TAX CHANGES FOR COMPANIES AND BUSINESSES

Corporate Income Tax

Last year, a 10% corporate tax rebate was given to assist companies affected by the economic downturn. This rebate will not be extended for a second year because the economy has rebounded strongly. Our corporate tax rate was last reduced to 26% in 1997 and remains generally competitive at this level. However, in recent years, many developed countries have been lowering corporate taxes to stimulate investments and if this trend continues, our tax competitiveness will be eroded over time. I have therefore decided to take a cautious next step by reducing the corporate tax rate by 0.5% to 25.5% with effect from Year of Assessment 2001. Maintaining a competitive tax regime is a cornerstone of our fiscal strategy and the tax cuts over the years have contributed greatly towards our economic growth. Revenue loss arising from the reduction in corporate tax rate is estimated at $140 million annually.

Extension of Property Tax Rebate on Commercial and Industrial Properties

In 1998, against a background of economic recession, a 55% property tax rebate for commercial and industrial properties was granted for two years, starting 1st July 1998. Although the real estate sector has shown recovery in the past year, rental markets remain weak. I have therefore decided to extend the rebate for another year, up to June 2001, but at a lower rate of 25%. This will also help to ease cost pressures on companies generally. Revenue forgone is estimated at $250 million. HDB, JTC and other Government agencies owning properties will pass most of the rebate to their tenants. I would also urge private landlords to do likewise, and pass on at least half of the rebate to their tenants.

Further Stamp Duty Relief for Corporate Restructuring and Merger

Currently, section 15 of the Stamp Duties Act provides stamp duty relief for corporate restructuring and merger. As section 15 is a relieving section, qualifying conditions have been set for the concession. In recent years, we have seen an increase in the number of companies involved in restructuring or merger to re-align their businesses, so as to improve on cost-efficiency and better deliver products or services to customers. With these developments in mind, I have therefore decided to expand the scope of stamp duty exemption to a wider spectrum of corporate restructurings and mergers. In addition to the existing exemptions, relief will be granted to the transfer of assets between associated companies, the restructuring and merger of listed companies, and companies which intend to list or further list their shares after the exercise.

Presently, if the transfer involves less than 90% of the company's shares, or if the consideration is made in cash, the exercise would not qualify for the relief. I have decided to lift these two conditions for the transfer of assets between associated companies, defined as one owning 75% or more of another company, or a third company owning at least 75% of both companies.

Currently, publicly-listed companies and companies which intend to list their shares after the restructuring or merger are not able to meet the condition of a 2-year moratorium on changes in beneficial ownership of the shares. I have decided to lift the 2-year moratorium on the consideration shares held by public shareholders, and also allow companies to float a portion of their issued share capital up to the minimum listing threshold required by the SGX for its mainboard listing. This threshold is currently 25%.

These changes will take effect shortly when details are announced by IRAS.