In the midst of significant global shifts in industrial policy and tax regulations, Singapore is encountering challenges that require strategic responses. The recent US Chips and Science Act, signed by President Joe Biden, allocates $52 billion for scientific research and semiconductor manufacturing, aiming to revitalize the US chip industry, create jobs, and bolster national security.
Simultaneously, sweeping export controls have been introduced by the US, targeting China and prompting similar policies in Europe and Asia to safeguard their positions in the chip industry. These developments pose challenges for Singapore, known for attracting multinational investments, as rising economic nationalism and protectionism impact its ability to utilize tax incentives to attract new investments.
Furthermore, the global corporate tax rules overhaul, including BEPS 2.0 proposing a minimum effective tax rate of 15% for multinational groups, limits Singapore's tax advantages. The country plans to implement a domestic top-up tax for large multinational enterprises from 2025 in response to these global tax developments.
The rising cost of doing business, particularly elevated rental costs for residential and commercial premises, has raised concerns among global companies in Singapore. The impact on talent relocation is also significant, with multinational firms signaling their preferences in policymaker consultations and expressing readiness to relocate staff if relief from rising rental costs is not provided.
In response to these challenges, experts suggest that Singapore should consider providing grants with more flexibility to support capability building and environmental, social, and governance (ESG) investments. Additionally, new growth areas such as sustainability and space technology require customized support, including land sites, ready-built facilities, and talent facilitation for specialized skills.
As BEPS 2.0 reduces tax incentives, Singapore may need to consider subsidies and taxable cash grants to support business spending. Rejigging business incentives and seeking implementation clues from other jurisdictions are also recommended, given the uncertainty surrounding the rollout of complex new tax rules.
Initiatives targeting digitalization, enterprise capabilities, and skills upgrading are available, with ongoing support for local capabilities, especially in sustainability-related fields, to strengthen expertise in emerging areas. Despite these challenges, Singapore's business-friendly environment and flexible workforce continue to make it a top choice for companies entering Asia, particularly in the chip industry, digital economy, and advanced manufacturing expansion.
In conclusion, while Singapore faces challenges amid global shifts in industrial policy and tax rules, strategic responses and targeted support for emerging areas can help the country stay competitive and continue to attract multinational investments.