Singapore Amber Road condo sets new price benchmark

Singapore Amber Road condo sets new price benchmark

By Joyce Teo, Property Correspondent

THERE is still plenty of life in the property sector, if preview sales at Amber Residences apartments are anything to go by.
The Amber Road project set a new benchmark price for the area, with units going for an average of $1,650 per sq ft (psf) at a weekend preview, where showflat visitors were treated to food, drinks and live music.

Of the 114 units at Amber Residences, 74 were sold at prices ranging from $1.6 million to $3.5 million. Prices at Amber Road have risen significantly with the market this year.

The Sea View, opposite the 21-storey Amber Residences, was released in mid-2005 at just $750 psf. Sub-sales have since been done at up to $1,510 psf.

Savills Residential’s senior associate director, Ms Phylicia Ang, said the Amber Residences preview was for special guests, including the developer’s business associates.

Most of the buyers were from Singapore. They could opt for the deferred payment scheme - which added 3 per cent to the unit price - but less than half did so. Developer Voda Land was given permission to sell with deferred payment before the scheme was withdrawn late last month.

Voda Land bought the freehold Amber Lodge and the Jin Fu Apartments site in a collective sale to form the plot for Amber Residences.

‘For the price that the buyers paid, which is a benchmark for Amber, the condo has to come with quality fittings,’ said Ms Ang.

Amber Residences has two- to four-bedroom units and six penthouses, ranging from 4,133 sq ft to 6,717 sq ft. Some of the best high-floor units went for over $1,800 psf, but the penthouses, which are all still available, will be priced at around $1,900 psf, or between $8 million and $13 million.

Source : Straits Times - 20 Nov 2007

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Consumer prices could rise by up to 4.5% next year: MAS -Singapore

Consumer prices could rise by up to 4.5% next year: MAS -Singapore

Central bank sticks to policy of letting Sing$ strengthen gradually, modestly

By Erica Tay, Economics Correspondent
PRICE pressures ranging from rising oil prices to a squeeze on resources at home, are likely to push consumer prices up by 3.5 to 4.5 per cent next year, after rising by about 2 per cent this year.
Singapore’s central bank announced its new 2008 forecast yesterday, raising it from the 2 to 3 per cent projected last month.

But the Monetary Authority of Singapore (MAS) added that its stance on the Singapore dollar’s exchange rate remains ‘appropriate’, and it has no plans for an earlier-than-scheduled policy review before its April meeting.

MAS’ policy is currently to allow the Singdollar to gradually and modestly strengthen.

Changing the policy to allow it to strengthen more quickly will help battle inflation. This is because Singapore imports many of its goods from overseas and these will become cheaper if the Singdollar is strong.

MAS deputy managing director Ong Chong Tee told a quarterly press conference yesterday that an inter-meeting review was ‘not on the cards’.

What is pushing up the consumer price index?
July’s one-off hike in the goods and services tax.
Next year’s rise in the housing cost component of the CPI, due to higher annual assessed values for homes.

At the same briefing, Mr Ravi Menon, second permanent secretary of the Ministry of Trade and Industry, maintained that government measures to ease the squeeze on the supply of office space and labour will help to cool cost pressures.

A host of factors are behind the faster rise in the consumer price index (CPI), including ‘technical’ factors such as July’s one-off goods and services tax hike.

Another factor is next January’s revision to the annual assessed values of homes by the tax authorities, which will in turn lift the housing cost component of the CPI.

‘Neither of them represents a sustained rise in inflationary pressures,’ said Mr Menon. ‘The effects of both will wear off over the second half of 2008.’

In addition, prices of crude oil and agricultural produce - which Singapore imports - have been rising globally.

The MAS’ move last month to allow the Singdollar to rise at a slightly faster pace would go towards curbing imported inflation.

The economic boom at home is driving up wages and rents amid a tight labour market and a shortage of office space. However, measures have been taken to increase the sale of land in business parks, lease out more vacant state buildings and release land for transitional offices, said Mr Menon.

