Opening Address By Ms Indranee Rajah, Minister In The Prime Minister’s Office, Second Minister For Finance And National Development, At The Tax Academy Signature Conference In Singapore, On Friday, 3 Sep 2021, 1.30pm03 Sep 2021
Mr. Ng Wai Choong, Commissioner and Chief Executive Officer, Inland Revenue Authority of Singapore,
Mrs. Eng-Tay Geok Lee, Chief Executive Officer, Tax Academy,
1. A very good afternoon. It is a great pleasure to be able to address you at this Plenary Session of the Tax Academy Signature Conference 2021.
2. While the global fight against COVID-19 continues, the winds of change that pre-dated the virus have not abated. Technology trends and the search for value globally have already been driving change for some time but they are now accelerating, given a new impetus by the pandemic.
3. The last one and a half years have driven home the need for businesses to digitalise, innovate and transform in a way never before seen. According to an October 2020 McKinsey international survey, all around the world, businesses are reporting rates of digitalisation 20 to 25 times faster than previously thought possible, with technology adoption at an unprecedented rate.
4. Many governments, already grappling with record-high levels of public debt pre-COVID, are now increasingly under pressure to rethink ways to plug the fiscal gap, worsened by the pandemic. Coupled with longer term structural changes such as slowing productivity growth and an aging population, a new fiscal compact will be needed
5. The theme of today’s conference, “Taxes and Investments in the Post-Pandemic World”, is thus timely.
International developments on BEPS 2.0
6. International consensus around the discussion to revise international tax rules and increase the taxes paid by multinational enterprises, also known as the Base Erosion and Profit Shifting, or BEPS, 2.0 Project is rapidly solidifying.
7. The G20 recently endorsed the “Statement on a Two-Pillar Solution to Address the Tax Challenges Arising From the Digitalisation of the Economy”. Supported by more than 130 jurisdictions of the Inclusive Framework, the Statement sets out the high-level parameters of Pillars 1 and 2, including the introduction of a global minimum effective tax rate of “at least 15%”.
8. The momentum to achieve a global agreement by the end of this year seems strong.
Singapore’s position on BEPS 2.0
9. Many will recall that it was in the aftermath of the global financial crisis that the 2015 agreement on the 15 BEPS Actions, also known as BEPS 1.0, emerged. Singapore has since been fully engaged in the BEPS discussions, and we have also swiftly and proactively updated our corporate tax system in line with international tax developments.
10. We will adopt the same approach for BEPS 2.0. The Inclusive Framework is still working through the parameters. If and when a consensus is fully reached, Singapore will adjust our corporate tax system as needed, in consultation with the industry. Any adjustments to our tax system will be guided by three principles:
a. First, we will abide by internationally agreed standards.
b. Second, we will safeguard our taxing rights.
c. Third, we will seek to minimise the compliance burden for businesses.
Remaining competitive in a post-BEPS 2.0 environment
11. As the scope for tax competition narrows, the post-BEPS 2.0 environment would increasingly be a competition between overarching economic ecosystems. Ultimately, the best response is to continue strengthening our overall competitiveness.
12. Last year, although like most of the world, Singapore saw a fall in foreign direct investment, we attracted $17.2 billion of commitments in Fixed Asset Investment, a 12-year high. These are expected to create close to 20,000 new jobs and over S$31 billion in Value-Added.
13. The pent-up demand for investments post-COVID-19 is an example of opportunity being seized. Despite the challenges, we must continue to maintain Singapore’s reputation and track record, as an attractive place for business and substantive economic activity.
14. Singapore’s overall competitiveness is not, and never has been, based on tax factors alone. We have built and will continue to build strong non-tax advantages, including our strategic geographical location and connectivity, excellent physical and digital infrastructure, rule of law, robust intellectual property protection regime, a skilled workforce, and our open and friendly business environment.
15. Let there be no doubt that post-BEPS 2.0, Singapore as a small economy will have to work harder than ever to attract and retain investment. But we are no strangers to hard work and meeting challenges.
16. Singapore will double down on enhancing our competitive advantages. In Budget 2021, we announced a $24 billion package over the next three years to help businesses and workers adapt to a post-COVID-19 world. This comprises support for enterprises to deepen their capabilities and leverage emerging technology, as well as support for workers to reskill and upskill in the future economy. We will continue to work with companies and the industry to create good business and job opportunities. We are also refreshing all 23 of our Industry Transformation Maps, or ITMs – to spur restructuring and transformation, and develop new growth ideas.
17. So, in terms of our response to BEPS 2.0, besides adjusting our corporate tax system, we will continue to partner companies located here, both MNEs and local enterprises, to transform and grow their businesses regionally and globally, as well as to create new links to access global markets.
18. I am confident that together – workers, industry, academia, and the Government – Singapore will be able to strengthen existing advantages, build new ones and seek new opportunities, to ensure Singapore’s continued economic success and a good future for our people.
Conclusion19. I hope the Plenary Session this afternoon will give participants much to think about and to look forward to, with the exchange of insights on taxes and investments in the post-pandemic world. So wishing everyone a fruitful Session. Thank you very much.