SINGAPORE: The corporate tax cut in the United States will be a boon for Singapore firms operating there, but its impact on inbound investment flows remains to be seen, analysts say. The cut from 35 per cent to 21 per cent will make a big difference to local companies with investments there, especially as Singapore does not have a tax treaty with the US, noted Withers KhattarWong partner Eric Roose.
Singapore firms agreed with his assessment. ST Engineering spokesman Lina Poa said: “The tax cu. will benefit ST Engineering as our US subsidiaries contribute a significant share of our total revenue.”
Any investments that we make are evaluated on their strategic fit and other factors, including after-tax returns. We welcome the US tax overhaul and will continue to evaluate opportunities that fit our business strategy,” Ms Poa added.
Mapletree Investments said: “This is a positive development… and we are still studying the other changes in detail.”
But while the tax cut could boost investment flows into the US, the question for Singapore is whether American companies might now re-evaluate their investments here.
After all, as Mr Roose noted, the difference between the US and Singapore’s corporate tax rates is now just 4 percentage points.
“The general effect overall will be that US companies will do more things in the US and bring their profits back. Companies will begin to reassess their global structures and whether they really need foreign operations, or as much as they have now,” he said.
“They will likely study whether the cost of operating in that country is still offset by the tax savings now.” “Multinationals that were, on the margin, considering offshoring some production may pause to take advantage of the lower domestic rates, but the factors of production that are Asia oriented, especially those related to the electronics supply chain, are very unlikely to move back to the US,” he noted.
“The labour cost advantages, economies of scale, and the component ecosystem is well ingrained in Asia, with little risk of foreign direct investment diversion to the US.”
