Income Tax (Amendment) Bill

Mdm Deputy Speaker, thank you for allowing me to join this debate on two important pieces of legislation that will strengthen Singapore's position as a global financial hub and as a responsible international player in tax regulation – the Income Tax (Amendment) Bill and the MMT Bill. I will cover both Bills today.

Both these Bills work hand in hand to ensure Singapore remains competitive in the global marketplace, yet they do so in complementary but contrasting ways – one offering relief, while the other enforces a stricter regime. Both promote fairness and transparency in our tax regime.

Mdm Deputy Speaker, the Income Tax (Amendment) Bill introduces targeted tax reliefs, particularly for sectors like financial services, shipping and real estate investment trusts (REITs). I believe these amendments will encourage foreign investment and help sustain our economic growth by enhancing Singapore's global competitiveness. The Bill also provides enhanced tax deductions for R&D, encouraging companies to invest in high-tech and green technologies. This will bolster Singapore's position as a leader in innovation and future industries, driving sustainable economic growth. Simplified tax administration will also make it easier for businesses to comply with tax regulations.

Moreover, the RIC benefits businesses and encourages investment and capital expenditures, R&D and talent development. The RIC also helps businesses offset the corporate tax liabilities, making it more attractive to establish many factoring facilities and regional headquarters in Singapore. Additionally, the Bill encourages focus on decarbonisation efforts, aligning with our broader sustainability goals. By keeping pace with global competition through these tax credits, Singapore enhances its abilities to attract substantial investments, ensuring long-term economic growth and segmenting its position as a premier business destination.

Mdm Deputy Speaker, the MMT Bill, on the other hand, focuses on enforcing a 15% minimum tax on MNEs with global consolidated revenues exceeding €750 million. This Bill is Singapore's response to the OECD's BEPS framework, particularly Pillar Two, which seeks to address tax avoidance and profit shifting by large corporations.

By adopting this Bill, Singapore aligns itself with global tax transparency efforts, ensuring that large MNEs contribute their fair share to our economy. The revenue generated through this minimum tax will safeguard the Government's financial base, allowing us to invest in infrastructure, social programmes and growth initiatives. These amendments will ensure that Singapore can create a more predictable and consistent tax landscape, a critical factor for MNEs that evaluate where to base their operations.

Additionally, the Bill promotes fairness by addressing the competitive disadvantages faced by local businesses, especially SMEs, when competing against MNEs. By enforcing a minimum tax, we are fostering fair competition and supporting the long-term sustainability of both our local businesses and our tax system. The 15% minimum tax helps Singapore protect its tax base by closing loopholes that allow profit shifting to lower-tax jurisdictions, ensuring that large corporations contribute to our nation's development.

Lastly, by complying with the OECD's global tax framework and aligning our income tax policies with international practices, Singapore strengthens its reputation as a transparent, ethical and business-friendly hub, which will continue to attract foreign investments.

However, despite many positive outcomes for the overall economy, these Bills could lead to certain challenges for businesses especially for SMEs. Mdm Deputy Speaker, I have a few clarifications for the Minister.

One, how will businesses currently benefiting from existing tax incentives be affected by these amendments? Will their exemptions continue under the new framework, or will they be required to re-apply?

Two, how will the minimum tax rate apply to industries with unique tax treatments, such as financial services, energy or digital businesses? Will specific sectors receive special considerations or exemptions?

Three, how do the new regulations align with Singapore's existing international tax treaties and agreements, specifically regarding parenting double taxation and resolving disputes? Will there be any adjustments required to ensure compatibility with the global minimum tax framework?

Four, what penalties will be imposed on businesses that fail to meet the compliance requirements, particularly in sectors like financial services and for Real Estate Investment Trusts (REITs)?

Five, can SMEs also benefit from the RIC or is it primarily designed for larger corporations? Are there limits or caps on the amount of tax credited can be refunded through the RIC?

In conclusion, both the Income Tax (Amendment) Bill and the MMT Bill represent forward-thinking steps that will secure Singapore's competitive edge in the global economy. By balancing the need for fairness, transparency and innovation, these Bills will help ensure our long-term economic growth while addressing the challenges posed by global tax trends. Mdm Deputy Speaker, notwithstanding my clarifications, this Bill has my full support.

Mdm Deputy Speaker, BEPS 2.0 seeks to close gaps in international tax rules, ensuring MNEs pay their fair share, particularly where they generate revenue. Pillar One reallocates taxing rights to market jurisdictions, posing a challenge for Singapore given our small domestic market. Pillar Two establishes a 15% minimum effective tax rate for MNEs.

