But even though Singapore’s 17% corporate tax rate exceeds the proposed global minimum on paper, deductions and incentives mean that the effective tax paid by some MNEs may be less than 15%. The benefit of such incentives, Poh of NUS warns, could be nullified by BEPS 2.0 since MNEs will have to pay top-up tax in their home jurisdictions. Singapore would be just subsidising additional tax collection for other countries instead of attracting business.
Singapore has long enjoyed the reputation of being the “Switzerland of the East”. As a geopolitically nonaligned country with an advanced financial system and strong rule of law, the Lion City is a crossroad for global capital flows in Asia, making it smoother and easier for the thousands of multinational corporations to set up shop here. Of course, a relatively low corporate tax rate of 17%, versus the OECD average of 23.51%, helps.
But BEPS 2.0 might just cast a shadow on Singapore as a financial hub. Deputy Prime Minister Heng Swee Keat observed during his Budget 2020 round-up speech that as a small hub economy with a smaller consumer base, Singapore could face weaker corporate tax revenues. The OECD has estimated that investment hub countries like Singapore could face a 5% drop in taxable revenue.
