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Singapore to Lower Company Tax Rates

Singapore will lower its company tax rates for the first time in the past three years, in a move intended to close the gap between its tax rate and that of Hong Kong. The Singapore government has been taking serious steps to lure investors and create new jobs. As of 2008, the maximum company tax rate in Singapore will drop from 20% to 18%, Second Minister of Finance Tharman Shanmugaratnam said Thursday. From July 1st, 2007, the country`s goods and services tax will gain 2 percentage points and reach 7%, to replace the lost company tax revenue, Shanmugaratnam added.

The Singapore government led by Prime Minister Lee Hsien Loong is taking advantage of the longs growth period in the past six years to improve the country`s ability to compete against countries offering lower coasts, in order to create new revenue sources. Singapore`s GNP totaled $134 billion, and its economy is the fourth largest in Asia. During 2006, the Singaporean economy grew by 7.9%, due to a record braking number of jobs created and tourists visiting the country offset the slowdown in export. This year Singapore`s economy is expected to grow by 6.5%.

``The gap with Hong Kong is considerably lower now and may just be the tipping point in terms of attracting a flood of investments,`` said Chua Hak Bin, a Citigroup economist in Singapore. ``It`s very positive. That would make Singapore very competitive,`` He said. Chia Boon Chong, spokesperson for Singapore Telecommunications Ltd., Southeast Asia`s largest telephone company said: ``We welcome the corporate tax rate reduction as it will have a positive impact on our net profit.``