FINANCIAL SERVICES | Staff Reporter, Singapore

Singapore’s dominance under threat as neighbours roll out enticing tax incentives

Tax policies need to be updated in Budget 2016.

Neighbouring Southeast Asian countries are trying to snatch multinationals away from Singapore’s shores by rolling out more incentives for the establishment of treasury centres and headquarters.

Singapore must answer the threat by ensuring that the country’s suite of industry-specific tax incentives evolves in tandem with business developments, according to Deloitte's pre-budget feedback for Budget 2016.

For instance, both Singapore and Hong Kong are choice locations for multinationals to locate their treasury centres in Asia. Singapore’s finance and treasury centre (FTC) incentive has been instrumental in influencing companies to locate their treasury centres in Singapore, but this may be changing with Hong Kong introducing new tax measures in a drive to attract regional treasury centres.

“Likewise, Malaysia and Thailand have introduced tax incentives for treasury centres and headquarter activities and in time may emerge as alternatives to both Singapore and Hong Kong,” said Michael Velten, Partner and Head of Financial Services Tax at Deloitte Singapore and Southeast Asia.

Deloitte Singapore called not only for the extension of the FTC incentive beyond 31 March 2016, but also for improvements to be made to keep the incentive relevant and useful with developments in treasury and financial activities globally.

Although incentives are key to keeping Singapore competitive, policymakers should also ensure that the country’s tax system is in line with the OECD’s Base Erosion and Profit Shifting (BEPS) Project.

“With the twin challenges of keeping our tax regime competitive and addressing the implications arising from the BEPS Project, a balance must be achieved between keeping Singapore’s tax system simple whilst ensuring that it remains coherent and acceptable in the international tax arena,” said Low Hwee Chua, Partner and Head of Tax Services at Deloitte Singapore and Southeast Asia.

“Singapore should continue to monitor its tax incentives framework to ensure it adheres to the minimum standards that have been established, and may also wish to consider publishing more detailed guidelines on the criteria required to obtain certain tax incentives, as transparency is a key tenet of the BEPS Action 5 recommendations on harmful tax practices,” Low added.

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