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Singapore Sounds Note Of Caution On BEPS

by Mary Swire, Lowtax.net, Hong Kong
17 April, 2015

Singapore's Senior Minister of State for Finance and Transport, Josephine Teo, has said that, while Singapore supports the present coordinated international efforts to "tackle harmful tax practices, we must take care to preserve useful and beneficial ones."

During her speech to the Tax Academy & IFA Singapore Asia Pacific Regional Tax Conference, she pointed out that Singapore has kept its tax rates competitive. "Even as we expect spending to increase, we will endeavor to keep the tax burden low," she stated, "and we do so for a very simple reason – we want to continue to encourage enterprise, savings, and investment, which in turn generate positive economic spinoffs."

She noted the changing international tax landscape, particularly the developments related to the Organisation for Economic Cooperation and Development's (OECD) Action Plan to counter base erosion and profit shifting (BEPS), and the "increasingly more aggressive actions" being taken by some tax authorities when scrutinizing cross-border transactions and in dealing with transfer pricing issues.

However, "while the desire for quick action is understandable," she warned, "we must acknowledge the risk of countries taking unilateral steps in an uncoordinated manner. Uncoordinated actions are very likely to create uncertainty and increase business risks. This could also discourage cross-border trade and investment which are vital to the economic success of many countries."

While Singapore "supports the coordinated efforts of the global community to update international tax rules so that a common set of rules is applied equally across jurisdictions," she stressed that "it is critical for the reforms to the global tax system to be carried out in a way that continues to accommodate legitimate business models, promotes global economic growth and trade, and not be used as a disguise for protectionism."

She also confirmed that Singapore is participating and contributing to the discussions on international tax policies, including BEPS, at the multilateral OECD and G20 meetings, and will continue to regularly review Singapore's tax policies to ensure that they remain "aligned with international standards."

This final comment probably alludes to the ongoing discussions taking place on the substantial related-party flows being seen from Australia to Singapore. Pascal Saint-Amans, Director of the OECD's Centre for Tax Policy and Administration, told a recent Australian Senate hearing on corporate tax avoidance and minimization that those flows do not necessarily amount to the product of BEPS, identifying that there is real economic activity taking place.

"Singapore is not in the same situation as a number of other very small economies where you have only sham entities. In Singapore, my understanding is that there are some requirements for real activity," Saint-Amans said.

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