In my speech, I will address three key points: firstly, the unintended consequences of implementing DTT and income inclusion rule under BEPS 2.0 Pillar Two; secondly, clarifications on the RIC; and thirdly, the timing of this implementation.

Mdm Deputy Speaker, investments are essential to Singapore's economic growth, job creation and long-term stability. Investments inject capital, create jobs and nurture local talent. They foster competitiveness, innovation and technology transfers through global partnerships.

To stay relevant, we must secure the right investments that refresh industries, attract expertise and adopt emerging technologies and shape our future economy. Investments across diverse sectors, such as the digital services and green technologies, strengthens resilience against economic shocks. The investments reinforce our role as a global hub and aligned with environmental plans, preparing Singapore for future challenges.

Mdm Deputy Speaker, today, we are debating two Bills: the MMT Bill, which implements DTT and income inclusion rule under BEPS 2.0 Pillar Two and the Income Tax Bill, which formalises changes to our tax regime, including the new RIC in section 93B.

While we support BEPS 2.0's goal of ensuring MNEs pay their fair share, implementing DTT and income inclusion rule could impact Singapore's attractiveness as an investment destination. Singapore remains a top investment destination, ranked 14th globally in the 2023 Milken Institute Global Opportunity Index, with foreign direct investment inflows rising from S$1.73 trillion in 2018 to S$2.62 trillion in 2022.

However, competition is intensifying. Countries are actively attracting investments: Japan announced a $18 billion package to boost its semiconductor industry; the United States (US) catalysed $450 billion in investments under the CHIPS Act; and Malaysia aims to secure US$107 billion in semiconductor investments.

Singapore's strategic location, skilled workforce and low corporate taxes are all critical to attracting investments. However, the 15% minimum effective tax rate could reduce the effectiveness of our tax incentives, making other jurisdictions more attractive. While the minimum effective tax rate may increase short-term tax revenue, MNEs could adjust strategies by relocating operations or headquarters, limiting sustainable gains. Competing countries may also improve other factors, such as access to land and skilled labour, where Singapore faces inherent constraints.

In the next investment cycle, if businesses scale back their investments into Singapore, or diversify their investments away from Singapore or explore other options, this could negatively affect employment and economic growth in sectors such as finance, technology and manufacturing. Following suit, sectors like logistics, pharmaceuticals and real estate may also feel the pressure.

Hence, we must strike a balance: closing international tax gaps while ensuring that BEPS 2.0 does not inadvertently disadvantage Singapore or limit future opportunities.

This brings me to my second point. As we comply with BEPS 2.0, the RIC strengthens our ability to attract investments. Prime Minister Lawrence Wong confirmed in his 2024 Budget Statement that the RIC qualifies as a qualified refundable tax credit. The Ministry of Finance (MOF) has also clarified that the RIC is treated as a grant under section 93B.

RIC incentivises activities such as new manufacturing plants and low-carbon energy projects, expansion in digital services, supply chain management, headquarters operations, R&D and decarbonisation efforts. More importantly, it also covers critical costs, including capital investments and investments in our workforce.

I have a few questions for the Minister.

Can qualifying activities include finance, insurance, aviation and investment in artificial intelligence (AI), given their importance to Singapore's economy? What criteria will the Economic Development Board (EBD) and EnterpriseSG use to determine the total RIC quantum a company is eligible for? Why is the RIC payout spread over four years? Could an earlier payout support higher investment hurdles? What is the total budget for RIC and how will it be funded?

The evolving global tax landscape requires us to monitor developments closely and adapt our strategies to attract investments vital to our economy's future.

Mdm Deputy Speaker, at this juncture, I would like to touch on some worrying views that has been propagated by some Members in this Chamber and beyond.

Firstly, on not approaching this with caution by downplaying the potential impact and over-estimating the benefits. Some Members shared the view that the implementation of BEPS 2.0 will be a windfall or generate clear net benefit for Singapore as it will have a muted effect on investments, a view by Member Assoc Prof Jamus Lim. And in some instances, Members go even as far as planning our operating expenditure from this uncertain perceived benefit.

Secondly, the mischaracterisation of investment incentives, propagating the view that we should restrict our investment toolkit so that we do not race to the bottom when it comes to sovereign tax policies and creating the false impression that grants may be another means for tax avoidance, a view shared by Member Mr Louis Chua.

I am glad that Members Assoc Prof Jamus Lim, Mr Louis Chua and Ms Hazel Poa, in their speeches yesterday have acknowledged the various factors that attract investments into Singapore. These include our skilled and educated workforce, robust infrastructure and technological advancements, political stability and a strong legal framework, including citing that Singapore is number one in IMD World Competitiveness Ranking. Their recognition highlights the effectiveness of the sound, long-term policies implemented by our People's Action Party (PAP) Government and our continued investments in our skilled workforce, advanced infrastructure and the importance of our tripartism.