And raising the foreign labour ratio and S-Pass (Employment Pass) quota will help ease manpower bottlenecks in the rapidly growing construction sector, he added.

‘In short, has the economy gotten hotter? Yes. Has it gotten too hot? No,’ he said.

While a slowing United States economy will cause Singapore to expand at a slower tempo, inflationary pressures are shaping up to be a more pressing concern than slowing economic growth, said economists.

‘Growth concerns have become secondary to inflationary concerns,’ said Standard Chartered Bank economist Alvin Liew.

Fortis Bank strategist Joseph Tan believes further monetary tightening via a faster appreciation of the Singdollar is likely at the next policy review. ‘The policy stance may change from a ‘gradual and modest’ appreciation of the Singdollar to an ‘immodest’ appreciation,’ he quipped.

However, Mr Liew said: ‘We believe the current Singdollar policy stance is enough to deal with imported inflation. The worry lies with domestic cost pressures, that is, wages and rents rising too much. If these are the concerns, there might be more measures to keep these pressures in check.’

Source : Straits Times - 20 Nov 2007

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Singapore Growth next year likely to slow to 4.5%-6.5%

Singapore Growth next year likely to slow to 4.5%-6.5%

MTI says economy faces external risks; GDP up 8.9% in Q3, with full-year figure expected to be 7.5%-8%

By Erica Tay, Economics Correspondent
SINGAPORE’S economy is projected to expand by 4.5 to 6.5 per cent next year against a backdrop of soaring oil prices and subprime problems in the United States.
This forecast from the Ministry of Trade and Industry (MTI) is considerably under the 7.5 to 8 per cent expansion the economy is expected to achieve for all of this year.

‘For 2008, external economic conditions are expected to weaken slightly’, said MTI, which nonetheless upped the outlook a notch from its previous official forecast of between 4 and 6 per cent growth.

The Monetary Authority of Singapore’s inflation forecast for next year has also been lifted and is now estimated to hit 3.5 to 4.5 per cent.

‘But is the economy overheating? Not quite,’ said MTI’s Second Permanent Secretary, Mr Ravi Menon, addressing concerns that the booming economy is putting a squeeze on resources and pushing up costs.

Mr Menon told a quarterly press briefing yesterday that constraints on labour and office space will ease once government measures to increase the supply of these resources take effect.

MTI also reported that GDP growth for the July-to-September quarter was 8.9 per cent, short of the 9.4 per cent tipped by both economists and official flash estimates based mainly on July and August data.

A weaker manufacturing effort in September was behind the downward revision.

On the other hand, the construction and financial services industries continued to expand at a frenzied pace.

Although rattled by August’s subprime mortgage meltdown in the US, Singapore’s stock market racked up a more than tripling in turnover volume from a year ago, while bank lending accelerated.

A key driver of loan demand was the building industry, which itself grew by 17.7 per cent, its third consecutive quarter of double-digit growth.

The financial sector whizzed along at 19.9 per cent, boosting overall growth in the services sector to 8.3 per cent.

MTI now expects GDP growth this year to be between 7.5 and 8 per cent, narrowed from a previous forecast range of 7 to 8 per cent.

With economic expansion of 8.1 per cent already in the bag for the first nine months, ‘the momentum is likely to continue into the last quarter of 2007, albeit at a slower pace’, it said.

The chief drag is expected to come from an ongoing fallout from the subprime crisis, which is hurting US consumer demand, contracting its housing sector and crimping global credit markets.

‘Growth in the European Union is also expected to soften as a strong currency erodes export competitiveness,’ it added, but the outlook remains positive for Asian economies like China.

The 4.5 to 6.5 per cent growth forecast captures two likely scenarios in the US, said MTI.

If the US resumes healthy economic growth in the second half of next year after a slowdown, as most economists believe, Singapore’s growth will be in the upper half of this range.

‘If the subprime problems worsen and persist, or if oil rises further above current levels, there could be a sharper and more protracted slowdown in the US economy,’ taking Singapore’s growth rate towards the lower half of the range, it predicted.

