Doing Business - Singapore vs Denmark

The accelerated globalization of economic activities has led to a breakdown of national boundaries. There is free flow of capital, technology, and information that is resulting in economic and financial interconnectedness between countries and markets. Moreover, agencies such as the World Bank, World Trade Organization, and International Monetary Fund are actively promoting free trade by urging countries to remove trade barriers and instead align themselves to the new global economy. Not surprisingly, more entrepreneurs and companies are venturing out of their home countries and incorporating their new venture in countries that offer the best environment for operating a business in the new world order. In particular, a country is assessed on the basis of its economic environment, tax regime, legal barriers, trade restrictions, political climate, social environment, business and physical infrastructure, level of red-tape and bureaucracy and other significant criteria.

In general, country reports, business surveys and economic indices are a valuable source of information regarding the feasibility of a given jurisdiction as a place for doing business. This guide serves to provide a comprehensive comparative analysis of doing business in Singapore and Denmark taking into account critical criteria such as business environment, taxes, IP protection, global competitiveness, openness to trade, level of bureaucracy, quality of manpower, and the living environment for expats.

Business Environment

  • There is no disputing the fact that Singapore is by far the easiest place to do business in the world. The country has consistently topped the World Bank’s ‘Doing Business’ survey for the past 8 years in a row. In the ‘2015 Doing Business’ Report, Singapore ranked #1 for ease of doing business, #2 for protecting investors and #1 for enforcing contracts among 189 economies worldwide. Singapore company incorporation is a simple procedure involving two-steps (company name approval and registration with the Company Registrar, ACRA) and a timeline of just one day. There are no restrictions on foreigners who wish do business in the country and the legal requirements for company setup are minimal. Although Denmark was just four places behind Singapore and ranked #3 for overall ease of doing business, it lagged behind the island republic in certain significant parameters. For instance, it ranked #29 for starting a business, #20 for investor protection, and #37 for enforcing contracts.
  • Although Denmark edged Singapore in Forbes’ ‘2011 Best Countries for Business’ list (Denmark #5 vs Singapore #6) it is interesting to note that Singapore fared much better in the areas of trade freedom (Singapore #1 vs Denmark #11), monetary freedom (Singapore #4 vs Denmark #22), red-tape (Singapore #4 vs Denmark #23), investor protection (Singapore #2 vs Denmark #27), and tax burden (Singapore #3 vs Denmark #11). It was on the parameter of personal freedom that Denmark ousted Singapore (Denmark #1 vs Singapore #92) which may have been the reason as to why it moved ahead of Singapore by just one place.

Taxes

  • Paying taxes in Singapore is easier as compared to Denmark according to the PWC, IFC, World Bank’s ‘2016 Paying Taxes Report’. Singapore ranked #5 for ease of paying taxes among a total of 189 economies while Denmark ranked #12.
  • The Forbes’ ‘2011 Best Countries for Business’ list confirms that Singapore imposes a lower tax burden (ranked #3 for tax burden) as compared to Denmark, which ranked #11 on the same parameter.
  • Back in 2009 the Forbes’ ‘Tax Misery and Reform Index’ showed that by ranking #11 on the index Singapore imposes a low tax misery on its residents while Denmark, which ranked #40 on the index is not so favorable for taxes.
  • Denmark imposes one of the highest tax rates in the world. Personal income tax rates follow a progressive system and can go up to as high as 51.5%. The Danish corporate income tax rate is 25% while VAT is also 25%. Dividends and capital gains are taxed at the rate of 28-42% depending on income level. On a comparative note, Singapore is a low tax country. In Singapore, personal income tax rates start from 0% and are capped at 20% for residents while non-residents are taxed at a flat rate of 15%. The corporate income tax rate in Singapore is approximately 8.5% for profits up to S$300,000 and a flat 17% above S$300,000. The GST or VAT rate is only 7%. Furthermore, there is no dividend tax, no estate duty, and no capital gains tax.

IP Protection

  • Both Singapore and Denmark are highly regarded for their protection of intellectual property rights. Denmark ranked #6 for IP protection in the World Economic Forum’s ‘Global Competitiveness Report 2011-2012’ while Singapore raced ahead of Denmark and ranked #2. Singapore allows companies to file for IP protection globally from Singapore and the country has witnessed an increase in the number of IP filings in recent times. The Intellectual property Office of Singapore has been ranked among the top five IP offices globally and has been lauded for its effective systems.