Let me cite a few examples where these worrying views had been shared.

Firstly, in the Hammer newsletter titled "Why the GST Hike is Not Necessary?", Issue 22, released on 1 July 2022, which was written by Members of Parliament Assoc Prof Jamus Lim and Mr Leon Perera. It cites that the third lever of alternative sources of revenue to the GST hike is the increase in corporate taxation due to BEPS 2.0 and went on to mention "each of these levers [of which one of which is BEPS 2.0], when pulled, could yield more revenues, equal or more than the GST hike", implying that the uncertain perceived net outcome of BEPS 2.0 can, on its own, fund the certainty of our increased healthcare cost.

In the second example, Mr Louis Chua, in his Budget speech on 26 February, on the topic of RIC and BEPS 2.0, shared that "it would be a sad day if countries go against the spirit of the reforms in the first place" and hopes that "additional tax revenue from BEPS 2.0 will not simply be in substance returned to the MNEs through other forms", views which he reiterated against yesterday.

That said, in my professional capacity as someone who is from the industry whose responsibilities is to look at where and how MNEs invest in factories and technology developments globally, I do caution against propagating these two simplistic views.

Mdm Deputy Speaker, the competition to attract investments is indeed intensifying. While various factors contribute to a country's attractiveness, tax remains a factor to consider in building a compelling business case when trying to cut across the investment hurdle, especially when we consider the differential cost of labour, the cost of land, the cost of construction and the increasing grants that are offered in other jurisdiction. And other jurisdictions are not standing still.

And as Members rightfully pointed out, we need to increase spending to strengthen key attraction factors, such as investing more in our workforce and enhancing productivity, objectives that clearly align closely with the intent of the RIC.

Hence, the net effect of BEPS 2.0 remains uncertain at this point, especially when Pillar One has not been considered.

Given the uncertainty surrounding BEPS 2.0, we must avoid equating non-inevitable costs, such as rising healthcare expenses, with the uncertain outcomes of BEPS 2.0 implementation, which is still in its early stages. It is unwise to base essential fiscal policies like healthcare spending on unpredictable future revenues. And worse, double dipping an unpredictable revenue to cover both healthcare costs and grants for investment.

I would also like to caution against the mischaracterisation of investment incentives, such as the Refundable Investment Credit (RIC), as enabling avoidance of the minimum effective tax rate.

While we do our part and comply with the global BEPS 2.0 rollout, we must be cautious not to restrict our investment attraction toolkit. As the Prime Minister highlighted in his Budget speech, the RIC qualifies as a qualified refundable tax credit scheme. It is evident that the design of this initiative is not intended to provide a tax haven but rather to function as a grant aimed at attracting the right investments into Singapore.

This grant focuses on developing new productive capacity, advancing R&D, fostering innovation and supporting decarbonisation efforts. Most importantly, the grant also covers key costs, such as capital expenditure and investment in our workforce, an objective that many Members in this debate have also reiterated.

It is a grant to attract high-value, high-quality investments into Singapore, which are our lifeblood for our survival. In both examples, it is evident that we cannot gamble the future healthcare needs of Singapore with uncertain revenue streams, such as the perceived gains from BEPS 2.0, nor double dip it. Nor should we gamble the future opportunities for our next generation by restricting schemes, such as RIC, which will limit our ability to attract good, high-value investments to provide good jobs for our people, especially in light of increasing competition to attract investments.

On my last point on timing of implementing the MMT Bill, while countries like Hong Kong, Ireland, Switzerland, Malaysia, Vietnam and Australia have begun to move legislation to implement IRR and TTT, there are other countries which have not started implementation, such as the US, the United Arab Emirates, Indonesia, China and India. Given the competition for investment, is there an opportunity for us to delay the implementation? Would that be useful for Singapore?

Mdm Deputy Speaker, in summary, Singapore is committed to being a responsible global citizen by implementing BEPS 2.0. While some Members may opine that the effects may be muted, the criticality of it means that we must tread carefully to avoid the unintended consequences that could weaken our investment ecosystem and economic resilience. Our future relies on it.

The introduction of RIC is a vital tool in our strategy, helping us comply with global tax rules while attracting the right investments to sustain growth and innovation. It is an investment attraction tool that can help us shape our future economy. We must remain vigilant, adaptive and proactive in adjusting our investment toolkit to maintain Singapore's competitiveness in a rapidly changing global environment.

