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59. Finally, on maintaining a competitive tax environment,
Professor Ivan Png has suggested minimising tax
incentives and moving towards a simple tax system
with a low headline tax rate.
60. This is an ideal which I sympathise with, but
unfortunately, reality is not so simple. The
basic problem is this. We want the best companies
in the world to come and locate here - offer
the best technology, best jobs, best markets
- but these best companies are in demand everywhere.
Other governments are courting them. Even the
developed countries are courting them. America,
Japan, Europe - they offer lucrative incentives
to selectively anchor key businesses and investments.
Sometimes, they give outright cash grants per
job created - one hundred thousand or two hundred
thousand Euros because every job created is one
fewer job on the unemployment rolls.
61. So, if we want them to come here and we say
you pay the same here as everybody else in Singapore
- 20 percent corporate tax - we cannot get them.
We are out of the running. They come to see us
and they show us; they say this is best of breed.
Best of breed - they ‘shop’ for the
best incentives from different governments -
investment allowances, tax holidays, grants,
training assistance schemes and so on. Assemble
one page ‘best of breed’ and they
tell us: please match this and then we will think
about whether to put you into the running.
62. And if we need them, we have to make an offer
which they will consider, but one which leaves
us above zero. Not ending with a net negative
but above zero. If they come, we get the economic
spin-offs.
63. On the other hand, if we say we give the same
favourable tax rates, flat tax rate, to other
companies that we give to the best, most desirable
project which we want to anchor here, the Government
will get very little revenue.
64. So we have to retain tax incentives to attract
and retain strategic businesses and activities.
At the same time, we have to ensure that our
incentives are granted fairly and objectively
- that the companies must meet our criteria and
deliver specific net benefits to our economy.
65. Overall, our formula has served us well. Quite
a low headline rate to support enterprise, plus
targeted incentives, usually with clear sunset
clauses, to promote strategic investments. But,
we try to keep our tax code clean - we do not
encumber it with many special perks and loopholes
as happens in other countries, because we would
like to keep the playing field as level as possible,
subject to this constraint - that there are companies,
which we need, whom we cannot charge the full
rate.
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