached on the framework.

These changes will be made “in close consultation with businesses and tax professionals”, he said.

Singapore will also continue to strengthen trust, reliability and integrity - the attributes that make it attractive for “substantial economic activity” – to create good jobs and opportunities for Singaporeans, he added.

“Our overall competitiveness has never been based on taxation alone,” he said. “It’s about ensuring a conducive environment for businesses and entrepreneurs to thrive.”