3/06/2007

china less attractive with higher corporate tax

China is raising its corporate tax on foreign companies from 15% to 25% while lowering the local companies' tax from 33% to 25%. This would make Chinese corporate tax very much higher than our 18/20%. Would this make us now more competitive than China? No doubt China has other comparative advantages like a huge market and a huge labour pool and can afford to raise its taxes. MNCs will have to make their assessments as to where will give them the best value. And Bintan/Batam with their own sets of problems that make operating there unprofitable, Singapore will now be slightly more attractive as a preferred destination. Oops forgot to mention India as another choice market. But we still have to lower everything to make ourselves competitive, except wages. But we have comparative advantage in having a big pool of local and foreign talents that can command higher wages. So not a problem there. Oh, workers level, that is another story.

1 comment:

Matilah_Singapura said...

Two words: Comparative advantage.

Sure the tax for foreign companies is up — higher than the local companies, but the point is that as a foreign company, one can still make money in China.

I doubt it will affect the great and enormous growth of capitalism in China.

Power to them! (regardless of stock market "corrections") The Chinese are great market players, even thought they are supposed to be communist.

Amazing!