Commentary: There is little room to increase GST or wealth tax, which is important to ensure Singapore’s main source of revenue.

On Friday, Mr Wong announced that Singapore would go ahead with plans to implement the two elements of Pillar 2 from 1 January 2025. The second pillar would create a global corporate tax floor for large multinational corporate groups with annual global revenues of at least $1 million. EUREUR 750 million (USD 808 million) – Regardless of where you operate, the minimum effective tax rate is 15%.

The first element, the Income Inclusion Rule (IIR), requires that Singapore-based multinational corporate groups with overseas operations are subject to a minimum effective tax rate of 15 per cent on their overseas profits. means that Second component – Domestic top-up tax (DTT) – Applies to multinational corporate groups operating in Singapore and having parents in other countries. Instead of paying the minimum effective tax rate of 15 per cent in the parent jurisdiction, you will pay additional tax in Singapore.

As long as there are affected multinational corporations, the group stays there Singapore, there should be additional income. short term.

Mitigating the impact of corporate tax rate increases

But it will be difficult to predict how much additional corporate tax revenue will be generated and for how long. Will the affected multinationals stay in Singapore or relocate to other locations deemed more advantageous?

Mr Wong reiterated that any additional revenue that could be generated from Pillar 2 would be reinvested to help Singapore remain competitive in a post-BEPS world.

More importantly, while protecting their revenue base by keeping multinational groups here, they can also reduce corporate tax revenue by encouraging multinational groups not currently operating in Singapore to relocate to Singapore. This means that we should also aim for gradual growth.