1986 Economic Committee , Singapore & The Direction of the 'Then' Tax Reforms in Singapore

1986 ECONOMIC COMMITTEE
The 1986 Economic Committee recommended the following key changes in the tax system to create a more conducive business environment to support hard work and enterprise, and nurture both MNCs and local companies:

a) Tax reductions totalling about $1.2 billion. This included a cut in the corporate tax rate from 40 percent to 30 percent (with further reduction to 25 percent as soon as the revenue position permits), a cut in the top marginal tax rate to 30 percent, and a 30 percent across-the-board investment allowance for expenditures on capital equipment and machinery.
b) Shift from direct to indirect taxes as the main source of Government revenue. Specifically, the Report stated that:

"Government should shift from direct to indirect taxes as its main source of revenue. Consumption taxes such as retail sales taxes may be administratively more difficult to collect but are economically preferable to income taxes. They do not penalize companies which are making profits or persons who are putting away savings. Tax is paid only when money is spent on consumption items, not when the money is invested in productive capacity"

c) Remove the existing bias that favours manufacturing activities in our tax incentive schemes. Tax incentives should be broadened, to be enjoyed by both services and manufacturing firms.
d) Move towards a uniform, low corporate and personal income tax regime with minimal selective tax incentives as a long-term goal.