Mdm Deputy Speaker, we cannot afford to gamble our future on uncertain revenue streams, nor can we limit the tools needed to attract investments critical for job creation, economic sustainability and our survival. Our objective must be clear: close gaps in international tax rules, ensuring multinational enterprises (MNEs) pay their fair share, and safeguard Singapore's future opportunities, all while planning prudently for the long term. Notwithstanding the clarifications above, I stand in support of the Bill, Mdm Deputy Speaker.

Mdm Deputy Speaker, I thank Members on both sides of the House for their strong support of the Bills as well as for their comments and suggestions. Let me start by addressing the Income Tax (Amendment) Bill.

Most of the Members who had spoken touched on the newly introduced RIC. I am glad that Members agree that this is a timely and important move to ensure that we attract and support businesses that undertake substantive and high-value economic activities in Singapore. Members' questions generally related to: (a) the types of activities supported; (b) the design; (c) the total amount awarded; and (d) the budget. Let me take these in turn.

Mr Mark Lee spoke on the need to keep the RIC flexible such that it would also support high-value activities that can only realise benefits in the long term. Indeed, we recognise that investments in innovation, R&D and sustainability will take time to bear fruit. For these, we require the RIC to be awarded based on expenditure with clear outcomes, within a reasonable timeframe commensurate with the type of activity undertaken. This is to ensure that the RIC supports projects that benefit our economy.

Mr Sharael Taha and Mr Mark Lee also asked whether the RIC scope could be expanded to include activities, such as finance, insurance, aviation and overseas or cross-border green projects. For a start, we have designed the RIC to support the qualifying activities announced at Budget this year. Nevertheless, we thank Mr Lee and Mr Sharael for their suggestions and will continue to monitor industry demand and trends, and assess how the RIC can be updated to remain competitive and relevant.

Mr Sharael Taha asked about the payout schedule of the RIC. Tax credits under the RIC will be offset against corporate income tax payable in the first instance. This means that companies can start to benefit by using the RICs to offset their corporate income tax payable once they are awarded the credits. The refund of unutilised credits within four years from the time the company makes the claim application is consistent with the GLoBE rules for qualified refundable tax credits.

The Bill allows for regulations to enable RIC recipients to choose to receive the RIC in cash instead of being offset in taxes and Mr Louis Chua asked for the rationale for this. We are considering such a feature as some companies have provided feedback that an option for the RIC to be paid in cash over a fixed schedule would provide greater cash flow certainty. As explained in my opening speech, the RIC is an expenditure-based grant delivered through the tax system. The net fiscal impact to the Government is the same, whether the RIC is used to offset taxes or is refunded in cash.

Mr Louis Chua also asked about the rationale for allowing RIC recipients to offset the taxes of related companies in the same group. Sometimes, companies may set up separate legal entities to better reflect the structure of their business and for risk management purposes. By segregating business activities, companies can better limit their liabilities and protect the assets.

So, for instance, a parent Company A that invests in a new manufacturing plant in Singapore may choose to set up a subsidiary Company B to hire workers and hold the plant assets. By allowing the RIC to be offset against taxes of related companies, we provide flexibility for such business structures. For all intents and purposes, the parent company is still making the investment in Singapore, the net fiscal impact remains the same and the underlying principle of supporting qualifying local expenditure incurred also remains unchanged.

Mr Sharael Taha asked how our economic agencies would determine the total RIC quantum that a company would be eligible for and the total budget and funding for the RIC. The RIC support would be commensurate with the size and quality of businesses' economic contributions to Singapore. Companies that invest more in Singapore or commit higher quality investments will receive more support.

The RIC will draw from the same funding sources that support the other schemes in our economic toolkit. These include our economic agencies' annual budgets as well as the National Productivity Fund (NPF). The Member might recall that we had topped up the NPF at Budget 2024 with S$2 billion to support the RIC and other investment promotion efforts. Our economic agencies will be publishing more details of the RIC soon to provide further clarity to businesses.

Next, let me address Members' comments on the MMT Bill. These broadly relate to: (a) the operation of the Pillar Two rules; (b) the consistency of GLoBE implementation across jurisdictions; (c) the compliance burden of the DTT and multinational enterprise top-up tax (MTT); (d) estimated revenue impact and use of revenues; and (e) economic competitiveness.

Several Members have sought clarifications on how the DTT and MTT will operate. Mr Neil Parekh and Mr Louis Chua asked how the DTT and MTT would affect specific groups of businesses, such as existing tax incentive recipients and businesses in certain sectors.

The DTT and MTT will apply to all large MNE groups with a global revenue of at least €750 million in at least two of the four preceding financial years. DTT and MTT apply to such MNE groups in all sectors unless specific exclusions under the GLoBE rules are applicable, such as for international shipping income. DTT and MTT also apply, regardless of whether the large MNE group is a tax incentive recipient. If a large MNE group's effective tax rate on its Singapore profits is below 15%, the DTT will top up its effective tax rate to 15%.