The growth forecasts assume oil prices of US$90 (S$130) a barrel for the rest of this year, and US$80 to US$85 next year.

Source : Straits Times - 20 Nov 2007

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‘We are not guilty. The decision makes no sense’

‘We are not guilty. The decision makes no sense’

TEMASEK Holdings said yesterday it is not guilty of breaking competition laws or price-fixing in Indonesia and vowed to fight the ruling by the country’s anti-monopoly watchdog.

‘We are not guilty. The decision makes no sense. It ignores the facts,’ said Temasek executive director Simon Israel in a tersely worded statement.

Indonesia’s Commission for the Supervision of Business Competition, known also as KPPU, yesterday ruled that Temasek must sell one of its two indirect stakes in the country’s top two mobile phone operators within the next two years.

One Temasek subsidiary, SingTel, owns a 35 per cent stake in market leader Telkomsel while another unit, Singapore Technologies (ST) Telemedia, owns an effective 30 per cent interest in Indosat.

The allegation is that Temasek abused its indirect ownership of both operators to fix phone tariffs high.

Mr Israel said yesterday this charge is groundless. ‘Temasek has no shares in Indosat and Telkomsel and we play no role in their business decisions and operations.

Accusations against Singapore company
THE investigation of Temasek Holdings by the anti-monopoly watchdog followed a complaint filed by a labour union last year, alleging that Temasek was overcharging its mobile phone customers in Indonesia.

The complaint was made at a time when several nationalist politicians, including Vice-President Jusuf Kalla, hinted that the government should buy back Indosat shares which had been sold to Temasek’s subsidiary, Singapore Technologies (ST) Telemedia.

‘Telkomsel is controlled by the Indonesian government, which also has a golden share in Indosat,’ he added, referring to veto rights that protect the Indonesian government’s interest in Indosat.

Mr Israel also noted that Indonesia’s telecoms sector is regulated. So it is inconceivable that the Indonesian government or the regulator would allow prices to be fixed at the expense of consumers.

‘Temasek will fight this decision,’ he declared.

SingTel and ST Telemedia also issued strong statements expressing disappointment at the ruling and denying any wrongdoing.

SingTel said SingTel Mobile is only a minority shareholder in Telkomsel and does not control Telkomsel.

In any case, SingTel has an independent board of directors and as a shareholder, Temasek does not control its operations.

‘In addition, the commission failed to accord fundamental due process rights to SingTel and SingTel Mobile,’ it added.

ST Telemedia chief executive Lee Theng Kiat said: ‘The KPPU decision calls into serious questions the application of the rule of law and whether foreign investors can safely invest in Indonesia.’

Citibank economist Chua Hak Bin said the ruling seems to go against Asean integration: ‘There seems to be a lot of obstacles and suspicion with regard to investments from neighbouring countries.

‘Onlookers will regard this verdict with some cynicism about whether it is objective or if there could be political considerations behind it.’
Source : Straits Times - 20 Nov 2007

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Temasek told to give up stakes in one of two telcos

Temasek told to give up stakes in one of two telcos

Singapore investment company and related firms fined $3.88m for ‘anti-competitive’ practices

By Azhar Ghani, Indonesia Bureau Chief & Salim Osman, Indonesia Correspondent

JAKARTA - JAKARTA yesterday said Singapore’s Temasek Holdings had violated anti-monopoly laws and ordered it to sell its shares in one of the two top Indonesian mobile telcos in which it has indirect stakes.
Indonesia’s competition commission also fined Temasek and eight linked companies 25 billion rupiah (S$3.88 million) each for unfairly dominating and manipulating the cellular communications market, and said the share sale had to be completed within two years.

The eight affiliated companies include SingTel and its mobile subsidiary. SingTel, which is 54 per cent owned by Temasek, in turn has a 35 per cent stake in Indonesia’s biggest mobile telco, Telkomsel.

