Singapore Announces Corporate Tax Rate Cut
January 23, 2009
Singapore will soon be just one of many countries to cut corporate tax rates recently.
Singapore cut corporate taxes for the second time in three years and said it will tap its reserves to fund record spending amid efforts to drag the island’s economy out of its deepest recession since independence.
The government will reduce the maximum tax rate payable by companies to 17 percent from 18 percent this year, Finance Minister Tharman Shanmugaratnam said in a budget address today. It will spend S$20.5 billion ($13.7 billion) on property and personal tax rebates and cash handouts to help businesses and workers, using S$4.9 billion of its national reserves.
The tax cut will narrow Singapore’s gap with Hong Kong as Prime Minister Lee Hsien Loong’s government aims to attract investment in services and manufacturing industries. Singapore said yesterday its economy may contract a record 5 percent this year as the global recession hurts exports and companies including Creative Technology Ltd. fire workers.
“A lot of help is extended to companies to keep jobs and the tax cut makes Singapore more competitive in this difficult period,” said Alvin Liew, an economist at Standard Chartered Plc in Singapore. “It’s a budget to help cope with the recession, not exit it.”
As we have stressed repeatedly, high corporate tax rates damage the economy and reduce competitiveness. Fortunately, and sometimes surprisingly, some countries have been realizing this, and U.S. policymakers at both the federal and state level need to pay attention.
While we were looking over the details of the corporate tax rate cut on the Singapore Government Budget website, we stumbled onto something else interesting: an animated online game titled “If I Were The Finance Minister.” As the title suggests, players allocate funds to certain budget areas and set tax rates as if they were the finance minister. We have not played the entire game, but it looks like fun (a quick registration is required). Now why is there no U.S. version of this game on the Joint Tax Committee website or Congressional Budget Office website?