According to Jeremy Hunt (the UK Foreign Secretary), Singapore can serve as a model for the post-Brexit UK. In an article written by him for Daily Mail in December 2018, he discusses the history of Singapore and admires its transformation “from a tiny territory devoid of natural resources into the world’s eighth-richest country”. But what reforms does the UK need to make to adopt the Singapore model? The answer needs to mention at least three, namely, limitation of customs duties, lowering taxation, and stimulating business incentives. Each of them will be examined in more detail below.
Limitation of customs duties
Singapore imposes customs duties on four categories of goods only, namely, (i) intoxicating liquors, (ii) tobacco products, (iii) motor vehicles, and (iv) petroleum products and biodiesel blends. All other products are not subject to customs duties. In comparison, at present, the UK must apply the EU Common Customs Tariff which imposes customs duties on a large variety of products. As a result of its free-market economy, Singapore’s economic freedom score is 88,88, which makes the small country the 2nd freest economy in 2018.
The corporate tax in Singapore is just 17%. Furthermore, a partial tax exemption as well as a three-year start-up tax exemption is available for qualifying start-up companies. The personal income tax is levied on the basis of a progressive tax rate ranging from 0 to 22%. The corporate and the personal tax rates are relatively low in comparison with the tax rates applied by most of the West European countries. For instance, although the UK charges a corporate tax rate of 19%, its personal income tax rate can go as high as 45%. The standard rate of the French corporate tax is 33%, whereas the personal income tax can go up to 45%.
Stimulating business incentives
Singapore offers numerous incentives aiming to stimulate the development of local businesses. For example, the Pioneer Certificate Incentive and the Development and Expansion Incentive encourage companies to expand their capabilities and conduct new economic activities in Singapore. The Intellectual Property Development Incentive promotes the development and use of intellectual property materials.
If the post-Brexit UK adopts a free-market approach, a low-tax system, and strong corporate incentives, it may enhance its reputation as a business hub and attract more investors. On the 17th of January 2019, Boris Johnson reaffirmed the low-tax ideas of Jeremy Hunt by stating that the UK must establish the most favourable tax environment in order to stimulate the income needed by the country. However, critics of the pro-business approach argue that it may lead to lowering of workers’ rights as well as a decrease of consumer and environmental protections. It remains to be seen what course the UK will take after Brexit if and when it occurs.
Ask Us Anything
If you want a legal creative sharp tax advice, if you have a remark, an idea… if you want to check a loophole, or you want a second opinion, a company… a bank account or you just want to chat…