2016 Pre-Budget Feedback

Budget 2016 marks the first Budget that would be delivered by Singapore’s new Finance Minister, Mr. Heng Swee Keat. Minister Heng is also chairing the Committee on the Future Economy (“CFE”) which would chart Singapore’s next lap of growth. A key focus of CFE, and by extension, Budget 2016 and future Budgets, would be to move the Singapore economy up the innovation ladder, from one that is “value-adding” to one that is “value-creating”.

Value-creation, or innovation-led enterprises, is core to every sector of the economy and is crucial to deliver new sources of growth and high-wage jobs. The focus on building new business capabilities and value-creation is ever more important for Singapore as a slower pace of growth is expected in 2016 and middle and back office jobs in the country are under threat from lower cost locations.

Fiscal policies drawn up to achieve this would be introduced amidst an international drive to combat tax avoidance. In this connection, Budget 2016 will be keenly watched as it will also be the first Budget to be released after the publication by the OECD of its final set of recommendations under the Base Erosion and Profit Shifting (“BEPS”) Project for a ‘comprehensive, coherent and co-ordinated reform of international tax rules’.

Thus, a balance must be achieved between keeping Singapore’s tax system simple whilst ensuring that it remains coherent and acceptable in the international tax arena, such as calibrating and articulating our available tax incentives such that they are only awarded based on substantive activities being performed in Singapore.

Mindful of these constraints, our proposals for Budget 2016 calls for the strengthening of initiatives to promote innovation whilst meeting the twin challenges of keeping our tax regime competitive and addressing the implications arising from the BEPS Project.