The other six are Singapore Technologies (ST) Telemedia and companies linked to it. ST Telemedia is wholly owned by Temasek and owns 75 per cent of Asia Mobile Holdings, which in turn has a 40 per cent stake in Indonesia’s No. 2 mobile telco Indosat.

Under Indonesian law, businesses cannot own majority shares in more than one firm in the same sector if it gives them more than half the market share. They are also barred from owning majority stakes in more than one firm in the same sector.

The commission said a controlling stake could be treated as a ‘majority stake’ and classed Temasek and its affiliates as a single business group, a classification Temasek said after the verdict has ‘no basis’.

It has been left up to Temasek to decide which of the two companies it wants to sell its stake in.

But in a move observers say is likely to drive down the value of the sale, the commission also ruled that no more than 5 per cent of the shares can be sold to any one party, and buyers cannot be affiliated to each other or to Temasek.

And, creating a further headache for Temasek, it claimed price fixing has cost consumers up to 30.8 trillion rupiah in excessive charges, an accusation observers say opens up the possibility of a future class action suit.

The verdict delivered by the Commission for the Supervision of Business Competition (KPPU), also included a fine of 25 billion rupiah for Telkomsel. The company has also been ordered to reduce its phone tariffs by at least 15 per cent within two years.

All the parties have up to 14 days to appeal before the sanctions kick in.

The verdict - marking the end of a year-long saga which began when a union accused Temasek of monopolistic behaviour - was read out to a packed audience of reporters and lawyers.

It was delivered after a lengthy four-hour preamble in which the KPPU panel sought to take apart arguments that Temasek and the other accused parties had submitted in their defence.

These covered the merits of the case, including whether Temasek was an active player in Indonesia or just a passive investor, as well as alleged procedural lapses.

But panel chairman Syamsul Maarif concluded that Temasek and its affiliates ‘are legally and convincingly proven to have violated Article 27 of the anti-monopoly law’.

He said: ‘If they don’t file their objection within the stipulated period, the ruling will take immediate effect.’

Both Temasek and ST Telemedia plan to contest the verdict, which analysts say will have been closely watched by foreign investors concerned about the risks of doing business in Indonesia.

University of Diponegoro law professor Joko Priyono told The Straits Times: ‘It’s shocking that Temasek can be found guilty of cross-ownership when the purchases of the stakes in Indosat and Telkomsel had been cleared by the government.

‘This doesn’t augur well for the future of foreign investments in the country.’
Source : Business Times - 20 Nov 2007

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Singapore Amber Residences condo a hit

Singapore Amber Residences condo a hit

70 units snapped up within hours during private preview at $1,650 psf average
By UMA SHANKARI
MORE than 70 of the 114 units at Voda Land’s Amber Residences in Amber Road were snapped up within hours during a private preview on Sunday at an average price of $1,650 per square foot (psf), the agency marketing the project said yesterday.

Sui Generis: The 40-unit condo in the Balmoral area is a joint project of UE and Kajima. 17 of the 23 units released have been sold at an average price of $2,500 psf
And elsewhere, about 70 per cent of units released at Sui Generis - a condominium in the Balmoral area being jointly developed by Singapore-listed United Engineers (UE) and Japan-based Kajima Corporation - have been sold at an average price of $2,500 per square foot (psf), UE said yesterday.

At the 40-unit Sui Generis, 17 units of the 23 released were sold through overseas previews during the past two months, UE said.

Prices fetched ranged from $2,300 psf to $2,580 psf. About 90 per cent of the units were bought by foreigners during roadshows in Indonesia and Hong Kong, UE said.

‘Given the continued foreign interest in Singapore properties, Sui Generis will tour various cities including Jakarta and Hong Kong,’ said Joseph Tan, executive director of residential at CB Richard Ellis (CBRE), which is marketing the project. Sui Generis will be launched in Singapore early next year.

CBRE said the average price of $2,500 psf is a benchmark for the Balmoral area.

‘Buyers are drawn by the good unit layout and quality of finishes, which explains why the project has achieved a benchmark sale price,’ Mr Tan said.

