Singapore slashes corporate tax by 2%

Singapore, Feb 15 (UNI) In a move to retain the status of Business Hub in Asia, Singapore has decided to cut its corporate tax by two percentage points to 18 per cent, Second Finance Minister Tharman Shanmugaratnam announced in Parliament today.

The cut in corporate tax rate would take effect from the assessment year 2008 and would cost the government 800 million dollars a year in revenues.

Presenting this year's Budget in the House today, Mr Tharman said the tax cut would bring more investments into Singapore.

He cited examples of other governments around the world having dropped their corporate tax rates over the last five years, including France and Eastern Europe.

He noted that emerging Eastern European economies were now presenting serious competition, offering tax rates as low as 15 per cent in Lithuania while France was looking into reducing its tax rate to 20 per cent from 33 per cent.

However, Mr Tharman said, goods and services tax (GST) will be increased by two percentage points to seven per cent from July 1.

''It was prudent to implement the increase now in one go, while Singapore economy was still strong.'' While this year the hike in CST will raise additional revenues of 750 million dollars this year, from 2008 1.5 billion dollars would be added to the government kitty per year.

Singaporeans will be compensated with a substantial offset package, which would cost the government four billion dollars in total over five years, Mr Tharman said.

UNI