Mr Don Wee asked how double taxation under the MTT would be prevented. The GLoBE rules provide for the order of imposition of top-up taxes. For example, DTT will apply before any MTT imposed by other jurisdictions. This ensures that taxing rights are coordinated and prevents multiple jurisdictions from imposing top-up taxes on the same income.

Mr Don Wee also asked about the exclusion of investment entities from the DTT. The exclusion is allowed under the GLoBE rules. Apart from Singapore, several other jurisdictions have also taken a similar approach. For an entity to qualify as an investment entity, it must meet the requirements specified in the GLoBE rules. The exclusion is to preserve tax neutrality such that the income of the investment entity is only taxed once at the investor level. As with all other rules, MOF and IRAS will monitor and ensure that the rules are applied as intended.

Mr Louis Chua also asked about the implementation of the subject-to-tax rule (STTR). The STTR defines "developing countries" for its purposes as those with gross national income per capita below a specified threshold level. Singapore does not qualify under this specific definition. As a member of the Inclusive Framework, Singapore is prepared to implement STTR in our tax treaties with developing Inclusive Framework members when requested by them. This can be done bilaterally or by signing the multilateral instrument. We are studying the best way to implement STTR.

Mr Don Wee asked about the mechanisms to ensure consistency in the implementation of GLoBE rules across jurisdictions. Ms Usha Chandradas also asked about the impact on Singapore's DTT and MTT if China and the US do not implement the GLoBE rules. Mr Sharael Taha shared the same concern and asked if we should delay our implementation of DTT and MTT.

As mentioned in my opening speech, many jurisdictions have either implemented similar rules or intend to do so in 2025. If we do not impose the DTT and MTT, affected MNE groups will have to pay the top-up tax to other jurisdictions instead. Hence, it is in Singapore's interest to push ahead with the implementation of both DTT and MTT so that we do not cede tax revenue to other jurisdictions.

The GLoBE rules have been agreed by more than 140 members of the OECD Inclusive Framework, including China and the US. Inclusive Framework members that implement the GLoBE rules must do so in a way that is consistent with the outcomes provided for under the rules. There will be a peer review process to assess jurisdictions' implementation for consistency with the rules. All Inclusive Framework members, including those that do not implement the GLoBE rules, are required to accept the application of the GLoBE rules by other jurisdictions.

Ms Usha Chandradas and Mr Neil Parekh also asked about the dispute resolution process for the GLoBE rules. There is broad international agreement that a robust dispute resolution mechanism is important for MNEs. However, discussions on the details are still ongoing at the Inclusive Framework. MOF and IRAS are participating in these discussions and will provide guidance when there is greater clarity.

Ms Usha Chandradas and Mr Neil Parekh also asked whether the GLoBE rules would affect Singapore's network of Avoidance of Double Taxation Agreements (DTAs). Based on guidance from the Inclusive Framework, the GLoBE rules are compatible with international taxation agreements like our DTAs. The vast majority of our treaty partners are members of the Inclusive Framework and have agreed to these rules.

Several Members, including Mr Yip Hon Weng, Ms Usha Chandradas, Mr Mark Lee and Mr Don Wee, have suggested simplifying the administration of the DTT and MTT to reduce the compliance burden on affected MNE groups. Let me assure Members that this is a priority for the Government. MOF and IRAS have simplified the administrative requirements where possible. For instance, an affected MNE group will only be required to register with IRAS once, for both DTT and MTT. We have also aligned the filing timelines for DTT and MTT returns to simplify compliance.

Like Ms Usha Chandradas and Mr Don Wee, we recognise that the new rules can be complex and MNEs may need time to become familiar with the rules. IRAS has been working closely with businesses and tax professionals over the last two years to prepare MNEs for the changes. This includes consulting businesses on the parameters for DTT and MTT and working with the industry and the Tax Academy to conduct training for tax professionals. This is an ongoing process. IRAS will learn from experience, continue to engage stakeholders and continue to provide guidance on MNEs’ obligations.

Several Members, including Mr Mark Lee and Mr Neil Parekh, had expressed concerns about penalties if businesses fail to comply with the new rules. To allay businesses’ concerns regarding penalties, IRAS will adopt a light-touch approach in the initial years of implementation, if an MNE group can demonstrate that it has taken reasonable measures to ensure the correct application of the GloBE rules. Mr Don Wee also asked if IRAS would be adequately resourced to administer the DTT and MTT. IRAS has set up dedicated teams to develop the necessary tax administration processes and IT systems to ensure smooth implementation of the DTT and MTT.

