The Singapore Budget 2015 announcement

SINGAPORE, 23 February 2015 – Deloitte Singapore’s tax specialists have put together their full and comprehensive reactions to the announcement of Singapore Budget 2015.

Low Hwee Chua (刘辉泉), Head of Tax Services, Deloitte Singapore and Southeast Asia:
“The Government promised a ‘People’s Budget’ and they certainly delivered: a birthday budget that invests in the future with enhanced subsidies for lifelong learning, Silver Support and a more progressive CPF scheme; but with increased taxes on the wealthy to help subsidise.”

Low Hwee Chua (刘辉泉), Head of Tax Services, Deloitte Singapore and Southeast Asia:
“This budget definitely will do more to support companies focusing on R&D, innovation and expanding into global markets – but SMEs saw increased CPF costs in a tighter labour market, offset by brief extensions of some of the key credits.”

Lee Chew Chiat (李招杰), Public Sector Leader, Deloitte Southeast Asia:
“Singaporeans should be proud that the Government is investing in many aspects for the future when around the world many countries are implementing austerity measures.”

Lee Chew Chiat (李招杰), Public Sector Leader, Deloitte Southeast Asia:
“The budget enhances our people to be ready for the future and at the same time takes care of today’s needs by helping the needy. Indeed a balanced approach!”

Lee Chew Chiat (李招杰), Public Sector Leader, Deloitte Southeast Asia:
“The budget has an innovation element for businesses which is crucial to our economy. To keep us differentiated and competitive, we transform ourselves through innovation. As we make heavy investments in our infrastructure, we must be cognisant of what other countries are doing. Putting on a future lens is necessary.”

Lee Tiong Heng (李忠兴), Tax Partner, Deloitte Singapore:
“Singapore has come a long way in increasing productivity. While not much headway has been made on productivity gains in the past three years, there is a marked difference between productivity gains for domestic sectors and those focused on international markets. In line with the Government’s push to drive greater productivity and innovation for businesses, Budget 2015 introduces various targeted measures, such as enhancing the Capability Development Grants (CDG) to provide a more flexible support platform for companies, particularly the SMEs to innovate and to internationalise. Making smaller projects of less than $30,000 easier to qualify for CDG from SPRING Singapore will be welcomed by the SMEs and should in some way support innovative efforts by SMEs.”

Daniel Ho (何仁奇), Director of Taxes, Deloitte Singapore:
“This year’s Budget is an innovative one. While encouraging innovation in businesses, particularly within SMEs, it also introduces an innovative measure under the Skills Future scheme to encourage continuous learning for workers, with a fund created for each individual that will be topped up regularly and can be used for upgrading and training purposes. To make it more effective, perhaps the government could have considered a further step of subsidizing employers who grant workers leave to attend such courses.”

Lee Chew Chiat (李招杰), Public Sector Leader, Deloitte Southeast Asia:
“SkillsFuture is future-oriented. An innovative perspective is required otherwise we develop skills that meet today’s needs and we cannot solve the issues faced tomorrow. The Individual Learning Portfolio should enable collaboration, especially for those with experience. Learning is no longer the same. Learning from others and collaborating with others are critical to survive in future.”

Daniel Ho (何仁奇), Director of Taxes, Deloitte Singapore:
“Although the transition support package first introduced in 2013 will be extended for another 2 years with watered-down benefits for the Wage Credit Scheme and corporate income tax rebate, companies having tax losses stand to lose out with the removal of PIC bonus and they will not be able to enjoy the corporate income tax rebate.”

Ajit Prabhu, M&A Tax Leader, Deloitte Singapore:
“First increase in highest marginal personal tax rates in the last 30 years- is Singapore becoming more like other developed countries?”

Jill Lim (林丽金), Global Employer Services Leader, Deloitte Singapore:
“A surprising move by the Singapore Government to propose an increase in the income tax rates for high income earners with effect from the Year of Assessment (YA) 2017 (income year 2016). This is probably done to fund the slew of upcoming schemes like the Silver Support Scheme being announced to enhance our social safety etc, and to ensure the future sustainability of the schemes. While mindful of the need to keep our tax rates competitive, the government has also recognised the need to keep our individual tax regime more progressive and improving on income inequality.”

Steven Yap (葉辉强), Tax Partner, Deloitte Singapore:
“This budget continues the trend to ask those who are better off to play their part, with the top individual income earners further increasing their share of contributions to Singapore.”

Steven Yap (葉辉强), Tax Partner, Deloitte Singapore:
“As the gap between the highest individual marginal tax rate and the corporate tax rate widens, it will be interesting to see whether this results in increased corporatisation.”

Ajit Prabhu, M&A Tax Leader, Deloitte Singapore:
“Good news for S-REITs with foreign assets- Section 13(12) exemption on foreign income extended to 31 March 2020.

Mixed news for S-REITs with local assets- all concessions extended to 31 March 2020 except stamp duty relief on transfer of real property into the S-REITs which lapses on 31 March 2015.”

Lee Tiong Heng (李忠兴), Tax Partner, Deloitte Singapore:
“Deloitte Singapore had wished for an extension of the M&A allowance scheme. Besides extending the scheme, the Minister has surprised us by increasing the M&A tax allowance to 25% from 5% and lowering the qualifying shareholding threshold to 20%. This will be of significant help for SMEs and businesses which are seeking for inorganic growth and consolidation.”

