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Deloitte Singapore’s 2015 Budget Wish List
Focus on three core groups to achieve sustainable inclusive growth and a forward-looking, competitive business environment for Singapore
- Enhance tax incentives and refine requirements for potential investors, to address international concerns about BEPS
- Continued engagement with trade partners to pursue new tax treaties and re-negotiate old ones to more competitive terms
- Refine and/or broaden various tax schemes to help businesses, especially SMEs, in their restructuring journey
- Extend and refine the PIC scheme and include a new category for innovative activities
- Adjust the personal tax regime to better achieve key social objectives and introduce new measures to mitigate rising costs of living
- Implement tax measures that are relevant to GST and applicable for specific industries – financial services, shipping, telecommunications and REITS
SINGAPORE, 30 December 2014 – The concerns of three groups –international investors, local businesses and Singapore residents – form the core of Deloitte Singapore’s 2015 Budget Wish List.
Closely monitor international tax developments and their impact on Singapore
The Government should continue to pay close attention to global developments surrounding Base Erosion and Profit Shifting (BEPS) and assess the impact to Singapore businesses and economy.
Mr Low Hwee Chua, Partner and Head of Tax Services at Deloitte Singapore and Southeast Asia says, “Singapore needs to safeguard its tax regime in order to maintain competitiveness and remain attractive to foreign investments. An even more robust, holistic and transparent approach to awarding tax incentives could help alleviate the concerns caused by BEPS.”
To maintain Singapore’s competitive edge as a regional hub and extend the country’s “second wing” of economic growth by developing her external economy, Deloitte Singapore feels the Government should continue its efforts to pursue tax treaties with emerging trade partners and re-negotiate existing agreements where other countries have obtained more favourable terms.
Supporting our businesses to restructure, particularly SMEs
Zooming in locally, suggestions have been made to offer more help to local businesses, particularly the SMEs, to counter the rising costs of doing business in Singapore. One such recommendation is to increase the partial tax exemption from the first S$300,000 of normal chargeable income to the first S$600,000 of normal chargeable income for SMEs. Under this enhancement, the effective tax rate for SMEs with chargeable income of $600,000 would drop to 8.4%, from the current 12.7%.
To align with the Government’s push to drive greater productivity and innovation for local businesses, Deloitte Singapore suggests improving the effectiveness of the popular PIC scheme. The recommendation is to combine the PIC cash payout across the relevant assessment years and increase the payout cap instead of limiting it to $100,000 per YA. Furthermore, a new scheme should be introduced to reward innovative activities that are not within the ambit of the current PIC scheme. To encourage SMEs to grow and build critical mass via acquisitions, the M&A tax allowance scheme should be extended, and perhaps enhanced to allow tax deduction for interest costs incurred in share acquisitions, and not just asset acquisitions.
“Learning from the German Mittelstand, we should look to provide a stronger platform for our SMEs to operate given that they are the engine of growth for the Singapore economy. Widening the PIC scheme to include more innovative activities – which may not qualify as R&D - appropriately rewards firms that pursue innovative solutions to improve productivity,” adds Mr Low.
More help for the middle class and addressing rising healthcare costs
To meet the nation’s social objectives and to better the lives of Singapore residents, Deloitte Singapore’s wish list includes suggestions to enhance the personal tax regime. With the Government’s efforts to boost the nation’s birth rates, Deloitte Singapore proposes to increase the quantum of child relief to $8,000 as the current child relief accorded may not adequately address the financial burden that most parents face.
As Singapore residents grapple with higher healthcare costs, allowing tax relief for own or dependents’ medical or hospitalisation insurance would be one way to alleviate such costs as well as encourage individuals to take greater ownership of their families’ health.
“Any additional relief will be appreciated by Singaporeans. We believe that the personal tax suggestions will help most Singaporeans and enable them to reap the rewards of our country’s growth,” says Mr Low.
The rising cost of housing in recent years has been a source of concern for many Singapore residents. Deloitte Singapore suggests that the Government allows tax relief for mortgage interest incurred on owner-occupied properties. Allowing taxpayers to claim such a relief will partially mitigate the financial strain of owning a property given the run-up in property prices in recent years and is in line with the Government’s policy to encourage home ownership.
Apart from tax measures directed at the three core groups, the wish list also contains recommendations pertinent to Goods and Services Tax. These include a proposed extension to co-funding for participation in Assisted Compliance Assurance Programme for a further three years and the removal of the requirement to report zero-rated purchases as taxable purchases to reduce compliance costs.
Key industries and businesses could also be given a shot in the arm. Representatives from the insurance, REIT and maritime sectors have maintained that tax incentives are instrumental in their growth. These incentives are due to expire within the next year or two and should be extended and in certain instances, enhanced.
"As we celebrate Singapore’s 50th anniversary in 2015, we should continue to enhance our taxation framework and further support the sustainable growth of our economy as we strive to become a world-class financial and business hub," says Mr Low.
The specific details are available in the appended annex