ROM (The Straits Times / Asia News Network): Singapore will face tougher competition if new rules for a global minimum corporate tax are introduced, Prime Minister Lee Hsien Loong said on Sunday (October 31).
In particular, the decision will have an impact on how the country attracts investment. This is because tax incentives – along with grants and other programs – are a major tool in the Economic Development Board’s arsenal.
“We will have to see how these have to be changed,” said Lee in an interview with the Singapore media at the end of this year’s summit of the group of 20 (G-20) heads of state or government.
“We will also have to see how we can continue to attract investment to Singapore to create jobs and to stay competitive.”
During the summit, the heads of state and government of the world’s largest economies supported a proposal to introduce a global effective minimum tax rate of 15 percent by 2023.
The move aims to get large multinational corporations to pay their fair share of taxes, rather than distributing profits across low-tax countries, with the aim of creating a “more stable and fairer international tax system”.
Lee described this as an effort by the countries to unite in order to jointly improve their negotiating position with those companies that have a very high level of attraction.
When asked for his thoughts on the plan, Lee said he believes the dynamics will not fundamentally change.
Countries will “find other ways to attractiveness” in order to get their investments and the projects they want, he said.
The Prime Minister also noted that attracting new investment to Singapore is not just about economic competitiveness. Instead, strategic and security considerations play a role.
As an example, he cited how the G20 leaders discussed supply chain resilience – in other words, ensuring that a country is not held hostage when its main supplier becomes unfriendly or its supply lines are disrupted.
“That means you are no longer just talking about jobs and economic value, you are talking about safety,” said Lee. “How much is that worth? What do we do when other countries act like this?
“I assume that there will be tougher competition for us. But we will take it calmly.”
Lee was also asked for his opinion on the United Nations or COP 26 climate negotiations, which opened in Glasgow on Sunday and were high on the G-20 agenda this year.
At the end of the G20 summit, world leaders had agreed to make efforts to limit global warming to 1.5 ° C above pre-industrial levels.
Countries belonging to the grouping of the world’s major economies, to which Singapore is not a member but has been invited as a guest, account for around 60 percent of the world’s population and an estimated 80 percent of global greenhouse gas emissions.
Lee noted that existing tensions – for example between great powers like the United States and China – are reflected in discussions and make them more difficult.
“Basically, when it comes to climate change where there is a common interest in an area of cooperation, one should be in a problem-solving mode, even if there is competition, other issues or rivalries,” he said.
“But inevitably, competition, rivalry and mood penetrate the cooperative part and make things more difficult. But they were still able to draw up a communique and open it for COP26,” he added.
“I hope there will be progress, but I expect it will be difficult.”
Aside from the rivalry between the great powers, there is also “pretty deep disagreement” between developed and developing countries on the matter, Lee noted.
“Some of these evolved when China changed its position, but other countries did not change their position that much,” he said.
“And you feel that this problem was created by developed countries and you have to make up for me if you want me to do my part now,” he said. “It’s going to be a very difficult conversation for a while.”