Next, moving on to comments on the potential revenue impact of the DTT and MTT. As mentioned by Prime Minister Lawrence Wong during the Budget debate this year, any DTT or MTT revenue will only be collected from FY2027. In the short term, the implementation of the DTT and MTT will likely lead to additional revenues. If so, then, as we have indicated, we will invest the revenue wisely to enhance our competitiveness, an approach that is supported by Ms Hazel Poa, Mr Don Wee, Mr Yip Hon Weng, Mr Louis Chua and Assoc Prof Jamus Lim.

However, what is still not clear is how much additional revenue we will collect and how long it will last. And this was the point that was raised by Mr Sharael Taha. This is because MNEs and other governments are also working out their responses to the GloBE rules. Whether we will have sustained revenue gains from BEPS and what our net position will be after taking into account our economic spending plans remains to be seen and is still uncertain.

Mr Yip Hon Weng and Mr Louis Chua have suggested that we use the revenue gains to support our healthcare expenditure. We agree that it is important to support our healthcare expenditure. But waiting to see what comes from DTT and MTT would be far too late. This would only be collected from FY2027.

By 2030, one in four Singaporeans will be aged 65 and above, with consequent increases in healthcare expenditure. That is why, rather than waiting for revenues that are uncertain and which would be too late, we have made structural revenue-raising moves, including the GST increase, to fund this expenditure. We have planned ahead for this and supported Singaporeans with a substantial Assurance Package to cushion the impact.

With respect to revenues from DTT and MTT, Members can be assured that the Government will see how to deploy revenues for the benefit of Singaporeans, to continue investing in our people, our economy and our infrastructure.

A few Members, including Assoc Prof Jamus Lim and Mr Louis Chua, had suggested that BEPS 2.0 would remove the race to the bottom for corporate tax rates. That is indeed the intent of BEPS 2.0. But we must also look at the reality. Whilst BEPS 2.0 may reduce the room for tax competition among countries, it does not reduce competition for investments.

Ms Hazel Poa was of the view that MNEs are highly unlikely to pack up and leave Singapore just because Singapore is implementing the DTT and MTT. While we certainly hope that that is the case, we would be wise not to take anything for granted or to be complacent. Again, a point that Mr Sharael Taha made. The global economic landscape has become even more competitive in recent years. As mentioned in my opening speech, major economies like the US, Germany and Japan are rolling out generous incentives to attract investments. That alone should tell you that investments are important to countries.

But to be clear, Singapore's competitive advantages have never been on tax factors alone, and this was recognised by Members of the House, including Assoc Prof Jamus Lim, Mr Louis Chua and Mr Mark Lee. For instance, Ms Hazel Poa acknowledged that we have strong advantages compared to other countries in the region, such as a highly educated workforce, a well-developed and globally connected financial system and excellent connectivity. Mr Louis Chua also highlighted other strengths, such as having robust infrastructure and a well-established legal system, and he cited many proof points, including the fact that Singapore was ranked second in the IMD World Talent Ranking, that we were fourth in the World Financial Centre's ranking and, in June 2024, Singapore took top spot in the IMD World Competitive Rankings.

So, I want to thank all Members, including the Opposition Members, for recognising the Government's efforts in establishing these advantages, which took a long time to build over many years and many decades, and these outcomes have been the result of consistent efforts on the part of the Government in order to create a vibrant and competitive economy over the years.

Assoc Prof Jamus Lim suggested that we channel DTT and MTT revenues towards developing productivity and innovative capacity, rather than foreign direct investments. I would make two points in response. First, foreign direct investments and productivity and innovation are not mutually exclusive. In fact, encouraging foreign direct investments is one way we can raise productivity and innovative capacity in our economy. Foreign direct investments have a strong value proposition. They bring with them new technologies, market access and business models that are internationally competitive. Second, productivity and innovation have always been mainstays of our economic strategy and take prominence in almost every Budget. So, in short, it is not one or the other, but we must have an array of economic strategies in order to grow our economy.

At the same time, we will continue to invest in our workers and local enterprise ecosystem, which form the backbone of our economy. SMEs and local companies with skilled workers and strong innovation capabilities will enhance Singapore's value proposition as an economic hub and strengthen our position in the global supply chain. We will also need to do more to sustain our other areas of competitive advantages, such as a skilled workforce, a vibrant innovation ecosystem, political stability, a strong legal system, quality infrastructure and connectivity, and also a vibrant arts and culture scene. These are important factors that businesses consider when making an investment.

