Doing Business - Singapore vs Germany

Every entrepreneur who starts up a company envisions growth for his business. In order to bring that dream to fruition, it is vital to choose the right environment with the right conditions to set up a business. As the saying goes, the grass is greener on the other side. Hence, entrepreneurs must consider the various challenges before venturing into a new country to set up their business. A careful analysis of strengths, weaknesses, opportunities and risks associated with setting up a business in a given market is crucial. In this regard, country guides on business environments are useful tools that help entrepreneurs compare business locations and make an informed decision.

This report is a comprehensive comparative analysis of doing business in Singapore and Germany and compares the two countries across several criteria such as business environment, taxes, IP protection, openness to trade, bureaucracy, labor force and living environment for expatriates.

Business Environment

  • The World Bank has consistently ranked Singapore as the world’s easiest place to do business. Singapore has maintained its number one position for the fifth year in a row in the latest edition of the ‘Doing Business Report’. Its ability to stay at the top of the list proves that it has the necessary elements that make it a great place to start and run a business. Germany, on the other hand was ranked #22. Singapore’s strengths lie in the areas of trading across borders (ranked #1), protecting investors (ranked #2), starting a business (ranked #4) and paying taxes (ranked #4). Germany did not perform as well when compared to Singapore on the same areas. It ranked #14 for trading across borders, #93 for protecting investors, #88 for starting a business and #88 for paying taxes. When it comes to setting up a business, it takes nine procedures and 15 days to do so in Germany. To incorporate company in Singapore, it takes only 24 hours and two procedures.
  • According to Forbes ‘2010 Best Countries for Business Index‘, Singapore is the fifth-best country in the world for business. Germany is on the list as well but comes in at #20. The reasons for Germany’s lower ranking is due to factors such as investor protection (Singapore ranked #2 vs Germany’s rank #74), red tape (Singapore ranked #4 vs Germany’s rank #63) and tax burden (Singapore ranked #4 vs Germany’s rank #48).

Taxes

  • The PWC, IFC, World Bank’s ‘2016 Paying Taxes Report‘ ranked Singapore #4 for ease of paying taxes while Germany came in #88.
  • The World Bank ‘2015 Doing Business Report‘ also ranked Singapore #5 for paying taxes while Germany came in #72.
  • When it comes to tax burdens, Forbes’ ‘2010 Best Countries for Business Index’ ranked Singapore #4 while Germany ranked #48. Prior to that, in Forbes’ ‘2009 Tax Misery & Reform Index‘, Singapore was ranked #11, indicating that tax burden on its residents were lower than in Germany (ranked #35). While personal income tax rates in Germany range from 0% to 47.5%, personal income taxation starts at 0% and ends at 20% for income above S$320,000 in Singapore. Germany’s federal corporate tax rate is 15.8% while the municipal trade tax ranges between 14%-17%. The effective corporate tax rate is between 30%-33%. Singapore’s corporate income tax rate is 8.5% for profits up to S$300,000 and a flat 17% for profits above S$300,000. With 16 tax payments, Germany imposes more than three times the number of tax payments than in Singapore.

IP Protection

  • Countries that have in a strong intellectual property system in place have been proven to flourish the most. According to the World Economic Forum’s ‘2014-2015 Global Competitiveness Report‘, Singapore has the fourth-best IP protection regime in the world while Germany is ranked 20th.

Global Competitiveness

  • In the World Economic Forum’s ‘2014 – 2015 Global Competitiveness Report’, Singapore is the second-most competitive economy among 140 economies while Germany’s competitiveness rank is #4. Although Germany is just two positions away from Singapore, its has many problematic factors including high tax rates and tax regulations, restrictive labor regulations, difficulty in getting access to financing, inefficient government bureaucracy, inadequately educated workforce and political instability. Singapore’s strong suit is precisely in these areas. Singapore has low corporate and income taxation, liberal labor laws, an abundance of funding, efficient and stable government and a talented workforce.
  • In the Heritage Foundation’s ‘2015 Index of Economic Freedom’ Singapore emerged as the second freest economy among 174 countries while Germany came in as the 16th freest. Singapore scored high points on areas such business freedom, trade freedom, government spending, property rights, labor freedom and freedom from corruption. Singapore superseded Germany in terms of fiscal freedom (Singapore’s 91.2 vs. Germany’s 60.8 points), labor freedom (Singapore’s 96.9 vs. Germany’s 51.2 points) and government spending (Singapore’s 91.3 vs. Germany’s 42.7 points).
  • In the IMD ‘2015 World Competitiveness Yearbook’ Singapore has performed better than Germany and clinched the #3 spot while Germany’s was ranked in the 6th position.

