A countries economy greatly depends on its tax system. Though different countries have different tax systems and for the kind of system they follow. A lot of things influence tax system and then the tax system adversely affect the economy of the country.
Singapore is considered to be the most hassle free country as far as the tax system is concerned maybe that’s the reason businessman flock to Singapore to set up business there. Even registering the business in Singapore and then targeting other Asian countries from there makes it easy for the firms. Singapore has a very simple tax system, in fact during the time of the recession when countries were increasing the existing tax rate or introducing new tax just to meet the financial crunch in the economy; corporate income tax in Singapore was reduced to only 17 per cent. This was done so that corporations have enough funds to run the business without having to worry about any extra tax that they would need to pay. After all, the economy of the country totally depends on the smooth running of the enterprise. This resulted in thousands and thousands of offshore companies starting up business setup in Singapore and hence Singapore ended up having an increased tax collection over all. This was the smartest move any country could have come up with.
Singapore tax system and tax rates are very simple and are meant to be easily comprehended and be easy for both sides business of the country and the economy. Hence Singapore has the policy of a single tax so apart from the corporate tax of 17 per cent there is no other tax. There is no tax not even on capital gain or dividends. Singapore have treaties with various countries around the world to help the companies based in their country and having networks all around just to avoid double taxation.
Apart from that Singapore also have a lot of tax benefits for the new business, like a company doesn’t need to pay any tax for income up to SGD $ 100,000 in the first three years and has a very nominal tax rate of 8.5 per cent for the income up to SGD $ 300,000. Again, there are special tax benefits for specific industry, like research and development each year. These are the reasons why various foreign companies having business set up in Singapore. Apart from the incredible business infrastructures there is a vast opportunity for the growth of such companies.
The easy tax system has always been one of the reasons for such a stable economy of the country and the reason to attract companies from other countries to set up a company in Singapore.