Impact of Impending US Tax Cuts on Singapore's Economy
Ministry of FinanceSpeakers
Summary
This question concerns the impact of United States corporate and personal income tax cuts on Singapore's economy, as raised by Mr Gan Thiam Poh and Mr Liang Eng Hwa. Minister for Finance Heng Swee Keat noted that while the US corporate tax fell to 21%, Singapore’s 17% corporate rate and 22% personal rate remain internationally competitive. He explained that companies weigh non-tax considerations like proximity to markets, business environments, and skilled manpower when making investment or relocation decisions. To remain attractive, Singapore will focus on deepening industry capabilities and strengthening links to the growing ASEAN and Asian markets. The Minister emphasized maintaining a pro-business environment and global connectivity to ensure Singapore continues to stay relevant to all investors in an increasingly competitive landscape.
Transcript
22 Mr Gan Thiam Poh asked the Minister for Finance what is the likely impact on Singapore should the US government reduce their corporate tax rate to 20% and reduce personal income tax.
23 Mr Liang Eng Hwa asked the Minister for Finance how will the impending massive corporate tax cuts in the US impact the Singapore economy and its competitiveness as a foreign direct investment destination and whether the corporate tax changes will result in significant US MNCs relocating their operations to onshore US.
Mr Heng Swee Keat: As highlighted in the Committee on the Future Economy (CFE) report in 2017, there is increasing competition in the global arena. The current United States (US) tax reform includes cut to the headline federal corporate tax rate from 35% to 21%, which is part of the current global downward trend in corporate tax rates. The top US marginal personal income tax rate is also reduced from 39.6% to 37%.
Companies with US linkages are likely to be analysing the details of the US tax reform package and reviewing their options. While the reform may enhance the tax competitiveness of US vis-à-vis other countries, companies would take into account non-tax considerations in their investment decisions. Considerations would include a location's business environment, its proximity to markets, availability of skilled manpower and corporate capabilities.
Singapore's corporate tax rate at 17% and top marginal personal income tax rate of 22% are competitive internationally. But we must continue to develop and strengthen our other competitive advantages by maintaining our pro-business environment and building on our connectivity to the global markets and our strong links to the Association of Southeast Asian Nations (ASEAN) and Asian economies which are expected to continue to grow strongly. We must also continue to deepen the capability of our industries and our people, so that we can continue to stay relevant and attractive to all investors.