Speech By Mrs Josephine Teo, Minister Of State For Finance And Transport At The Tax Academy & CPA Australia International Tax Forum: Global Tax Trends And The Asian Growth Story

Commissioner of Inland Revenue, Mr Moses Lee

CEO, Tax Academy of Singapore, Mrs Chia-Tern Huey Min

Divisional President (Singapore), CPA Australia, Mrs Deborah Ong

Distinguished Guests

Ladies and Gentlemen,

1          I am pleased to join you this morning at the International Tax Forum organized by the Tax Academy & CPA Australia to discuss Global Tax Trends and the Asian Growth Story. Let me extend a very warm welcome to all delegates and speakers, particularly those who have come from overseas.

Tax Academy’s International Tax Training Programmes

2          At the Tax Academy’s Signature Conference last year, I launched the Advanced Management Programme in International Tax, which is a collaboration between the Tax Academy, the Nanyang Technological University of Singapore and the International Tax Centre of Leiden University. This programme aims to create opportunities for tax professionals from the region to benefit from rigorous international tax training.   I am pleased to update that the first module of the programme was successfully conducted in May this year, and it has received very positive feedback.

3          International tax training is essential given the open nature of Singapore’s economy. Over the last decade, our total trade flows have more than doubled to reach nearly one trillion dollars or about 3.2 times of our GDP. With Singapore being a global hub for businesses with increasing cross-border trade and investment flows, it is imperative that tax professionals raise their international tax competency to keep up with their clients’ needs.

4          I am confident that the training institutions and professional bodies in Singapore like the Tax Academy and CPA Australia will continue to harness the best tax expertise to bring about quality training for the businesses and the tax community, including holding high quality conferences like this.

Global Tax Landscape

5          Financial upheaval over the last few years continues to put a drag global economic growth.  Fiscally-constrained governments face increasing urgency to raise tax revenue, either through more stringent enforcement of existing laws or by introducing new taxes. The United States(US) for example, will soon be implementing the Foreign Account Tax Compliance Act, which requires financial institutions all around the world to collect, consolidate, and transmit information on US account holders to the Internal Revenue Service. The European Union has also been deliberating the pros and cons of a financial transaction tax.

6          Assessments and penalties can now involve billions of dollars.  Coupled with tax audits that have become more frequent and aggressive, businesses face a greater risk of international double taxation and higher compliance cost. With businesses shifting focus to emerging markets, including to those in Asia, tax developments in this part of the world will become more important and relevant for the international business community.

7          Where tax administration is concerned, Singapore is mindful of the need to provide a conducive environment for our businesses to invest and grow internationally. This will be achieved through two main strategies – first, to strengthen our network of agreements for the avoidance of double taxation (DTAs) and second, to make compliance with our tax rules easier. 

Strengthening our DTA network

8          DTAs help businesses to prevent the double taxation of income.  But more than that, DTAs provide an avenue for tax authorities to discuss cross-border taxation issues such as those relating to transfer pricing.  They also promote  government-to-government tax cooperation leading to greater alignment with global standards.

9          Given the very open nature of our economy and the high levels of investment flows, DTAs are very much relevant to Singapore. Over the past 10 years, Singapore has signed 22 new DTAs, bringing our network to a total of 69 DTAs today. This network includes a good mix of major economies and emerging economies from Europe, Africa and Asia.

10         Among the top 15 source countries for Foreign Direct Investment (FDI) into Singapore, we have DTAs with nine, including the Netherlands, Japan and the United Kingdom(UK). Among the top 15 destinations for FDI originating from Singapore, we have DTAs with 10, including China and India.

11         We review our DTAs regularly to stay ahead of developments and ensure that they remain competitive, comprehensive and relevant, both in terms of coverage and quality. In this regard, we welcome any feedback from the business community to share possible areas for improvements in our DTAs. We will also actively pursue opportunities for new DTAs to further expand our existing network.

Making compliance with our tax rules easier

12         As globalization intensifies and businesses increasingly have to deal with multiple tax authorities, the cost of tax compliance will rise.  Complicated or ambiguous tax rules can also increase the compliance burden for businesses. It is therefore important to make sure that Singapore’s tax administration stays efficient and effective.

13         IRAS has done well in fostering a conducive environment for businesses to operate. In a unique study done by PwC, the World Bank and IFC which measures the ease of paying taxes across 183 economies worldwide, Singapore was ranked 4thoverall. In terms time taken to comply, it was estimated that a medium-sized business in Singapore took 84 hours per annum to pay taxes and make CPF contributions.  Compared to the world average of 277 hours per annum, we haven't done too badly.  However, there is still room for improvement. 

14         IRAS has been rigorously reviewing its processes and streamlining its tax reporting requirements to minimise cost of compliance for businesses. For example, IRAS recently launched a simplified income tax return for small companies, which will benefit nearly 70% of companies in Singapore. These companies need only complete a 3-page form containing the essential tax and financial information most relevant to small companies. They do not have to submit their financial statements or tax computations.

15         In last year’s Budget, we announced the introduction of a foreign tax credit pooling system to give businesses greater flexibility in their claim of foreign tax credits and in so doing, make their tax compliance easier.

16         IRAS remains mindful of the need for open communication with key stakeholders. Through regular dialogue sessions with various industry groups and tax professionals, we hope to provide clarifications or receive feedback on tax matters.

Conclusion

17         Our tax policy supports our larger economic policies and objectives.  As a leading tax administration, IRAS will continue to keep up with developments in international taxation.  As policy-makers, we will stay attuned to business concerns and refine our tax policy and systems to maintain our competitive edge.

18         On this note, it is my pleasure to declare today's Forum open. I wish you all a fruitful discussion and to our overseas guests, I hope you will have an enjoyable stay in Singapore. Thank you.