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Deloitte Singapore’s proposals for Budget 2018
Deloitte Singapore calls for an enhanced broad base and progressive tax system for sustained economic growth and an inclusive society for Singapore Budget 2018.
The lead up to Budget 2018 has been dominated by speculation on whether taxes would be raised to meet future spending requirements, and if so, which tax (hopefully this stays in the singular!), as well as the magnitude of the increase.
If past Budgets are any indication to go by, announcements of tax hikes are generally reserved to the tail end of the Finance Minister’s Budget speech. This certainly heightens the drama of Budget 2018, but as tax professionals, we would be keenly awaiting measures introduced by the Finance Minister to maintain Singapore’s edge amidst stiff tax competition from developed countries.
In the main, our proposals for Budget 2018 are shaped by twin requirements of maintaining competitiveness in a fiscally sustainable manner. Given the emphasis on fiscal sustainability, our Budget 2018 proposal kicks-off with our recommendations on achieving that goal, with a key focus on ensuring that Singapore’s tax base is not eroded by structural shifts in the economy.
Let us not forget that 2018 marks the first year that spending on activities along the innovation value-chain would no longer be supported by the Productivity and Innovation Credit (PIC) Scheme. Although the Government has indicated that not all businesses will survive the transition into the ‘future economy’, businesses should not be left bereft of support in the post-PIC era. Our proposals seek to enhance the current broad-based R&D regime as our neighbouring countries continue to introduce and enhance their R&D tax incentive offerings, to enable Singapore to remain competitive.
In line with the shift away from broad-based initiatives, we have also called for targeted measures in a bid to lower compliance costs and to ease cash flow for SMEs.
In light of the tax reform in the United States, there is a risk that a ‘race to the bottom’ will develop in a bid to retain foreign investments. Our proposal calls for a review of a transit from tax incentives, which benefits a select group of taxpayers, to an overall reduction in tax rates that is enjoyed by all taxpayers.
Lastly, we believe that people are our greatest assets and have made proposals to complement the existing tax measures to ensure that no one gets left behind as Singapore continues her transition into the ‘future economy’.
Our proposals for Budget 2018 include recommendations on:
- Enhancing Singapore’s broad-based R&D regime to keep pace with regional developments
- Lowering compliance costs by simplifying certain tax provisions for SMEs
- Fostering an inclusive society by providing enhanced deductions for hiring and integrating persons with special needs into the workforce
- Reviewing Singapore’s corporate income tax rate in view of international tax developments
- Moving towards a more progressive and gender-neutral individual taxation system