Sui Generis comprises mostly three and four-bedroom apartments. There are also four penthouses. The project’s name is a Latin expression that means ‘a person or thing that is unique and in a class of its own’.

At Amber Residences, the average price per unit came to $1,650 psf, with choice high-floor units being sold for more than $1,800 psf, said Savills Singapore, which is marketing the project.

‘Following the overwhelming success and strong demand for this unique development, we plan to release a few more units for this coming Sunday’s preview,’ said Phylicia Ang, senior associate director of Savills’ residential division. ‘It will then be followed by an official launch for the remaining units - including choice units - from Dec 1.’

The sales were done by private invitation only and most of the buyers were locals, Savills said.

Amber Residences is made up of a single 21-storey block with mostly two, three and four-bedroom apartments. There are also six penthouses.

The project is possibly the first on the East Coast where all units have a premium finish and fittings usually associated with high-end condominiums, Ms Ang said.
Source : Business Times - 20 Nov 2007

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Singapore Ginza Plaza to get $26m facelift

Singapore Ginza Plaza to get $26m facelift

It will be redesigned by DP Architects and renamed West Coast Plaza
By UMA SHANKARI
FAR East Organization will spend $26 million updating the 16-year old Ginza Plaza shopping mall.

Oasis: West Coast Plaza, which has a net lettable area of 160,000 sq ft, hopes to capture the ‘breezy, easy-going spirit of the West Coast’
The mall, which will be renamed West Coast Plaza, is expected to be ready for business in the third quarter of 2008.

Vivienne Tan, president of Far East Retail Consultancy, said changing demographics in the West were a key factor in the decision to refurbish the mall.

‘As its original name suggests, Ginza Plaza used to cater to the Japanese expatriate community that lived in the area,’ Mrs Tan said.

‘But now we’re seeing a good number of other nationalities moving in. There is also a growing private residential population,’ she said.

Danny Yeo, director of retail at Knight Frank, which is marketing the mall, said rents at West Coast Plaza will range from $8 to $25 per sq ft per month (psf pm). Before Ginza Plaza was vacated, average rentals were $5-$6 psf pm, Mrs Tan said.

Billed as ‘An Oasis in the West’, West Coast Plaza, which has a net lettable area of 160,000 sq ft, hopes to capture the ‘breezy, easy-going spirit of the West Coast’. The mall has been redesigned by DP Architects.

Far East hopes to attract residents living in the West, who are generally thought to have higher disposable incomes than residents in other parts of Singapore.

A study by Knight Frank showed the West has a higher proportion of private housing (about 30 per cent) than the island-wide residential mix (about 18 per cent). Also, nine or more new private residential developments within 2km of West Coast Plaza are expected to be completed around the same time as the mall, Far East said.

Increased demand for private property and the presence of a more varied expatriate community are thought to be due to a growing number of professionals working in the area, in places such as science hub one-north.

Far East also hopes to attract students from more than 27 educational institutions within 3km of the mall, including students from the National University of Singapore.
Source : Business Times - 20 Nov 2007

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Singapore Orchard Road prime rents 4th highest in Asia

Singapore Orchard Road prime rents 4th highest in Asia

By ARTHUR SIM

ORCHARD Road prime rents have hit US$325 psf per year, making it the world’s 14th most expensive area for shopkeepers. By contrast, annual prime rents for sites on New York’s Fifth Avenue are US$1,500 psf, or US$922 for sites on the Avenue des Champs Elysees, in Paris.
Orchard Road is also the fourth most expensive shopping location in this region - after those in Hong Kong (Causeway Bay - US$1,213 psf/year), Tokyo (Ginza - US$683 psf/year) and Seoul (Gangnam Station - US$431 psf/year).

A report by Cushman & Wakefield (C&W) shows that Singapore’s busiest shopping street did slip one place from its previous 13th position last year but attributed this to the strength of the euro over the Singapore dollar.

