HOW DOES SINGAPORE ACHIEVE A BALANCED NATIONAL BUDGET WITH COMPETITIVE TAX RATES?
Acornerstone of Singapore’s fiscal regime is a set of prudent budgeting and expenditure policies, supported by a rigorous tax system which serves four key objectives — to raise adequate revenues for government expenditures, support social objectives, promote economic development, and fulfil our role as a responsible international tax jurisdiction.
Singapore relies on a combination of direct and indirect taxes to support government expenditure. Over the years, Singapore has shifted from relying mainly on direct taxes such as corporate income tax and personal income tax, to indirect taxes like Goods and Services Tax (“GST”) which has a broad tax base. Keeping the tax base wide helps to reduce revenue volatility and enhance Singapore’s fiscal sustainability.
Direct taxes today contribute about half of our government operating revenue, with indirect taxes making up the rest of our tax revenue. In the last financial year, the three highest revenue-contributing taxes were corporate income tax, GST and personal income tax, which comprised 25 percent, 17 percent and 19 percent of total tax collected, respectively.
Singapore has also been refining its fiscal policy to support and promote various social goals. A progressive tax system, together with government transfers, helps to ensure that our overall system of taxes and benefits is both equitable and efficient. In recent years, Singapore further enhanced the progressivity of its tax system by introducing progressive tax rates for property tax and increasing the marginal income tax rates for high-income earners.
As a small and open country, Singapore has to continuously nurture a competitive business environment to attract substantive businesses to Singapore so as to create good jobs for our people. Our corporate income tax rate of 17 percent is on par with the global trend of falling corporate tax rates as countries seek to improve their competitiveness by lowering their taxes on companies.
Our sound and competitive tax policies are complemented by an efficient tax administration that ensures compliance by all taxpayers at minimal costs. PwC ranks Singapore as the fifth easiest place to pay taxes worldwide in the Paying Taxes 2015 survey.
Singapore also maintains a wide network of taxation agreements which helps local businesses minimise double taxation on their cross-border business activities. Local businesses are able to enjoy greater tax certainty as they expand overseas. These bilateral agreements also provide an avenue for Singapore to cooperate with other tax jurisdictions to address cross- border tax issues, by providing for exchange of information arrangements and dispute resolution mechanisms. The country stands firm in its commitment to work closely with the global tax community to fight cross-border tax evasion.
Singapore celebrates its Golden Jubilee this year. Our tax regime has played a critical role in contributing to the nation’s success in the last 50 years, and will continue to play a pivotal role in building a better Singapore.