Address By Mrs Josephine Teo, Minister of State For Finance And Transport At The Global Launch Of WB-PWC Paying Taxes 201321 Nov 2012
Thank you for inviting me to the Global Launch of Paying Taxes 2013. I must say that in that short hour, I found the presentations to be very interesting and also providing a useful way of comparing tax systems worldwide. I’m happy to note that the report is being launched for the first time in Singapore and this is something that we are very keen to support.
2 The report covers topics that are important to Singapore, to our policymakers and our tax administrators – IRAS. Businesses here know that we take our tax competitiveness very seriously. We are constantly reviewing our policies and exploring how we can administer them more efficiently.
3 I will focus my points on three areas. The first is on the World Bank and PwC’s observations on tax systems, both at the broader level and for Singapore. My second point is on how these relate to some of the improvements that we are trying to put in place. Thirdly, I will also say something about the Doing Business report by the World Bank.
4 Both Dr Claros and Mr Packman spoke about the relationship between taxes and GDP growth, investments and human development. It is quite clear that it is not just the Total Tax Rate that matters, but also the kind of spending that we put the taxes to that could help improve the quality of life for our people.
5 In terms of tax administration, if it is too burdensome because of complexities that we have built up, it may actually affect growth, investments and human development. One particular point that was in the report but perhaps not fleshed out in great detail here, is that this could impede investments by SMEs, who understandably do not have the resources and wherewithal that larger companies have to deal with tax administration. Quite rightly, Singapore sees it as a competitive advantage to keep our tax rates low but at the same time, make tax administration efficient and as easy as possible for businesses operating here. As the tax commissioner at IRAS might say, “I can’t make it tax-free or pain-free, but I can certainly make it fuss-free”. In response, to David’s (Sandison) earlier question on whether we could further lower taxes, my colleagues might again say “perhaps not less tax or less pain, but certainly less fuss”.
6 The second point I wanted to make was how Singapore could try and improve our tax administration. Here, I would like share some initiatives that we have started recently with the aim of improving compliance cost as well as productivity and efficiency for businesses. They are in three areas. The first is for the GST, which has been pointed out that it is an additional item that we have as compared to the other tax jurisdictions which were ranked ahead of Singapore in the report. Two other initiatives relate particularly to SMEs and I will touch on them in greater detail.
7 In April last year, IRAS introduced the Assisted Compliance Assurance Programme (ACAP). This programme aims to help businesses with the GST control framework. If we think of it as part of their corporate governance framework, they can undertake the ACAP review to assess the robustness and effectiveness of their internal control system that impacts GST compliance. Businesses that achieve certain benchmarks in the level of controls will be accorded ACAP status and can enjoy benefits such as a step-down of GST compliance activities that are monitored by IRAS. In doing so, businesses can reduce the reducing the compliance time and costs. There is a rough estimate that a company can potentially save up to $150,000. In order to get ACAP going, IRAS co-funds the cost of the risk review. Since last year, the programme has seen quite a good take-up.
8 The two other areas that we are working on to try and improve efficiency are targeted at SMEs. The first is the simplified version of Form C, which I think many of you are familiar with. Previously, the Form C was a seven-page return that has to be submitted together with financial accounts and tax computations to IRAS. What we have done is that for businesses, with an annual turnover of less than $1 million, they get to fill in a much simplified version, which is a 3-page Form C-S. They also do not need to put in their financial accounts and tax computations. We expect this will reduce the time taken to complete the form by about half. About 110,000 or 70 per cent of our businesses are expected to benefit from this.
9 The other initiative that is targeted at SMEs is something that removes a step in tax filing completely. Traditionally, all companies have to file an estimate of their Chargeable Income within 3 months after the end of their accounting period. What we have done is to say that if you do not expect to have Chargeable Income and your business has less than $1 million in turnover, you can be completely exempted from this step and just go ahead and file your income tax return. This initiative is expected to benefit about 67,000 or 42% of all companies in Singapore.
10 What we do hope is that with continued efforts to help keep tax compliance easy, we want to continue to improve the business environment for Singapore. A very important contributor to this process is the engagement with the business community. I am pleased to see that Mr Shanker Iyer is here today. He is one of the strongest proponents of us further simplifying our rules, and has always given very useful input to MOF and IRAS.
11 Finally, I would like to make a brief comment about the World Bank’s Doing Business report. As Mr Claros pointed out earlier, Singapore has been ranked the most business-friendly out of 185 economies for the seventh consecutive year. We would like to thank the World Bank for this recognition. I particularly liked what you shared earlier, which is the idea of creating a frontier and for all economies to measure how they are always getting better.
12 Even for Singapore, we find that concept very useful. Although we have made very good progress over the years and have worked hard to stay a very business-friendly environment, the competitive landscape is one that continues to challenge us. We do not take that for granted. So I am sure my colleagues will study the report very carefully and look at how we can close our own gap to the frontier.
13 On that note, let me wish you a very good panel discussion and I am sure you will have many ideas we can follow up on.