Budget 2017 Feedback
Deloitte Singapore’s proposals for Budget 2017
Singapore is, at least from a tax perspective, living in interesting times.
With 2016 drawing to a close and Budget 2017 just around the corner, it is opportune to reflect on the confluence of external and domestic factors that led to this remark and their impact on Singapore.
We start with the observation that globalisation has taken a hit in 2016, as a result of major events happening in several countries, notably in the United States and the United Kingdom. This poses risks for Singapore, a country whose economy relies heavily on international trade. Despite the trend towards protectionism, businesses in Singapore have little choice but to look overseas due to a limited domestic market.
On the local front, 2017 also marks the last year of the Productivity and Innovation Credit (PIC) Scheme, a broad-based government initiative to support investments in a broad range of activities along the innovation value chain. Since 2010, businesses have gradually grown accustomed to the generous tax deductions and to a lesser extent, cash pay-outs offered for a gamut of activities, ranging from buying a laptop to undertaking research and development (R&D). Although the productivity needle has not moved as significantly as one would have hoped, the lasting legacy of PIC will be to put the need for efficiency and innovation at the top of the agenda for most businesses.
Turning to the OECD’s Base Erosion and Profit Shifting (BEPS) Project, an ambitious revamp of international corporate tax rules by the world’s major economies to ensure multinational corporations pay their ‘fair share’ of taxes, various proposals have been introduced and countries have been signing up to these proposals. With the recent completion of a multilateral instrument which allows countries that sign up to swiftly implement tax treaty measures aimed at preventing cross-border tax avoidance, there is no doubt that we are now firmly in the implementation phase of the BEPS project.
With the above in mind, our submission for Budget 2017 calls upon the Government to build upon the strong foundations laid in previous Budgets – helping Singapore businesses survive and thrive amidst tumultuous economic conditions by reinforcing the pillars of innovation and internationalisation, whilst carefully steering Singapore through choppy ‘BEPS’ waters by ensuring that our tax system remains transparent and acceptable in the international tax arena.