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LARGE MNES CONTRIBUTE 73% OF SINGAPORE’S CORPORATE INCOME TAX REVENUE

Large MNEs accounted for 73 per cent of Singapore’s total corporate income tax
revenue in 2021.ST PHOTO: LIM YAOHUI
Angela Tan
UPDATED Jul 16, 2024, 12:04 AM

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SINGAPORE - Singapore is the fourth-most dependent economy in the world that
relies on large multinational enterprises (MNEs) for its corporate income tax
revenue. 

Large MNEs – those with consolidated annual revenues of at least €750 million
(S$1.1 billion) – accounted for 73 per cent of Singapore’s total corporate
income tax revenue in 2021, according to data from the 2024 edition of the
Organisation for Economic Cooperation and Development’s (OECD) Corporate Tax
Statistics report. 

Ireland was the most dependent economy, with MNEs accounting for 87 per cent of
its total corporate income tax revenue in 2021. Hong Kong was second at 79 per
cent, and Chile third at 76 per cent. 



Many of the MNEs in Singapore are foreign-owned, and this dependency has
increased in recent years, the data showed.

Singapore’s statutory corporate income tax rate is 17 per cent, but it offers a
range of tax incentives and schemes to encourage specific industries and
activities to foster economic growth and innovation. This brings down the
effective tax rates companies pay.

The report, released on July 11, also contains new data on the effective tax
rates available to MNEs on highly mobile intangible assets through intellectual
property (IP) regimes and other similar measures.



It showed that for Singapore, the rate under its IP regime to support research
and development here was 5 per cent.

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OECD’s data showed this rate is low but common among other jurisdictions, many
of which have lower rates.

Singapore could expect that income under these regimes could be subject to
top-up taxation under the OECD’s global minimum tax initiative.  



In 2021, nearly 140 countries signed the OECD’s global tax deal. The two-pillar
agreement aims to stop a practice where companies use tax strategies to exploit
gaps in tax rules and shift profits to locations where the tax rates are low or
non-existent.

Pillar One targets to reallocate the residual profits of large multinationals
from their home countries to places where they generate revenue. 

Pillar Two aims to create a consistent tax environment by ensuring
multinationals with revenue of at least €750 million pay the minimum effective
tax rate of 15 per cent in every country where they operate.

To align with this, Singapore will introduce the Income Inclusion Rule (IIR).
This will subject MNEs parented in Singapore to a minimum effective tax rate of
15 per cent on the profits made by their overseas subsidiaries.

Singapore is also proposing to move ahead with the Domestic Top-up Tax (DTT),
according to February’s Budget statement. This will apply to the Singapore
profits of MNEs operating here.

The IIR and DTT would take effect for a company’s financial year starting on or
after Jan 1, 2025, and will apply to MNEs with global revenue of at least €750
million annually.

More on this Topic
Global growth forecast is lifted but risks loom: OECD Budget boost for firms to
help Singapore stay competitive even after global tax kicks in

The Ministry of Finance had sought the public’s views on the landmark changes on
June 10. The public consultation closed on July 5.

OECD’s data also showed Singapore’s tax system allows for some amount of
accelerated depreciation of assets relative to economic depreciation. 

This means the forward-looking effective average tax rate – an indicator of
investment incentives – in Singapore is slightly below the statutory tax rate. 

Globally, the OECD data continues to point to the existence of companies
exploiting gaps in tax rules, though there are some signs of modest reductions
in recent years.

Statutory corporate tax rates worldwide are stabilising after a lengthy period
of falling rates, according to the OECD report.

Average statutory corporate income tax rates have remained steady at 21.1 per
cent over the past three years. This follows a two-decade period that saw them
fall from 28 per cent in 2000 to 21.1 per cent in 2021.

The effective average tax rates have continued to decline modestly, from 21.6
per cent in 2017 to 20.2 per cent in 2023.

Anticipation of the new global minimum tax may have contributed to the recent
stabilisation, the report said.

More than 35 jurisdictions are implementing, or plan to implement, the 15 per
cent minimum corporate effective tax rate with effect from 2024, reducing
competitive pressures on statutory corporate income tax rates. 

The average effective tax rates including incentives have stayed relatively
constant from 2019 to 2023, compared with a decline of almost 13 percentage
points from 2000 to 2019, the report said.

More on this Topic
S’pore’s 15-year-old students top OECD’s creative thinking testWorld economy
looks to dodge stagflation rut as outlook perks up


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