Steven Yap (葉辉强), Tax Partner, Deloitte Singapore:
“The five times increase in M&A allowance from 5% to 25% of the value of acquisition capped at $20 million and allowing the claim applicable to 20% (reduced from 50%) of the shareholding eligibility tiers in the target company – should be a boon for many Singapore companies, especially SMEs that are contemplating to restructure, acquire, merge-consolidate – to be more competitive or gain a greater market share in these challenging times – at a certain deal size. It is a big helping hand assisting Singapore SMEs to be scalable for the future especially with the regional economic integration in the Asian Economic Community. The revision produces the same $5 million total M&A allowance possible as it was under its predecessor M&A allowance of 5% on $100 million acquisition value cap. Perhaps, introducing the 25% M&A allowance on the $20 million acquisition cap as an alternative would be preferred over replacing the 5% M&A allowance of $100 million acquisition cap. The options of either 5% on $100m or 25% on $20 million cap would continue to encourage different types of Singapore SMEs to benefit from the M&A allowance of different deal sizes – as we enter the second half of the 10-year restructuring.”

Lee Chew Chiat (李招杰), Public Sector Leader, Deloitte Southeast Asia:
“Healthcare is expected to rise from over S$9B in 2015 to S$13B in 2020. Future schemes should consider seriously promoting healthy living instead of episodic treatment.”

Lee Chew Chiat (李招杰), Public Sector Leader, Deloitte Southeast Asia:
“The Silver Support Scheme is a critical and permanent component of our social security scheme. We can be more targeted to the individuals who are really in need of assistance by using technology appropriately. We could extend beyond the 3 factors of lifetime wages, household support and housing type by using more granular data to make sure no one falls through the cracks.”

Sabrina Sia (佘爱玲), Director of Taxes, Deloitte Singapore:
“Budget 2015 continues to strengthen Singapore's social security system through a multi-pronged approach, including (1) raising CPF contribution rates for older workers and the CPF contribution ceiling, (2) enhancing the Special Employment Credit Scheme to encourage re-employment beyond the age of 65, and (3) introducing the Silver Support Scheme which will be a permanent scheme to supplement income for the bottom 20% of Singaporeans aged 65 and above. In particular, restoring CPF contribution rates for workers aged 50 to 55 to the same level as those for younger workers, recognises older workers can contribute as much to the workforce, if not more, than their younger colleagues.”

Daniel Ho (何仁奇), Director of Taxes, Deloitte Singapore:
“The planned 50% increase (from S$20billion to S$30billion) of development expenditure by 2020 is good news for businesses, with construction companies being the expected beneficiaries of this birthday Budget with the focus on reinvestment of infrastructure.”

Daniel Ho (何仁奇), Director of Taxes, Deloitte Singapore:
“Employers appear to have suffered another whammy in trying to cope with rising business costs, with the proposed increase in CPF rates for older workers and also the proposed increase in the CPF ceiling. But the proposed extension of the Enhanced Temporary Employment Credit should help at least for the coming 3 years.”

Richard Mackender, Indirect Tax Leader, Deloitte Singapore:
“It is clearly understood that the Government sees a need for increased revenue over the medium term and the Minister made a point during his budget speech that Singapore’s tax base should be broad. One of the obvious ways to raise revenue is via indirect taxes, but the Government has previously promised not to move the GST rate until at least 2016. Given the fiscal environment however, the Government is likely to be mulling an increase in the rate as soon as the time is right.”

Ong Siok Peng (王淑苹), Director of Taxes, Deloitte Singapore:
“A jubilee celebration not only for Singapore, but also for our jubilee senior workers with the restoration of CPF contribution rates to the same level as younger workers. However, a challenge as businesses continue to face rising costs.”

Ong Siok Peng (王淑苹), Director of Taxes, Deloitte Singapore:
“A budget which again emphasises that the government will help you if you would help yourself. The government will continue to fund businesses which help themselves to reduce business costs in the long term through productivity and innovation.”

Sabrina Sia (佘爱玲), Director of Taxes, Deloitte Singapore:
“While the increase in CPF rates comes as no surprise, it has taken more than 10 years for the CPF wage ceiling to return to the pre-2004 levels of S$6,000 when the median income of the average Singaporean was much lower. The golden question is whether the employer rates will ever return to 20%.

Sabrina Sia (佘爱玲), Director of Taxes, Deloitte Singapore:
“With the recent debate on the need to ensure individuals have enough in our CPF for our retirement, the proposed increase to the CPF rates for older workers does not come as a surprise.”

Bob Fletcher, Customs & Global Trade Leader, Deloitte Singapore & Asia Pacific:
“Good news and bad news for motorists. The increase in petrol duties will clearly not be welcomed but the road tax rebates should help offset the impact of the increase in 2015. The further extension of the Carbon Emission Vehicle Scheme (CEVS) to 2017 and the enhancement of the Early Turnover Scheme (ETS) are positive steps in encouraging motorists to convert to more “environmentally-friendly” or green vehicles.”

Ajit Prabhu, M&A Tax Leader, Deloitte Singapore:
“Increase in petrol duties by 20 cents per litre (premium) and 15 cents per litre (normal) – short lived cheaper motoring as a result of global drop in petrol prices although mitigated for the first year by a 20% rebate on road tax.”

Daniel Ho (何仁奇), Director of Taxes, Deloitte Singapore:
“The government has listened to our feedback and has extended the sunset date for Maritime Sector Incentives to 31 May 2021, removing uncertainty for shipping players looking to base their operations out of Singapore in the near future. The Minister also announced an expansion in the types of shipping income that will qualify for exemption and the scope of interest withholding tax exemption. This will make Singapore one of the most competitive shipping tax regimes in the world, and is in line with the government’s intention to promote the logistics industry.”

Steven Yap (葉辉强), Tax Partner, Deloitte Singapore:
“A Jubilee Budget as Singapore enters the Golden Era!”