Singapore, a Southeast Asian city state whose early economic progress was closely tied to investments from foreign multinationals, presented a budget on Monday that has few incentives to draw more of such investors, one tax expert said.
Speaking to CNBC's "Rundown" on Tuesday, PwC Singapore's tax leader Chris Woo said the absence of such big-bang tax measures could mean that Singapore is feeling comfortable with its position amid an increasingly competitive tax environment.
"It's interesting to see there isn't anything spectacular that would grab the attention of the foreign investors. Last night in the US time or European time, if someone was looking to invest in Singapore or was waiting for goodies in the budget, there weren't really any big goodies for these multinationals outside Singapore to attract them to Singapore," said Woo.
"Singapore, at this stage of global tax competitiveness, believes that it's at a good position at the moment. There could be some tweaks later on. Singapore of course has a very substantial incentive regime… it appears to be that Singapore is investing for the long term," he added.
The city state's low tax regime and its current tax incentives to lure multinationals has come under the spotlight in recent years. The Organisation for Economic Cooperation and Development's global initiative has worked to close the gap in international tax rules that allow companies to artificially shift profits across borders.
The OECD's initiative is known as the Base Erosion and Profit Shifting (BEPS) project.
"The BEPS project seeks to ensure that companies are taxed where substantive economic activities are performed. Singapore supports this principle. We are, in consultation with businesses, refining our schemes and implementing the relevant standards," Finance Minister Heng Swee Keat said on Monday while delivering his budget speech.
Ajay Sanganeria, tax partner at KPMG in Singapore, said in a note that the country's compliance to the BEPS initiative enhances its reputation as a legitimate place to do business.
"Singapore will definitely stand out as a low tax yet BEPS-compliant market to [multinational corporations] looking for jurisdictions in which to invest," he said.
Today, even as the country increases its focus on building local capabilities, it continues to work on attracting foreign companies with its Economic Development Board targeting to draw between S$8 billion and S$10 billion in investments this year.
On Monday, Heng unveiled an annual Budget statement that featured strategies to tackle a rapidly changing economic climate and advances in technology. Among measures announced by Heng include help for local companies and workers to gain capabilities, higher corporate tax rebate and a new carbon tax.
For the fiscal year starting in April 2017, Singapore's expenditure is expected to grow by S$3.7 billion from a year ago to S$75.1 billion with an overall surplus of S$1.9 billion, down from the previous year's S$5.2 billion.
While many observers lauded the budget as being expansionary and inclusive, some questioned the lack of assistance to smaller companies, who are grappling with rising business costs.
Kurt Wee, president of the Small and Medium Enterprises Association, said on CNBC's "Squawk Box" that rising costs are a concern flagged by the community over the last three to four years, but there have not been sufficient measures to address that.
"You've got labour cost that's quite a bit of pressure on businesses, you've got rental cost, compliance cost… In the near term, you're going to see levies going up, we don't see many cost measures that are going to help SMEs in this climate," he said.