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Singapore: Participation in G20 Tax Avoidance Prevention Plan

(June 22, 2016) On June 16, 2016, Singapore announced that it will participate in a tax avoidance prevention plan approved by Group of Twenty (G20) nations that was originally developed by the Organisation for Economic Co-operation and Development (OECD). (Marius Zaharia, Singapore to Join G20 Plan Against Tax Avoidance, JAKARTA GLOBE (June 16, 2016).) A key feature of the plan is the enhancement of communication among the G20 states through the adoption of a “Common Reporting Standard.” (Pat Sweet, G20 Endorses OECD Tax Avoidance Timetable, CCH DAILY (Nov. 17, 2014); Common Reporting Standard, OECD website  (last visited June 21, 2016).)

The plan is designed to have profits taxed where the value was created, i.e., the site of the economic activities that were profitable, rather than having additional profit being attributed to the portion of the business located in the jurisdiction with the most favorable tax rules. This is an issue for Singapore, as companies, including Apple and Google, have sometimes shifted their revenue to list it as originating in Singapore, based on having a portion of their operations there, to benefit from the tax environment. (Zaharia, supra.)

The Finance Ministry of Singapore issued a statement noting that the city’s tax policies “are designed to support substantive economic activities, in order to create skilled jobs and build new and enduring capabilities in Singapore. … We do not condone activities aimed at base erosion and profit shifting.” (Zaharia, supra.)

The G20 was founded in 1999 and is “the premier forum for its members’ international economic cooperation and decision making. Its membership comprises 19 countries plus the European Union.” (About G20, G20 TURKEY 2015 (last visited June 20, 2016).) OECD “provides a forum in which governments can work together to share experiences and seek solutions to common problems.” Its purpose is “to promote policies that will improve the economic and social well-being of people around the world.” (About the OECD, OECD website (last visited June 20, 2016).)