We will use the additional revenue from the DTT and MTT to invest significantly in many of these areas. Our investments into future infrastructure, for example, put us in good stead for sustainable and resilient future growth. These include the upgrading of our nationwide broadband network and artificial intelligence infrastructure, Changi Airport Terminal 5, Tuas Mega Port, as well as critical infrastructure to facilitate Singapore’s transition to cleaner energy and safeguard our energy security.

Mr Louis Chua said he hoped that the additional tax revenues from DTT and MTT would not be effectively returned to the affected MNEs. Let me reiterate that we intend to fully comply with the GloBE rules and have no intention to collect DTT and MTT only to return it back to affected MNEs. Members should not mistake reinvesting the additional tax revenues from DTT and MTT into our broader economy, with returning DTT and MTT to affected MNEs. They are two separate things. We will reinvest revenues. But we have no intention to round trip anything in derogation of the GloBE rules.

Fundamentally, our economic philosophy has always been to support all companies that can bring value to Singapore, not just MNEs. This has been done through both tax and non-tax measures. Any company that wins in Singapore is a win for Singapore, regardless of whether it is an MNE or SME. These winners will strengthen our ecosystem and create better jobs for Singaporeans. This philosophy will not change with the introduction of the DTT and MTT.

If a company is prepared to make a substantive investment in Singapore, carry out high-value business activities here and provide good jobs for Singaporeans, we stand ready to support them, regardless of whether the company is an SME or MNE. Whatever support we give, we will ensure that it is compliant with the GloBE rules.

Ms Hazel Poa also suggested that MNEs benefit more than SMEs from our corporate tax system. We should look at this not only from the tax perspective, but also consider the amount of support that the Government provides to SMEs through grants and other schemes that we have. We have always supported our SMEs in their growth and productivity journey. Over the years, we have introduced many initiatives targeted at our SMEs, such as the double tax deduction for internationalisation, the SMEs Go Digital programme and the Productivity Solutions Grant. We have also set up SME Centres to support SMEs in exploring solutions to grow their businesses.

We have also introduced newer schemes more recently, for instance, the Singapore Global Enterprises initiative and the Enterprise Innovation Scheme at Budget 2023, and the enhancement of Partnerships for Capability Transformation scheme at Budget 2024. Many of these schemes are available only to SMEs, and, for many schemes, SMEs also receive higher support. This Bill also contains specific support for SMEs. As mentioned in my opening speech, the enhancements to the Renovation and Refurbishment scheme will simplify compliance and give SMEs more flexibility to manage their cash flow needs.

We will continue to do more. In April this year, the Government set up an Inter-Ministerial Committee for Pro-Enterprise Rules Review to oversee Government efforts to improve regulatory efficiency and reduce compliance burden for our SMEs and help them to better navigate Government rules and regulations. Rest assured we will continue to support our workers and SMEs to thrive in a more uncertain and competitive business environment. I encourage all SMEs to take advantage of available Government initiatives to grow, digitalise and internationalise.

To conclude, the two Bills introduce major changes to our corporate tax regime. The provisions seek to anchor high-quality investments in Singapore, ensure that our tax system remains relevant and fair to businesses and individuals, and keep Singapore in step with international tax developments. The Government will continue to work closely with all stakeholders to ensure a smooth transition. The Government will also continue to invest in our economic competitiveness so that Singapore remains one of the best places to do business. Mdm Deputy Speaker, I beg to move.

Mdm Deputy Speaker, I have two clarifications, first, for Mr Sharael Taha, and then one quick one for Second Minister Indranee Rajah.

For Mr Sharael Taha, I am wondering if he will first acknowledge that BEPS 2.0 will, at the minimum, lead to an increase in net revenue, as has been estimated by several independent studies, such as the OECD or academics like Gabriel Zucman at Berkeley, or perhaps he has his own estimates that would suggest that there would be a net revenue loss, in which case, I hope that he will be able to share this with the House. If so, I wonder if he would not also agree with me that we should at least plan for the possibility that such a revenue stream, however uncertain, should at least be appropriately channeled to specific uses. After all, we would expect our fine professionals at MOF to engage in such a scenario analysis, lest the Ministry ends up inadvertently with higher-than-expected revenues, which would implicitly suggest then that we are overtaxing the people over and above the nation's current expenditure needs and, hence, putting a crimp on private economic activity.

Finally, my question for Second Minister Indranee is that while I do not think for a moment that foreign direct investments and improvements in technology are exclusive – indeed, I had explicitly referred to that complementarity in my speech – I hope she would at least accept my argument that we should not be pursuing capital for its own sake, but rather to focus on the importance of reinvesting not just in building up more physical capital, but importantly also the human capital of our people.

