Taxes for Nation Building 14 August 2017

Transcription

1 Taxes for Nation Building 14 August 2017

2 Taxes for Nation Building 14 August Introduction 2. Singapore s tax milestones 3. Going forward

3 1. Introduction

4 Singpoare s GDP per capita (current US$ 000) 1. Introduction Singapore s economic journey (2000 present) Knowledge and Innovation-intensive ( ) Technology-intensive Global financial crisis ( ) ( ) Labour-intensive ( ) Skills and capital-intensive Asian financial crisis ( ) Singapore recession 0 ( )

5 2. Singapore s tax milestones

6 Singpoare s GDP per capita (current US$ 000) 2. Singapore s tax milestones ( ) Labour-intensive Highlights include: Formation of Singapore Economic Board (EDB) in 1961 Birth of Jurong industrial estate in 1961 Low-cost location for global manufacturing First oil refinery at Pulau Bukom Singapore s independence Economic Expansion Incentives Act (EEIA) is introduced

7 2. Singapore s tax milestones Pioneer Status, etc The Pioneer Certificate Incentive (PC) aimed at encouraging companies to grow capabilities and conduct new or expanded activities in Singapore. Source: Source: Shell is the first foreign investor to receive Singapore s Pioneer Certificate No. 1 for its investment to build an oil refinery on Pulau Bukom in Source:

8 Prime Minister Lee Kuan Yew touring Jurong industrial estate, set up in the 1960s to draw multinationals to the island-state. Former EDB chairman Chan Chin Bock, now 82, recalls that in his first year at the board, he went up Jurong Hill almost every day, either to help arrange for factory openings or with investors to view potential sites. Source:

9 Singpoare s GDP per capita (current US$ 000) 2. Singapore s tax milestones ( ) Skills and capital-intensive Highlights include: Formation of Monetary Authority of Singapore (MAS) in 1971 First wave of MNCs augment local presence Approved Oil Trader (AOT) programme introduced Formation of MAS Significant withholding tax changes Foreign Worker Levy (FWL) scheme introduced Corporate income tax rate slashed from 40% to 33% 0.4

10 2. Singapore s tax milestones What some MNCs did, in the 1970s United States Europe Asia Hewlett Packard (HP) Produced the first pocket calculator in Singapore HP Singapore becomes the fastest growing HP entity ever SKF Factory for textile machinery components opened in Singapore Yokogawa Electric Incorporated Yokogawa Electric Singapore Pte Ltd Established Yokogawa Corporation of Asia Pte Ltd. Started Meter Production in Bedok Factory Sundstrand (now known as Sundstrand Hamilton) Commits to building a 6,968 m 2 aircraft equipment parts plant: the first major investment in Singapore s aerospace industry Siemens Medical Instruments Pte Ltd Worldwide manufacturing and logistics Centre for the Siemens Audiology Group Established in Singapore in 1974 Tata Group First established its presence in Singapore in the early 1970s. That was when Tata Precision Industries was set up, with assistance from the EDB, to manufacture tools, dies and moulds

11 2. Singapore s tax milestones (1977) Significant withholding tax changes Extracted from IRAS website URL: Files/IRASHome/Other_Taxes/WHT%20Flow chart%20a(1).pdf

12 Sells Sells Sells Sells Sells Sells 2. Singapore s tax milestones (1989) Approved Oil Trader (AOT) The Approved Oil Trader (AOT) programme was introduced in The objective of the programme [later subsumed as part of a broader Global Trader Programme (GTP)] is to expand the potential of Singapore as an entrepot port and to encourage companies to use Singapore as a base to conduct their offshore trading activities for the region. Below are some examples: Marketing Procurement Trading A s Oil Refineries Raw material Suppliers (3 rd party) Grain exporter X (3 rd party) A SG B SG C SG Oil users (3 rd party) B s factories Grain User Y (3 rd party)

13 Singpoare s GDP per capita (current US$ 000) 2. Singapore s tax milestones ( ) Technology-intensive, but also a more mature economy with slower growth Highlights include: Shift in tax policy towards lower direct taxation Greater overseas competition 1997: Asian Financial Crisis 3% GST was first implemented Approved Bond Intermediary (ABI) scheme introduced

14 2. Singapore s tax milestones (1994) Indirect Taxes: Good and Services Tax (GST) Recommendation for indirect taxes from Report of the ECONOMIC COMMITTEE (1986) Government should shift from direct to indirect taxes as its main source of revenue. Consumption taxes are economically preferable to income taxes. They do not penalize companies which are making profits or persons who are putting away savings. Tax is paid only when money is spent on consumption items

15 2. Singapore s tax milestones (1999) Approved Bond Intermediary (ABI) scheme Introduced with the intention of further promoting and developing a vibrant bond market Facilitated qualifying debt securities (QDS) issuances Subsequently merged into Financial Sector Incentive (FSI) scheme

