Why is India considering a tax-free dividend?
Singapore’s ruling National People’s Congress (NPC) is expected to announce a tax free dividend to be paid in 2021 as part of its efforts to diversify its economy away from heavy reliance on oil, gold and cash.
It is expected that a 1% dividend would be paid on 1 million shares of the state-owned Singaporean Resources Corp, which has a market capitalisation of $7.4 billion.
It will be a first for Singapore, which is one of the most tax-dodging nations in the world.
The company, Singapore-listed Singapore Resources, has been under investigation by authorities over allegations of tax evasion.
“The Singapore government has always been clear about the need for diversification of Singapore’s economy,” said Michael Coughlan, chief executive of Singapore-based property consultancy and tax consultant.
“But we are not quite there yet.”
Singapore is currently the world’s fifth largest economy and has the second-highest share of GDP in the OECD, behind the United States.
It has also been a leader in the use of technology to manage wealth and create wealth.
Singhiras government has also made efforts to cut taxes in recent years, including introducing a property tax exemption of 3%, the highest in Asia.
But the Singaporean government has been criticised for its handling of its economy, and the country’s tax burden has ballooned since 2008.
The country is one in the top 10 in terms of tax burden, according to a report by consultancy Gartner.
China has the highest rate of income tax in the region, with Beijing imposing a 20% tax rate on incomes over 1 million yuan ($30,000).
The Chinese government also imposed a 10% tax on foreign direct investment (FDI) last year.
A similar tax is proposed for Singapore by the NPC, which will be decided by the legislature.
Under the proposal, Singapore would be exempt from taxes and charges on its earnings and capital gains for five years, after which it would pay tax on income and capital earned.
This would be a significant tax cut for Singaporeans.
Tax experts say the dividend would also encourage other large exporters to invest in Singapore, potentially raising the countrys gross domestic product (GDP) to 10.5% of GDP by 2020.
According to the Tax Justice Network (TJN), a Singapore-focused group that supports lower tax rates, Singapore has a GDP per capita of about $23,000 and an income tax rate of about 8%.
“It will make a real difference to Singaporeans if we get a dividend of that size,” said Mr Coughlon.
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