Deloitte Singapore’s response to the “Emerging Stronger Together” Singapore Budget 2021

SINGAPORE, 16 February 2021 – Deloitte Singapore’s subject matter experts share their reactions and comments to the Singapore Budget 2021 announced today:

Mr CHEUNG Pui Yuen (鍾培源), Chief Executive Officer, Deloitte Singapore:

“A key highlight of Budget 2021 are the measures around the Green Plan that kick starts a green revolution in our city state. As Minister Heng said, ‘Sustainability is a journey, not a destination’.”

“In previous years, Singapore has taken tentative steps in terms of sustainability efforts. This year, Singapore is taking it to the next level with the Green Plan, to ensure that we are all doing our part to build a sustainable future at home and contribute as a responsible member of the international community. The Green Plan places emphasis on harnessing opportunities for technological advancements, innovations and entrepreneurship as the enablers for restructuring resilience and sustainable development, for example, through the new Enterprise Sustainability Programme to help businesses - especially SMEs – to focus on sustainability opportunities.”

"The message for the need for collective action from individuals to tackle the climate problem and achieve the Green Plan was felt strongly in the Budget. We can all reap the benefits and live in a clean and green Garden City when we transform our entire value chain sustainably.”

Mr LOW Hwee Chua (刘辉泉), Regional Managing Partner for Tax & Legal, Deloitte Singapore & Southeast Asia:

“Much of what we saw in the Budget was hinted at in recent weeks: the exciting Green Plan with its push to put sustainability at the core; further support to innovation and jobs with $24 billion to support businesses and workers; and a focus on the social compact to ‘emerge stronger together’. In tax terms, DPM Heng said himself that “No Finance Minister likes to talk about tax increases” but recognised that in the coming years, the Budget will need to balance again – the GST increase will eventually come – and our tax system must maintain resilience to withstand shocks.”

“Overall, this was a Budget with a vision – a Budget aiming to build on the emerging post-pandemic recovery and strengthen the ability of companies and entrepreneurs to continue to transform and grow; but also a Budget that recognises that drawing on reserves in the longer term is not sustainable and so set the scene for future tax changes ahead.”

Mr Richard MACKENDER (马克德), Tax Partner and Indirect Tax Leader, Deloitte Singapore, Southeast Asia and Asia Pacific:

“The change is aligned with the previous announcement made in the Budget 2020 that the GST increase cannot be deferred indefinitely. The revenues in the medium term are expected to be weak amid the gloomy economic environment due to COVID-19 pandemic. The timing of the increase is expected to take place closer to 2022 than later, but taking into account of the pace of our economic recovery, our revenue outlook and expenditure. The Government expects that the economy should be growing strongly by the 1-3 year(s) timeline as we recover from the COVID-19 pandemic.”

“It is not a surprise that the Government will change the GST treatment of low-value imports of goods so that overseas suppliers will be affected by GST in the same way as local businesses. But businesses will welcome the timeline of 2023 to get ready.”

“GST on low-value imported goods from 1 Jan 2023 would be welcomed by local small business to level the playing field as more people are moving towards purchasing on online platforms. This has noticeably accelerated during the current pandemic but is expected to continue as the trend was towards online consumption even before the pandemic hit.”

“Local buyers of advertising space in the financial services sector will be adversely affected by the change in GST treatment of low-value imports of goods. Currently, whether GST is charged or not depends on where the advertisement is intended to circulate – predominantly outside Singapore means no GST. After the change, a local financial services buyer of advertising will be incurring GST on advertising whether they buy locally (because now they are the local contractual party) or they buy from overseas (because GST reverse charge means they will need to self-assess GST on the inbound service)."

Mr Andrey BERDICHEVSKIY (白安哲), Director, Deloitte Future of Mobility Solution Centre:

“In the Singapore Budget 2021, it was announced that $30 million will be set aside over the next five years for EV-related initiatives, such as measures to improve charging provision on private premises. In addition, the minimum $5,000 additional registration fee (ARF) will be removed to allow consumers to make full use of tax rebates of up to $45,000. These initiatives to increase the supply of charging stations and reduce taxes for EVs will help to mitigate current barriers of EV adoption in the country - with 34% of Singaporeans concerned about availability of charging and 20% concerned about the EV price premium, according to Deloitte's Global Automotive Consumer Study 2021.”

