SINGAPORE is not a tax haven even as the Government cuts the corporate tax rate to 17 per cent this year.
The Republic has low but not no tax; strong rule of law; companies with substantive business activities, and it is now considering adopting an internationally-recognised standard for the exchange of tax information, said Senior Minister of State for Finance and Transport Lim Hwee Hua in Parliament on Tuesday.
She was responding to a question from MP Inderjit Singh (Ang Mo Kio GRC) that lowering the corporate tax rate would increase the perception of Singapore as a tax haven.
'President Obama has in fact recently announced that he will take drastic measures against countries that fall in his tax haven list. This may put Singapore in a precarious position vis-a-vis the US,' Mr Singh said.
There is no one definition of a tax haven, but the US Government Accountability Office identified in report last year some comon characteristics including having no or nominal taxes; ineffective information exchange with foreign tax authorities; and a lack of legal transparency.
Mrs Lim said on Tuesday during the debate on the Finance Ministry's budget: 'Singapore is certainly not a tax haven.'
While Singapore's corporate tax rate at 17 per cent is competitive, it is by no means among the lowest in the world, she explained, citing examples of lower tax regimes in Romania at 16 per cent, Ireland at 12.5 per cent, and Bulgaria at 10 per cent. Hong Kong has a corporate tax rate of 16.5 per cent.
Mrs Lim also explained that Singapore is substantial manufacturing and services economy, where companies have 'real operations' compared to mailbox companies, which as the name implies, are shells of parent firms with no substantial business activity, set up to avoid taxation.
Unlike tax havens, Singapore also has a reputation for strong rule of law and a network of 60 tax agreements with other economies, the minister added.
And Singapore is now looking at adopting the Organisation of Economic Cooperation and Development (OECD) standard for transparency and effective exhange of tax information, which was supported by a United Nations committee of tax experts last October.
'We will be engaging the OECD and the industry to study this OECD standard with a view to endorsing it,' said Mrs Lim.