This comprehensive two-part article addresses the manner in which, and the possible reasons why, Singapore adopted the principal purpose test (PPT) and the discretionary benefits provisions in the OECD’s Multilateral Instrument (MLI), and the potential consequences of that decision. Part 1 of the article focuses on the reasons for, and manner of, introducing the PPT while Part 2 examines the potential consequences, with specific reference to channelling highly mobile income to tax havens via Singapore. The author argues that Singapore’s introduction of the PPT is unlikely to deter foreign direct investment and jeopardize the country’s current attractive business and tax-competitive position. Rather, the way that Singapore introduced the PPT – by way of the MLI together with the discretionary benefits provision – appears to be in line with its policy of granting tax benefits (including treaty benefits) using the tax authority’s broad discretionary powers and deploying a purposive approach to interpretation of the law.