Mr Daniel HO (何仁奇), Tax Partner, and Tax Leader for Government & Public Services sector, Deloitte Singapore:

“Given the extraordinary spending to combat the pandemic, it can be expected that the Government will focus more on minimising tax leakages and tax filing processes that faciliate timely and accurate tax reporting. Furthermore, "working from home” may require more robust processes to facilitate data collection for tax reporting. Companies should review their tax processes to minimise non-compliance.”

“Covid-19 has clearly opened the Government's eyes to what can be achieved in a digital and virtual environment, as well as the need for businesses to digitise and transform. SG Budget 2021 is flushed with a suite of measures to achieve this goal, with funding for operational digitalisation, funding for venture investments and even CTO advisory support. The Government indeed has foresight and is looking to turn a crisis into opportunity.”

“Budget 2021 sends a signal that businesses need to really think about how they can digitalise their processes and transform their operating model in the new business environment. They can tap on the schemes available and if new roles are created in the process, the JGI will come in handy too.”

“The extension of 250% deduction for donations is a welcomed gesture to encourage philantrophy in these difficult times.”

“There are limited corporate tax changes this year and no corporate tax rebate - the bulk of them deal with providing cash tax relief such as accelerating tax claims for equipment and renovation spending, and extension of loss carry-back relief. This is in line with recent budgets and also expected given the tightened fiscal position.”

Mr Rohan SOLAPURKAR, Tax Partner and Consumer Industry Tax Co-Leader, Deloitte Singapore and Deloitte Southeast Asia:

“The extension of JSS for firms in Tier 1 and Tier 2 till September and June 2021 respectively, while expected, is a welcomed move. This will help companies overcome immediate liquidity and cash flow issues.”

“With border travels continuing to be controlled and restricted, the extension of the JSS support will be appreciated by the aviation and tourism sectors.”

“It remains to be seen if the increase in petrol duty rates with immediate effect and the various electric vehicles (EV) related initiatives will encourage Singaporeans to make the switch to EVs as the government push towards a much-needed greener Singapore.”

Ms LIEW Li Mei (刘丽梅), Tax Partner and International Tax Leader, Deloitte Singapore:

“As the Covid-19 pandemic widens the social gap, it is really heartwarming to see the Government finding ways to support the more vulnerable groups, such as lower income families, older workers and children with special needs; showing its commitment to ensure that no one is left behind.”

“With the extensive EV initiatives and various other green initiatives, the Government reminds us that, though it is important to emerge stronger together through the Covid-19 pandemic, it is also equally important that we do not lose focus on building a sustainable society for our future generations.”

Ms Sabrina SIA (佘爱玲), Tax Partner and Leader of Global Employer Services, Deloitte Singapore:

“It does not come as a surprise that there is no change to the individual tax rates given the severe and prolonged economic impact of the COVID-19 pandemic.”

“It does not come as a surprise that no personal tax rebate is granted as direct subsidy in cash or in kind may be more meaningful for the average income taxpayers who pay minimal tax, but who are more likely to be impacted by the COVID-19 pandemic.”

Ms ONG Siok Peng (王淑苹), Tax Partner and Tax Leader for Transportation, Hospitality & Services sector, Deloitte Singapore:

“Support for businesses in the form of various enhanced financing schemes, and co-funding of digital solutions and new technologies will provide much-needed relief for the businesses' cash flow issues and help them to transform and enhance their competitiveness.”

“The wage credit scheme (“WCS”) was first introduced in the 2013 Budget to encourage employers to share productivity gains with workers to retain workers, where the Government co-funds part of the wage increases given to Singapore employees. The WCS was subsequently extended a number of times. The government has again extended the WCS for another year. While this is definitely a welcomed move, businesses should continue their transformation efforts to stay competitive to ensure that wage increases can be sustained as the WCS will eventually be phased out.”

“Jobs and skills support packages awarded for accelerating the upskilling of workers to adapt to business digitalisation and transformation will help workers stay relevant and employable.”

“As said by the Minister in his speech ‘Working from Home’ is just a short step to ‘Working from Anywhere’ - even as “working from home” becomes the norm and possibly “working from anywhere” in the future. Before allowing all employees to do so, businesses should carefully consider tax implications for both employees and businesses that may arise in different jurisdictions.”