Global Competitiveness

  • Singapore is the second most competitive economy in the world according to the World Economic Forum’s ‘Global Competitiveness Report 2014-2015’ while Denmark was accorded the 13th position among 144 economies. In particular, Singapore ranked #1 for goods market efficiency. Additionally, it ranked #2 for infrastructure, labour market efficiency, financial market development, and #3 for institutions and health and primary education. On the other hand, tax rates and regulations, access to financing, restrictive labor regulations, inefficient government bureaucracy, and political instability were among the major problematic factors for doing business in Denmark.
  • According to the Heritage Foundation’s ‘2015 Index of Economic Freedom’ Singapore is the second freest economy in the world while Denmark is less freer with a rank of #11. Other factors that led Denmark to be pushed out of the top ten slot were its heavy tax burden and high government spending, which accounts for over half of its GDP. Singapore scored 91.2 for fiscal freedom and 93.8 government spending. Denmark’s overall tax burden is almost 60% of total domestic income and public debt accounts for 45% of GDP. Denmark’s fiscal freedom score was a dismal 39.6 and government spending score was 1.8.
  • Singapore ranked #3 in the IMD ‘2010 World Competitiveness Scoreboard’ while Denmark proved to be less competitive with a rank of #12.

Openness to Trade

  • The World Economic Forum’s ‘2010 Global Enabling Trade Report’ reaffirms that the Singaporean economy is the most open to trade. The country was highly ranked for its open trade policy, minimum trade barriers, simple and low tariff structure, excellent customs services, top notch border administration, high quality transport infrastructure, and supportive business environment. Denmark was close behind in the third position. The country ranked third behind Singapore for the efficiency of its border administration. It also lost out on parameters such as market access and tariff structure. Denmark ranked #95 for domestic and foreign market access while Singapore ranked #1. Singapore ranked #4 for complexity of tariffs while Denmark ranked #96.
  • According to the World Bank’s ‘2012 Doing Business Report’, Singapore ranked #1 for trading across borders while Denmark ranked #7.

Bureaucracy

  • According to corruption watch-dog Transparency International’s ‘2010 Corruption Perceptions Index’, both Singapore and Denmark are perceived to be the least corrupt nations in the world. Similarly, both the countries scored 93 points for freedom from corruption in the Heritage Foundation’s ‘2012 Index of Economic Freedom’.
  • The World Economic Forum’s ‘2014 – 2015 Global Competitiveness Report’ also reveals that Singapore has the highest public trust of politicians and #2 for the least burden of government regulation while Denmark scored #16 and #80 on both parameters.
  • A recent report by the  the Political & Economic Risk Consultancy Ltd (PERC) also reaffirms that Singapore has the best bureaucracy in Asia.

Labor Force

  • Aon Consulting’s ‘2010 People Risk Index‘ shows that Singapore is the third-lowest risk city in the world for recruiting, employing, and relocating employees while Denmark’s rank was #8. In fact, Singapore was the only city in Asia-Pacific to be ranked amongst the top 10 lowest risk cities.
  • Singapore was accorded the top spot in BERI’s ‘2011 Labour Force Evaluation Measure’, while Denmark trailed behind in the twelfth position.
  • Denmark ranked #12 for labor market efficiency in the World Economic Forum’s ‘2014 – 2015 Global Competitiveness Report’ while Singapore ranked #2.

Living Environment

  • Singapore is the twelfth best country in the world for expat life experience according to HSBC’s ‘2010 Expat Experience Report’.
  • Gallup’s ‘2010 Potential Net Migration Index’ unveils Singapore as the world’s most favored immigration destination.
  • Singapore is the #1 place for Asian expats confirms ECA International’s ‘2010 Location Ratings System’ while the Danish city of Copenhagen is the fifth best place to live for Asian expats.
  • Singapore ranked #8 in the world for personal safety in Mercer’s ‘2011 Quality of Living Rankings’ while Copenhagen (Denmark) ranked #11.

Country Rankings: SINGAPORE VS. DENMARK

Year Category Singapore’s Rank Denmark’s Rank Source
2016 Ease of Paying Taxes

5

12

PWC, IFC, World Bank’s Paying Taxes Survey
2015 Ease of Doing Business

1

3

World Bank, Doing Business Report
2014-2015 World’s Most Competitive Economy

2

13

World Economic Forum,  Global Competitiveness Index
2015 World’s Freest Economy

2

11

Heritage Foundation, Index of Economic Freedom
2015 World’s Most Competitive Economy

3

8

IMD, World Competitiveness Yearbook
2014-2015 World’s Best IP Protection

2

24

World Economic Forum, Global Competitiveness Index
2014 Best Countries for Business

8

1

Forbes, Best Countries for Business List
2014 Country Most Open to Trade

2

74

World Economic Forum, Global Enabling Trade Report
2011 World’s Best labor Force

1

12

BERI, Labor Force Evaluation Measure
2010 World’s Lowest Risk City for Employing and
Relocating Employees

3

8

Aon Consulting, People Risk Index
2011 World’s Best Place for Personal safety

8

11

(Copenhagen)

Mercer, Quality of Living Rankings
2010 World’s Best Place for Asian Expats

1

5

(Copenhagen)

ECA International, Quality of Living Rankings

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