C&W’s report tracks retail rents in the world’s top 231 shopping locations across 44 countries. Its data show that annual prime rents increased by 11.3 per cent for Orchard Road while in the top three most expensive locations in New York’s Fifth Avenue, Hong Kong’s Causeway Bay and Paris’s Avenue des Champs Elysees, rents increased by 11.1, 6.97 and 14.5 per cent respectively.

At the fourth and fifth most expensive locations - London’s New Bond Street (US$814 psf/year) and Tokyo’s Ginza - annual rents increased by 20.95 and 4.8 per cent respectively.

Although C&W expects retail rents in Singapore to continue their upward trend, it noted that rents in other cities have increased faster, notably in India. It believes that this will help make Singapore more competitive and maintain its attractiveness as a retail destination in the region.

Rental growth across Asia as a whole increased by 23.8 per cent. C&W head of retail services (Asia Pacific) Sebastian Skiff said: ‘Of particular note is the robust performance in Tokyo driven largely by lack of supply. India saw particularly strong growth, with rents nationally up 53.5 per cent.’

He also noted that Australia, Korea, Singapore and Hong Kong saw solid growth from already relatively high bases.

On the demand for prime retail space, C&W’s global head of retail, John Strachan, said: ‘We are seeing the emergence of a line-up of global shopping destinations, whether Fifth Avenue in New York, Causeway Bay in Hong Kong or Avenue des Champs Elysees in Paris, where retailers are using flagship stores in prestige locations to leverage the value of their brands.’

Globally, Chicago’s Oak Street was the location with the biggest rental increases in local currency. Rents for prime properties doubled in one year.

This was followed by rents in New Delhi’s Ansal Plaza and Connaught Place which saw annual increases of 87.5 per cent while rents in St Petersburg’s Nevsky Prospekt increase by 81.8 per cent.

Source : Business Times - 20 Nov 2007

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SINGAPORE Fifteen Balestier terrace houses sold for $61m

SINGAPORE Fifteen Balestier terrace houses sold for $61m

Buyer pays $739 ppr, a record for freehold residential land in vicinity
By KALPANA RASHIWALA

A ROW of 15 terrace houses in Jalan Bunga Raya have been sold for $61 million or an all-up unit land price of $739 per sq ft per plot ratio (psf ppr) - a record for freehold residential land in the Balestier/Novena area.

Hot properties: GMG Building (above), a 12-storey freehold office block in Robinson Road, has been put up for sale. The 15 terrace houses along Jalan Bunga Raya have a total land area of 24,058 sq ft. Access to the houses is by Jalan Bunga Raya, which can be alienated by the state for about $7m, boosting the land area to 32,978 sq ft
Before the deal, which was brokered by DTZ, the highest residential land price fetched in the area was around $600 psf ppr.

DTZ said the buyer of the 15 houses is a consortium comprising Chinese developers and local partners. All owners of the houses have agreed to the sale.

The 15 homes have a total land area of 24,058 sq ft. Access to the houses is by Jalan Bunga Raya, which can be alienated by the state for about $7 million, boosting the land area to 32,978 sq ft, subject to approval by the Singapore Land Authority.

A development charge of about $263,000 is also payable. The $739 psf ppr unit land price to the developer includes these two payments it will have to make to the state and based on the enlarged plot size.

Under Master Plan 2003, the site has a 2.8 maximum plot ratio - the ratio of maximum potential gross floor area to land area - and a 36-storey height limit. DTZ estimates the plot can be developed into a new condo with about 56 apartments averaging 1,500 sq ft. ‘The breakeven cost is likely to be $1,150-1,200 psf,’ said DTZ senior director, investor advisory services & auction, Shaun Poh.

Separately, DTZ has put up for sale GMG Building, a 12-storey freehold office block in Robinson Road.

The property is being sold by Robinson Land Pte Ltd, which is currently refurbishing the block. Refurbishment work, estimated to cost about $5-6 million, is expected to be completed and the building ready for occupation around the first quarter of 2008.

‘This prime office building will be sold, completely refurbished and with vacant possession, which would allow investors to take advantage of current favourable office rental rates,’ Mr Poh said.