Openness to Trade

  • Data from the World Economic Forum’s ‘2010 Global Enabling Trade Report’ shows that when it comes to openness to trade, Singapore takes the number one spot out of 125 countries while Germany takes the 13th place. Singapore emerged number one due to its open trade policy, stable regulatory environment, low trade barriers, low tariff structure, efficient border administration, sophisticated transport and port infrastructure, logistics efficiency, and affordability of shipments. Germany did not perform as well as Singapore due to the complexity and quantity of tariffs it imposes, its inefficient and non-transparent customs administration, low use of info-communication technology, difficulty in hiring foreign labor and high costs on business due to terrorism. While Germany ranked #101 for domestic and foreign market access and ranked #15 border administration, Singapore ranked #1 on both counts. In terms of business environment Germany ranks #15 while Singapore ranks #2.

Bureaucracy

  • According to the ‘2014 Corruptions Perceptions Index‘ released by Transparency International, a global coalition against corruption, Singapore was perceived as a “very clean” and non-corrupt country and was ranked #7. Germany was considered clean as well but was ranked #12.
  • The WEF’s ‘2014 – 2015 Global Competitiveness Report’ also reveals that Singapore has the highest public trust of politicians and the least burden of government regulation. In comparison, Germany ranks #15 and #34 respectively.
  • In 2010, the Political and Economic Risk Consultancy (PERC) accorded Singapore the status of having the most efficient bureaucracy in Asia.

Labor Force

  • Singapore’s top position in BERI’s ‘2010 – 2011 Labour Force Evaluation Measure‘ for more than 30 years is testament to its ability to attract and retain the world’s best labor force. On the other hand, Germany came in at #61.
  • Aon Consulting’s ‘2013 People Risk Index‘ reveals that Singapore is the second-lowest risk city in the world for employing people while Berlin (Germany) was placed at the 40th position.
  • The WEF ‘2014 – 2015 Global Competitiveness Report’ ranks Singapore #3 in terms of labor/employee relations while Germany ranks #20.
  • In 2010, INSEAD ranked Singapore’s workforce as the sixth-best in the world.

Living Environment

  • The ‘2010 HSBC Expat Economics Report‘ shows that Singapore is considered a top wealth hot-spot (ranked #3), where the propensity to earn disposable income and enjoy luxury is high. This puts the city state in the 4th position of the list. Germany ranks #24 at the bottom quartile of the list, indicating that it is an unattractive location for career progression.
  • According to Gallup’s ‘2010 Potential Net Migration Index‘, Singapore is the most desirable immigration destination while Germany is the 28th most desirable.

COUNTRY RANKINGS: SINGAPORE VS. GERMANY

Year Category Singapore’s Rank Germany’s Rank Source
2015 Ease of Doing Business 1 14 World Bank, 2015 Ease of Doing Business Report
2015-2016 World’s Most Competitive Economy 2 4 World Economic Forum, Global Competitiveness Report
2015 World’s Best Country for Business 8 20 Forbes’ Best Countries for Business Index
2015 World’s Freest Economy 2 16 Heritage Foundation’s Index of Economic Freedom
2015 World’s Most Competitive Economy 3 6 IMD, World Competitiveness Yearbook
2014 Country Most Open to Trade 1 10 World Economic Forum, Global Enabling Trade Report
2016 Ease of Paying Taxes 5 72 PWC, IFC, World Bank’s 2016 Paying Taxes Survey
2014 Country with Least Corruption Perception 7 12 Transparency International’s Corruption Perceptions Index
2014-2015 World’s Best IP Protection 4 20 World Economic Forum, Global Competitiveness Report
2010 World’s Best Labor Force 1 61 BERI’s Labor Force Evaluation Measure
2013 World’s Lowest Risk City for Employing and
Relocating Employees
2 40
(Berlin)
Aon Consulting’s People Risk Index
2010 Most Desirable Immigration Destination 1 28 Gallup Potential Net Migration Index
2010 World’s Best Financial Quality of Life for Expats 4 24 HSBC’s Expat Economics Report

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