OBG talks to Pehin Dato Abd Rahman Ibrahim, Minister of Finance II at the Prime Minister’s Office

Interview: Pehin Dato Abd Rahman Ibrahim

What tax incentives exist in order to stimulate economic growth and foreign direct investment (FDI)?

PEHIN DATO ABD RAHMAN IBRAHIM: In Brunei Darussalam, we have taken various steps to encourage FDI in the country, whilst taking into account the significance of diversification of the economy and the role of small and medium-sized enterprises. These include the Investment Incentives Order, 2001 and the Income Tax Act. The corporate tax rate has been reduced gradually to 20% in 2012, from 30% in 2007. In addition, new companies are granted exemption from tax on income of up to BN$100,000 ($77,880) for the first three years after their incorporation. At the same time, thresholds have been introduced, reducing the tax rate to 25% on the first BN$100,000 ($77,880) earned, and to 50% on the following BN$150,000 ($116,820) earned.

We have also increased the allowed claims on capital allowances. The amount companies are able to claim on initial capital allowances was increased by 100%, while claims for industrial buildings were increased to 4% from 2%. The claims for plant and machinery were increased to 40%, from 20%. Accelerated capital allowances have also been introduced to encourage taxpayers to use computers and other automation equipment and acquire new plants and machinery.

What is being done to ensure good corporate governance within the private sector?

PEHIN DATO ABD RAHMAN: Brunei Darussalam is committed to the highest standards of good governance domestically and internationally. This commitment is enshrined in Brunei Darussalam Vision 2035, which aims at ensuring good governance both in public and private sectors by providing high quality public service, streamlining regulatory frameworks and enhancing efficiency in government procedures. These efforts are duly reflected in the yearly improvement of Brunei Darussalam in the World Bank’s Ease of Doing Business index. In the international arena, Brunei Darussalam is a member of the Global Forum on Transparency and Exchange of Information for Tax Purposes, and stands committed to the standards established by the OECD.

How would you assess the success of the Sustainability Fund in safeguarding against oil revenue vulnerability and promoting economic diversification?

PEHIN DATO ABD RAHMAN: The two issues of oil revenue vulnerability and economic diversification have sat atop the national agenda for quite some time. With the consent of His Majesty the Sultan and Yang Di-Pertuan of Brunei Darussalam in 2008, the Sustainability Fund was established and charged with exploring these two critical issues, amongst others.

One component of the Sustainability Fund, the Fiscal Stabilisation Reserve Fund (FSRF), has the specific mandate of providing funding to the annual budget if there is an oil revenue shortfall. This is to allow the government to continue to carry out its obligations. Since its establishment, favourable global energy prices have allowed Brunei Darussalam to continue to enjoy a comfortable fiscal position. As a result the FSRF, which acts as a buffer fund, has continued to accumulate assets.

What are the initiatives being pursued to facilitate trade in Brunei Darussalam?

PEHIN DATO ABD RAHMAN: The Ministry of Finance’s latest initiative in this regard is its flagship project, Brunei Darussalam National Single Window, under the Royal Customs and Excise Department. Launched in February 2013, the project is expected to be fully operational by September. It aims to facilitate trade by integrating the overall regulatory processes for imports and exports among the government agencies concerned. This will simplify and expedite the application process by allowing a single submission of trade documents. Traders and importers will benefit from quicker processing times, which in turn may help them reduce their operating costs. The project is in line with the development of the ASEAN Single Window, which will be a key component of the ASEAN Economic Community.