How can Singapore sharpen its global competitiveness?

singapore cyber exposure index ranking
Picture for representation Edgar Su/Reuters

As Budget 2018 draws near, Ernst & Young Solutions (EY) outlined its call for the government to take into a two-pronged focus: enhancing Singapore's global competitiveness and maintaining a progressive and fair tax rates.

EY Head of Tax Services Chung Sim Siew said the Budget 2018 should be able to develop resilience and agility to help firms adapt to change and to explore opportunities in the growing digital economy.

Chung-Sim said Singapore can use its position as Chair of ASEAN this year to propose measures to coordinate certain tax schemes in order to boost a greater cross-border flow of capital and labour.

Also Read: Reforms induce bull run in equity markets despite some volatility (2017 in Retrospect)

"The government may consider adopting a consistent definition of tax concepts such as permanent establishment and characterisation of software payments, and proposing common tax administration standards such as those in relation to transfer pricing," she said.

She has taken into consideration the recent changes in the global tax environment especially with the implementation of Base Erosion and Profit Shifting (BEPS) action plans and the changes in US tax reforms.

Chung-Sim noted that with these changes, the impact of foreign direct investment flows into the ASEAN region would fundamentally change.

Another suggestion for Singapore is to improve the relevance of its tax treaty network to include the US and other new countries. There is also the need to update existing comprehensive tax treaties with countries such as Australia and the Philippines.

In terms of the impending tax hikes, EY recommended a multi-step approach should the Goods and Services Tax (GST) rate be increased.

EY Partner for GST Services Chew Boon Choo said it would be better to stagger the GST rate increase to lessen the immediate impact on consumer spending.

However, she said this may result in higher compliance costs for firms due to the updating of their accounting systems.

For EY Indirect Tax Services Leader Yeo Kai Eng, the GST rate could play a part in improving the competitive field for local and overseas business. He recommended establishing a GST registration regime for overseas suppliers of digital services.

Yeo said this could introduce another stream of revenue for the Government to support Singapore's projects on infrastructure and social services. Additionally, this scheme would be able to control tax leakages brought about by the digital economy.

This article was first published on January 5, 2018