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Doing Business in Singapore VS Australia
It would surely be a tough decision for one looking to set up a business in either Australia or Singapore. In terms of facilities and infrastructure, both countries are also very developed nations, where most facilities and basic necessities are easily available. Both countries are also very developed nations, where most facilities and basic necessities are easily available, but there are a few differences a potential investor would need to take into consideration when choosing which country to do business.
A Successful Free-Market Economy
The economies in both countries are significantly different right from their sizes, key business sectors and resources. The economy in Australia has seen steady growth and enjoys a low unemployment rate, low public debt and a strong, stable financial system. The country was also left unaffected by the global financial crisis and it’s banking system remained strong and it’s inflation was under control.
On the other hand, Singapore’s economy is also strong and the country is highly developed and enjoys a successful free-market economy. Also, Singapore has a corruption-free environment, stable prices and a per capita GDP higher than that of most developed countries. The economy depends heavily on exports, particularly in consumer electronics, information technology products, pharmaceuticals, and on a growing financial services sector.
In terms of corporate taxes, Singapore enjoys one of the lowest in the world with a flat rate of 17 per cent. Also, as an added bonus, newly incorporated companies can enjoy partial or full tax exemptions, provided they meet the criteria set out by the Inland Revenue Authority of Singapore. As for Australia, their corporate tax is significantly higher and in fact is considered the eighth-highest corporate tax rate in the world, at 30 per cent. However, similar to Singapore, there are certain tax exemptions that can be applied for.
The Doing Business report has ranked Australia 44th worldwide in the category of paying taxes. This represents an improvement from its 49th position in the 2013 report. On the other hand, Singapore maintained its 5th position year on year, due to its tax rates and filing procedures. As for individual taxes, both countries use a progressive tax system, where the tax rate increases exponentially in accordance with an individuals’ annual chargeable income.
Cost of Labour
As for the business structure one should adopt when planning to invest in either country, the structures are not much different. Investors can opt for either a private company limited by shares; partnership/joint venture; public companies;
branch office; or representative office. The legal systems in both countries is largely influenced by English Law and there is not much difference in terms of legal requirements. The companies have to be governed by either it’s constitution for Australia or articles of association in Singapore. Also, most business structures would require at least one director to be ordinarily resident and that the registered address of the company be located within the country. In terms of finding the right people for the workforce, both countries are strategically located in South East Asia and are in close proximity to manufacturing centres such as Vietnam and China, as well as Islamic countries such as Malaysia and Indonesia. The average cost of labour is significantly different in both countries, as Australia has a minimum wage system in place. With effect from 1 July 2014, the national minimum wage in Australia is AUD$640.90 per week (before tax), or AUD$16.87 per hour; and the disabled will get a certain percentage of the national minimum wage, in accordance with the National Minimum Wage Order.
In addition, if employees are required to commute for long distances, it is often the market practice to pay workers additional allowances or provide for accommodation in Australia. In contrast, there is no minimum wage in Singapore. Hence, to a potential investor who is running on a relatively tight budget and foresees that several staff members will have to be employed, a key consideration may be the cost of labour that will be incurred in the long run.
Australia supersedes Singapore in terms of the level of women’s participation in the workforce. In this indicator, Australia was ranked 60th while Singapore was ranked 84th.
Other than foreign investment friendliness, protection of Intellectual Property (IP) rights helps boost investor confidence. According to the Global Competitiveness Report (GCR), Singapore stands second in the world and first in Asia for having the best IP protection. The Political & Economic Risk Consultancy Report 2011 and the International Property Rights Index 2012 have formerly ranked Singapore top in Asia for IP protection. Australia came in at the 21st position in the GCR.
The above analysis confirms that while Australia has a strong capital market, competitive work force and a vibrant innovation culture, there are certain factors such as inefficient government bureaucracy, higher tax rates and restrictive tax regulations, as well as inadequate seed capital for start-ups, that are hampering its investor-friendly image. Whether it is Singapore or Australia, there are various considerations that a potential investor would need to ponder. Alternatively, given the extremely close ties between the two nations and the fact that there are multiple flights between each country daily, an investor may even wish to consider using either country as a launch pad to expand the business’ regional operations from. Apart from all these reasons, Singapore edges over Australia due to its excellent connectivity to the world’s largest emerging markets including India and China.