16 Singpoare s GDP per capita (current US$ 000) 2. Singapore s tax milestones ( present) Knowledge and innovation-intensive, etc Highlights include: Major push to diversify economy Research and development identified as important driver for long-term growth Global financial crisis in 2008/ First REIT listing Gradual increase of GST to 7% Productivity and Innovation Credit (PIC) Scheme introduced Casino Tax introduced

17 2. Singapore s tax milestones (2001) Economic Review Committee Introduced group relief to allow local corporate groups to offset certain unutilised loss items of one company against taxable profits of another company within the same group Incongruence of imputation system with group relief mechanism Introduced shift from a full-imputation system to an one-tier corporate tax system

18 2. Singapore s tax milestones (2010) Productivity and Innovation Credit (PIC) scheme introduced 6 activities covered under the scheme: Purchase/ Lease of PIC IT & Automation Equipment Training of Employees Registration of Patents, Trademarks, Designs & Plant Varieties Acquisition/ Licensing of Intellectual Property Research & Development Designed Projects Approved by DesignSingapore Council

19 3. Going forward IRAS Change in Percentage for Collection by Tax Type Type of taxes collected FY03/04 % change FY15/16 Indirect taxes S$3bn 18% +5% S$10.3bn 23% Direct taxes* S$9.8bn 59% -8% S$23bn 51% Other taxes** S$3.8bn 23% +3% S$11.4bn 26% * Corporate income tax, individual income tax ** FY03/04: Stamp duty, betting taxes, private lotteries tax, property tax, estate duty ** FY15/16: Stamp duty, betting taxes, property tax, withholding tax

20 3. Going forward Indirect taxes in Asia Pacific region An increasing focus on e-commerce Highly focused, e.g. specific rules exist Relatively new indirect tax regime Increasing focus (e.g. may target e- commerce) Indonesia Singapore Thailand Vietnam Australia China Japan New Zealand Taiwan No indirect tax regime in place Malaysia Myanmar Hong Kong

21 3. Going forward Major economic initiatives One Belt, One Road ASEAN Economic Community (AEC)

22 3. Going forward Diverted Profits Tax (DPT) the UK example A new tax aimed at companies that enter into arrangements that divert profits from the UK. Rules are complex Rate of tax charged higher than the UK corporation tax Below describes an example Overseas IP holding structure US Parent UK Trading Company Royalty Cayman Island IP Holding Company

23 3. Going forward Peer Review and Monitoring in Countering Harmful Tax Practices 1 Feb 2017: OECD released the Terms of Reference and Methodology for peer reviews on the Action 5 standard for the exchange of information on tax rulings (the "transparency framework"). Peer review and monitoring process to be conducted by the Forum on Harmful Tax Practices (FHTP) in accordance with the Terms of Reference and Methodology. The Terms of Reference are broken down into four aspects, which capture the key elements of the transparency framework: 1. The information gathering process; 2. The exchange of information; 3. Confidentiality of information received; 4. Statistics. 23

24 3. Going forward Peer Review and Monitoring in Countering Harmful Tax Practices * Report from OECD Secretary-General to G-20 leaders meeting in Hamburg July 7 8 summit. 24

25 3. Going forward s White Paper on Singapore s tax policy Recommendations include: Singapore should continue to use tax incentives to attract the industries it believes will add value to the Singapore economy and society, where such incentives continue to be based on sound principles consistently applied and based on economic substance being established in Singapore. Singapore should not adopt one low flat tax rate for all taxpayers. A continuation of the principled and consistent approach to tax incentives is appropriate, provided requirements over economic substance and stringent adherence to transfer pricing requirements remain. Singapore should be more appealing for research and development (R&D)and Intellectual Property (IP) management activities. Tax reform can catalyse and propel Singapore s progress towards its objective of becoming a global IP management hub. A broader interpretation of R&D for tax purposes, a pre-claim framework for Singapore businesses to obtain upfront certainty on eligibility of projects for R&D claims, and a suite of tax incentives can boost Singapore s already beneficial fiscal regime for IP management activities.

26 3. Going forward Committee on the Future of Economy (CFE) on Singapore s future tax system Our tax system should remain broadbased, progressive, and fair, even as we raise revenues over time to meet rising domestic needs. Singapore s tax regime should remain competitive and progrowth, for this is vital if we are to sustain innovation and promote a dynamic economy.

27 In closing... Florence Loh Partner Singapore Phone: The information contained in this presentation is of a general nature only. It is not meant to be comprehensive and does not constitute the rendering of legal, tax or other professional advice or service by PricewaterhouseCoopers Singapore Pte. Ltd. ( ). has no obligation to update the information as law and practice change. The application and impact of laws can vary widely based on the specific facts involved. Before taking any action, please ensure that you obtain advice specific to your circumstances. The materials contained in this presentation were assembled on 7 August 2017 and were based on the law enforceable and information available at that time PricewaterhouseCoopers Singapore Pte. Ltd. All rights reserved. In this document, "" refers to PricewaterhouseCoopers Singapore Pte. Ltd., which is a member firm of PricewaterhouseCoopers International Limited, each member firm of which is a separate legal entity.