‘It’s also an excellent opportunity for end-users seeking a corporate HQ with naming rights. The property is expected to fetch about $2,600 psf over the total strata area of 54,832 sq ft, working out to a total amount of $142.6 million.’

Robinson Land, whose shareholders include the Buxani Group of Singapore and some overseas investors, bought GMG Building last year for $48 million or $875 psf of strata area.

Refurbishment work, which started recently, will boost the building’s net lettable area (NLA) to 54,895 sq ft, about 5 per cent higher than the previous NLA. There is not much redevelopment.

The refurbished building is being sold through an expression of interest exercise that closes on Dec 5.

Source : Business Times - 20 Nov 2007

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Singapore is easiest country in Asia in which to pay taxes

Singapore is easiest country in Asia in which to pay taxes

A company takes only 49 hours a year to comply with tax obligations: report
By MICHELLE QUAH

SINGAPORE has trumped Hong Kong in being the easiest country in Asia - and the second easiest worldwide - in which to pay taxes, says the latest ‘Paying Taxes’ report by the World Bank, International Finance Corporation and PricewaterhouseCoopers (PwC).

The report - the second in an annual series on tax systems in 178 countries - ranks nations according to the number of different types of tax they have, the time it takes to meet tax obligations and tax rates.

The study found that a company in Singapore takes only 49 hours a year to comply with tax obligations. This compares with a global average of about two months a year - 15 days for corporate taxes, 21 for employment taxes and contributions and 21 for consumption taxes.

Companies here only need to meet five tax payments a year - making Singapore the fifth country in the world with the fewest number of tax payments. Singapore also has the 14th lowest total tax rate in the world.

‘Singapore has a strong reputation for the ease of conducting business,’ said Paula Eastwood, head of corporate tax at PwC Singapore.

‘An effective tax administration, together with a streamlined, efficient tax collection process, is fundamental to the ability to do business in a country.

‘Given that an inefficient tax system disproportionately affects smaller businesses, it is critical to a country’s development to continue to streamline processes or risk being left behind.

‘Companies operating in Singapore benefit from an efficient tax system and low rates of tax and are therefore better able to concentrate on their core business competencies.’

The report says nations can boost their competitiveness by simplifying tax systems and compliance obligations, which could involve reducing the number of taxes. Government revenue would increase, while companies could benefit by having fewer tax compliance obligations.

‘Reducing the tax burden was the second most popular reform of the business regulatory environment this year,’ says Rita Ramalho, co-author of the report and a tax specialist with the World Bank-IFC Doing Business project.

‘Despite previous reluctance to reduce tax burdens for fear of cutting government revenue, some governments that have implemented tax reform have reaped the benefits of higher investment and economic growth. Economies with a lower business tax burden also have more new firms entering the market.’

Still, tax reform is considered controversial in most countries, attracting intense political debate - with the choice often perceived as lower taxes with more votes but potentially less government revenue, versus higher rates with discontented voters but potentially smaller fiscal deficits.

The study, however, found that in reality there is often no trade-off between revenue and votes, as reform can involve more than adjusting tax rates. It found that since 2005, 90 reforms in 65 economies have pointed to the four most successful reforms as being: the introduction of online filing; the combining of taxes; the simplification of tax administration; and the reduction of tax rates and the broadening of the tax base.

Countries in Eastern Europe and Central Asia introduced the most reforms in 2006 and 2007, but tax rates remain highest there and in Africa. The compliance burden is highest in Latin America, Eastern Europe and Central Asia.

The report calls on businesses to play a strategic part in reform. PwC’s Ms Eastwood said: ‘Businesses could be more upfront in revealing their total tax contributions, to help governments assess their real economic footprint.

‘More and better information about the taxes paid and the cost of compliance is essential to understanding how tax systems affect businesses.

‘It is clear that governments need to look across all taxes when considering reform. Greater transparency helps focus public debate on where reform efforts are most effective. Ultimately, this will give business more confidence and willingness to invest.’

Source : Business Times - 20 Nov 2007

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