Tax talks: Where does Singapore stand?
Entrepreneurs residing in Singapore and Hong Kong experience no burdensome taxes, according to a paper published by Grant Thornton.
Titled Grant Thornton International Business Report 2010, the paper sought the perceptions of owners and directors of PHBs (privately held businesses) on the issue of tax in their respective country.
The global study covering 36 key economies worldwide, found entrepreneurs residing in Singapore and Hong Kong are among the most satisfied with their country's tax system. Entrepreneurs interviewed from the remaining economies felt burdened by at least one category of taxation in their country.
Most burdensome taxes by economy
53 and 38 percent of entrepreneurs cited Hong Kong and Singapore respectively as having no burdensome taxes.
| Business profits | Personal income taxes | Employment related taxes | Indirect taxes | No burdensome taxes |
| Japan (46%) | Denmark (60%) | Belgium (74%) | Argentina (53%) | Hong Kong (53%) |
| Vietnam (41%) | Finland (54%) | Poland (65%) | Thailand (42%) | Singapore (38%) |
| Mainland China (34%) | New Zealand (38%) | Sweden (52%) | Mexico (41%) | |
| Malaysia (32%) | Netherlands (37%) | France (52%) | Taiwan (37%) | |
| Greece (31%) | Canada (37%) | Brazil (45%) | Botswana (36%) | |
| Italy (23%) | United States (36%) | Australia (42%) | Chile (31%) | |
| South Africa (31%) | Germany (39%) | India (29%) | ||
| Chile (31%) | Ireland (39%) | Armenia (27%) | ||
| United Kingdom (38%) | Philippines (25%) | |||
| Turkey (34%) | ||||
| Russia (31%) | ||||
| Spain (29%) |
Source: Grant Thornton IBR 2010 60 countries with the highest and lowest taxes
These perceptions are not unfounded. According to statistics provided by Worldwide Tax (www.world-wide-tax.com), Singapore and Hong Kong share one of the lowest company tax, personal income tax and value-added tax rates in the world.
Hong Kong in particular has a benign tax regime, with no VAT, sales tax, tax on investment income and no employment taxes paid by the employer. Corporate tax is only 16.5 percent.
Other countries in the low tax regime bracket include Bulgaria, Cyprus and Canada. Countries with a high rate of business tax include Germany, France, Belgium, Brazil, USA, India.
Countries with marginal income tax rates above 40% include Australia, New Zealand, Belgium and Germany.
Countries listed below from low to high in terms of company tax.
| Income tax | VAT / GST | ||
| Corporate | Individual | ||
| BVI | - | - | - |
| Montenegro | 9% | 9% | 17% |
| Bulgaria | 10% | 10% | 20% |
| Cyprus | 10% | 20-30% | 15% |
| Gibraltar | 10% | 0-40% | - |
| Serbia | 10% | 10-20% | 18% |
| Ireland | 12.50% | 20-41% | 23% |
| Latvia | 15% | 23% | 22% |
| Lithuania | 15% | 15%/20% | 21% |
| Romania | 16% | 16% | 24% |
| Canada | 16.5%(federal) | 15-29%(Federal) | 5%(gst) |
| Hong Kong | 16.50% | 2-17% | - |
| Singapore | 17% | 3.5%-20% | 7% (gst) |
| Czech Rep. | 19% | 15% | 20% |
| Poland | 19% | 18%/32% | 23% |
| Slovakia | 19% | 19% | 20% |
| Hungary | 10/19% | 16% | 27% |
| Croatia | 20% | 15-45% | 23% |
| Egypt | 20% | 10-20% | 10%gst |
| Libya | 20% | 15% | - |
| Russia | 20% | 13% | 18% |
| Saudi Arabia | 20% | 20% | – |
| Slovenia | 20% | 16%-41% | 20% |
| Turkey | 20% | 15-35% | 18% |
| Estonia | 21% | 20% | 20% |
| Luxemburg | 21% | 0-38% | 15% |
| Thailand | 23% | 5-37% | 7% |
| Ukraine | 23% | 15/17% | 20% |
| Greece | 24% | 0-45% | 23% |
| Switzerland | 12.5-24% | 0-11.5% (federal) | 8% |
| Austria | 25% | 21%-50% | 20% |
| Barbados | 25% | 20/35% | 17.50% |
| China | 25% | 5-45% | 17% |
| Denmark | 25% | 38-59% | 25% |
| Israel | 25% | 10-48% | 16% |
| Vietnam | 25% | 5-35% | 10% |
