Since Singapore’s corporate income tax rate is the lowest among Asean countries, raising government revenue by increasing corporate tax rate makes sense.
But according to PAP, this will make us less competitive to the extent that higher costs will cause investors to flee, foreign investors would likely not consider Singapore and our economy will face imminent collapse.
This is of course PAP’s propaganda.
If PAP was concerned about higher costs, then it wouldn’t have increased all sorts of costs recently. Over decades, domestic cost increases are mostly PAP-driven.
The real reason for PAP’s reluctance to hike corporate tax is because it wants to help ensure profitability of government-linked companies, eg SingTel, DBS Group, PSA, Keppel Corp, etc.
Should corporate tax increase by 5% – still below Malaysia and Indonesia, this will add hundreds of million$ to GLCs’ tax bill. Ultimately, Temasek’s unverifiable high returns will also be impacted.
GLCs – helmed by former generals, scholars and civil servants – are known to be poorly managed because senior management executives are only book-smart and approved by book-smart politicians.
If not for PAP constantly tweaking legislations in their favour, a few GLCs would have followed NOL into the ocean.
An example of how PAP policies have benefitted GLCs is Lau Goh’s FT policy. This helps to slash GLC’s wage bill because they are the biggest employer of foreign workers in Singapore, eg Changi Airport Group, public transport operators SMRT and SBS, Keppel O and M, etc.
If PAP was not involved in business, corporate income tax would have been easily increased. But with GLCs paying billions in taxes, any corporate tax increase will reduce Temasek’s profits by hundreds of million$.
The alternative is of course to increase revenue with another GST hike or other indirect taxes/fees.