Mr James WALTON, Transportation, Hospitality and Services Sector Leader, Deloitte Singapore:

“It’s good to see further ongoing support to the Arts and Sports sectors, and particularly to the self-employed. However, it’s clear that this industry will continue to need extended support for at least the remainder of 2021 and probably beyond, as international visitors and large events remain scarce and many businesses and workers in the sector face up to an uncertain future.”

Mr WONG Chee Ming (黄志明), Tax Partner, Deloitte Singapore:

“This year’s Budget “Emerging Stronger Together” goes beyond short term relief that addresses immediate needs to continue the fight against the pandemic. The government will also channel resources to sectors that are still facing challenging times. The Finance Minister has announced numerous Budget measures for targeted support towards sectors that remain under stress (e.g. aviation industry). Such measures also include positioning Singapore to seize growth opportunities in post Covid-19.”

“It was expected that the Government will continue to help the hardest-hit sectors such as aviation and tourism. They face a lot of uncertainties as travel restrictions for most parts of the world are not expected to ease soon and the fight with COVID-19 could be in a long haul.”

Mr Danny KOH (许建兴), Tax Partner, Deloitte Singapore:

“Businesses will be disappointed that costs incurred for COVID-19 medical tests will not be claimable as an input tax credit. We would urge the Government to consider alternative support measures (e.g. granting a certain fixed amount per employee if the businesses can provide valid reason(s) for the need to travel) for affected businesses to help them defray the cash-flow impact of costs incurred for employees who are required to travel.”

“The announcement by the Government to impose GST on low value imported goods should be welcomed by our local GST-registered suppliers as it will put them on equal footing with overseas suppliers of the same goods. Currently, import GST relief is granted on non-controlled and non-dutiable goods imported by post or air with a total CIF (Cost, Insurance & Freight) value not exceeding S$400. Therefore, overseas suppliers who are not registered for GST are able to sell their goods into Singapore GST-free and hence giving them an unfair advantage over our local GST-registered suppliers of the same goods who would need to charge GST at the current standard rate of 7%.”

“With this change, we believe overseas suppliers will be required to be registered for GST in Singapore and charge GST on their sales of low value goods into Singapore if they exceed the GST registration threshold (yet to be determined). Therefore, it is important in our view that the GST registration threshold is set at a low value or otherwise many overseas suppliers will not be caught under this new regime and the same problem will persist. The current GST registration threshold for overseas suppliers of digital services is at S$100,000 annually so we believe a similar threshold may be adopted too.”

“It also remains to be seen whether the implementation of this new regime will indeed result in Singapore consumers buying less goods via the internet as it appears that online shopping via the internet has already became a popular hobby for many Singapore consumers.”

Mr Brent VASCONCELLOS, Tax Partner and Energy, Resources & Industrials Industry Tax Leader, Deloitte Singapore and Southeast Asia:

"The Government has committed to assist Singapore businesses commercialise intellectual property under its Singapore Intellectual Property Strategy 2030 – thus helping to continue promoting Singapore as a highly attractive IP hub within the region."

Mr Richard MACKENDER (马克德), Innovation Leader, Deloitte Southeast Asia:

“The Government's continued focus on innovation platforms to promote start-ups and corporate innovation, such as through the Open Innovation Platform and Global Innovation Alliance, will greatly enhance Singapore's appeal as an ecosystem and innovation centre.”

“Innovation and technology skills are vital to be able to meet the challenges of the post-covid-19 world. The Government's investment in developing skills in the Innovation and Enterprise Fellowship Programme will definitely help local talent to upskill and add value.”

Mr WONG Meng Yew (王明耀), Tax Partner and Global Trade Advisory Leader, Deloitte Singapore and Southeast Asia:

“The hike in petrol duty has not come too much as a surprise given the last increase in rates 6 years ago and the need to raise Government revenues. The hike is expected to contribute approximately $100 million in additional duties based on an estimate of about 730,000 petrol-based vehicles currently plying Singapore’s road. The transitional offset measure will however help cushion and defray the additional costs to vehicle owners and commercial operators.”

Larry Low, Tax Partner, Deloitte Singapore:

“The increase in the GST rate sometime during 2022 to 2025 may be timely to cushion an adverse impact to our income tax revenue arising on the back of developments in international tax under BEPS 2.0 which invariably should have an impact on our tax revenue base.”

 

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