| Netherlands | 20-25% | 0-52% | 19% |
| Portugal | 12.5/25% | 11.5-46.5% | 23% |
| Finland | 26% | 6.5-30% | 23% |
| Belarus | 26.28% | 12% | 20% |
| Sweden | 26.30% | 0-57% | 25% |
| Panama | 27.50% | 15-25% | 7% |
| Indonesia | 28% | 5-30% | 10% |
| Norway | 28% | 28-49% | 25% |
| South Africa | 28% | 0-40% | 14% |
| U.K. | 28% | 0-50% | 20% |
| Australia | 30% | 17-45% | 10% GST |
| Japan | 30% | 5-50% | 5%(consump) |
| Mexico | 30% | 0-28% | 16% |
| New Zealand | 30% | 0-39% | 15%gst |
| Philippines | 30% | 5-32% | 12% |
| Spain | 30% | 24-45% | 18% |
| Tunisia | 30% | 15-35% | 18% |
| Italy | 31.40% | 23%-43% | 20% |
| Germany | 30-33%(effective) | 14-45% | 19% |
| France | 33.33% | 5.5-40% | 19.60% |
| Monaco | 33.33% | 0% | 19.60% |
| Belgium | 33.99% | 25-50% | 21% |
| Brazil | 34% | 7.5-27.5% | 17-25% |
| Argentina | 35% | 9-35% | 21% |
| Malta | 35% | 15-35% | 18% |
| Morocco | 35% | 0-41.5% | 20% |
| Pakistan | 35% | 0-25% | 15% |
| Zambia | 35% | 0-35% | 16% |
| U.S.A. | 15-35% | 15-35% | - |
| India | 30-40% | 10-30% | 12.50% |
Source: https://www.worldwide-tax.com.
In previous decades countries like the US and Japan cut effective tax rates to keep local business globally competitive. However Governments are unlikely to cut tax in 2012. Governments instead will seek to reduce national debts accumulated from the recession by increasing taxes.
This will incentivise entrepreneurs from Europe, the US and parts of Asia to incorporate their start-up companies in Singapore and Hong Kong.
In March 1999, Bob Perlman, then Vice President of Taxes for Intel Corporation, told the Senate Finance Committee that if he had known at Intel's founding “what I know today about the international tax rules, I would have advised that the parent company be established outside the U.S. Our tax code competitively disadvantages multinationals simply because the parent is a U.S. corporation.”
Starting a company in Asia
When making decisions to invest in Asia, entrepreneurs need to assess a country's tax risk. Despite the growth potential of many Asian countries, their taxation systems can substantial reduce a company's retained earnings.
China is a magnet for investment because of the nation's growth potential. However, China's tax system is one of the most complicated in the world, incorporating every conceivable type of taxation that exists including VAT, business tax on services, corporate and personal taxes, and worldwide taxes.
India's business community reports a high burden of indirect taxes including VAT, GST, commodity taxes, real and personal property taxes and excise duties. Complying to the tax codes of these two countries is challenging. Many businesses are too small to afford the professional outsource fees required to comply properly.
In stark contrast, the tax systems of Hong Kong and Singapore are very simple. The only major difference is Singapore has a goods and services tax. Both countries have low business tax rates, many different kinds of tax incentives and have a high degree of tax stability.
Disclaimer
The information given is of a general nature and may not be applicable in a specific situation. Under the <a href="https://futurebooks.com.sg/terms-of-use" target="_blank">Terms of Use</a> of this website, we disclaim liability for any act done or omission made on the information provided and any consequences for any such act or omission. For specific legal advice, you should seek professional legal assistance.
Anthony Coundouris is the founder of Futurebooks Pte Ltd. Futurebooks offer affordable incorporation, bookkeeping, business planning and business brokering in Singapore and South East Asia.
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