Thank you, Mdm Deputy Speaker. Just to answer the query that Member Assoc Prof Jamus Lim asked. If he would have heard my speech, I mentioned that while it may increase short-term revenue, MNEs could adjust strategies by relocating operations of headquarters, limiting the sustainable gains – something which Minister Indranee Rajah has also mentioned.

So, yes, it may increase the short-term revenue. However, because we do not know how MNEs will react to it, there may be a possibility that it is not a sustainable gain.

The point I was truly making was about how we approach this situation when investments are such a critical thing to the survival of Singapore. The point I was making was not to approach this in a simplistic manner and underplay the effect of it and overestimate the benefits of it, to the extent of banking it in such that the increase in corporate taxes alone because of BEPS 2.0 can by itself cover the revenue that is generated by the increase in GST.

So, it is about how do we approach this situation and about us being more cautious about it, and not count the chickens before the eggs hatch.

I thank Assoc Prof Jamus Lim for his clarification. He asked whether I could agree that we should not invest in capital for the sake of capital and also to acknowledge the importance of human capital.

This Government never does anything just for the sake of a single thing. This Government is driven, first and foremost, by the well-being of Singaporeans, the importance of making sure that Singaporeans have personal growth, good development that will enable them to have good jobs, good incomes and, therefore, to have good standards of living and to be healthy and to do well in life.

And so, if you look at all that the Government has done, not just in the past years but in the past decades, at the heart of it has been the development of Singaporeans. Nowadays, we call it human capital. When we first started out, we talked about education. If you look at the amount that we put into education, I mean, it is the second highest amount in our Budget. And then, from primary and secondary, which was the initial investments into our human capital, we then went, in the last decade, into SkillsFuture, recognising that as people come out into the workforce, they will need to continue to learn to grow. [Please refer to "Clarification by Second Minister for Finance", Official Report, 15 October 2024, Vol 95, Issue 143, Correction By Written Statement section.]

And then, in this year's Budget do not forget we had the ITE Progression Award as well as the various SkillsFuture programmes. So, I think where I can wholeheartedly agree with Assoc Prof Jamus Lim is the importance of investment in human capital, which we will do.

But we also obviously have to do investments into hard capital because we have just spent about two hours discussing the MRT. If we want people to have a good quality of life, you must have good quality infrastructure. So, we do need to make sure that we have good capital investments as well. Buildings, making sure we have homes, making sure that the city is a city in nature. All of those things. So, we can certainly agree that we want the best for Singaporeans and will invest in our human resource.

Thank you, Mdm Deputy Speaker. Just a few related clarifications on RIC.

What is the current fiscal impact of our existing tax incentives and how will this change with the passing of the Bill? Correspondingly, what is the estimated net fiscal impact of the RIC on an annual basis? In other words, is there guidance by MOF to EnterpriseSG or the EDB on the budget for RIC, as this will be directly linked to some of the targets of EDB, such as your fixed asset investment, job creation and so on.

The other question is, in terms of the potential companies that could qualify for the RIC. In terms of the guidance to be published, would the criteria on the assessment be also published? And is there any timeline for this, as it was previously mentioned that it was going to be out by the third quarter?

Let me see if I got his questions correctly. On the RIC, Mr Louis Chua's question was on who would get it and what would be the criterion for getting RIC, is that right?

I had mentioned that in my opening speech. Essentially, the ones that can get the RIC credits would be those who make investments in high-value and substantive economic activities. So, we have kept it broad at the moment, but there is a certain sense to that – the development or expansion of manufacturing facilities, setting up of headquarters and services, pursuit of R&D, innovation activities, commodity trading, decarbonisation. All of these are part of how they can basically add to or grow our economy and support our green transition.

And on the question of guidance and timelines, give IRAS a little time to work on that. We will put it out, but as I mentioned in my speech, we are working and engaging with the stakeholders. But we will make sure that there is appropriate guidance when the time comes for them to implement it.

Thank you, Mdm Deputy Speaker. I have one clarification for Minister Indranee. Does the Government have any plans at this point in time to devote more resources to the development of international tax education in Singapore at the tertiary level or beyond?

The short answer is that we would love to, but we are always being called upon to give people education on many things. And every time we are asked, Minister Chan Chun Sing flinches because it always goes back to the Ministry of Education (MOE). So, we have to educate on mental health, we have to educate on being green. We have to educate on many things. We will do our best on this.

It is a technical subject; it can be quite complex. Just on ordinary tax, it is tough enough, let alone international tax rules. But the key thing is to put it out in as ordinary, plain layman language as we can. Where possible, we will work with MOE to see what can be included in the general Economics modules. Obviously, students in the Institutes of Higher Learning will have to deal with it, if they are dealing with tax modules. But other than that, I would say that the IRAS website is a good place to start and so are the BEPS websites.