Tax - efficient supply chain management

• Main Author: Fan, Yue Jiao
• Other Authors: Teo Chee Chong
• Format: Final Year Project
• Language: English
• Published: 2015
• Subjects: DRNTU::Business::Operations management::Supply chain management
• Online Access: http://hdl.handle.net/10356/63736
• Institution: Nanyang Technological University

Tax-efficient supply chain management (TESCM) is becoming increasingly essential for the multinational enterprises (MNEs) in the globalized environment. The centralization model is one of the major strategies in trend. Research efforts extensively cover the tax issues related to the model, but the considerations on logistic aspects are lacking. The centralization model is achieved by the headquarters carrying most functions, assets and risks (FAR) of the business at a low tax jurisdiction and all the other business units providing services to the entrepreneur at a cost with limited FARs. Most profits gained by the MNE are deemed taken place at the headquarters in the low tax jurisdiction. Therefore, the overall tax expense is reduced. The centralization model usually does not require physical restructure of the supply chain, except for the relocation of headquarters. However, the locations of warehouses or distribution centers have impacts on the tax efficiency due to the arbitrary definition of permanent establishment on warehouses. The decision matrix developed in this paper can facilitate the decision making of warehouse location given possible scenarios a TESCM planner may encounter. Besides locating in the center of the Asia-Pacific region, Singapore has a competitive direct taxation structure and many other essential factors attracting the international business owners to centralize their businesses here. The case study of LVMH Group both elaborates the application of the centralized model and the decision matrix, and also facilitates the understanding of Singapore’s SWOT to be the choice of business centralization in the region. The SWOT analysis shows an optimistic outlook of Singapore with strong competition posted by Hong Kong. However, Singapore should continue to build on her advantages, including tax structures, and lead the regional cooperation on TESCM strategy implementation so as to attract more investment and new technology into Singapore.