Deloitte Singapore’s responses to the Singapore Budget 2016 announcement

Press releases

Deloitte Singapore’s responses to the Singapore Budget 2016 announcement

Singapore, 24 March 2016 – Deloitte Singapore’s subject matter experts share their reactions and comments to the Singapore Budget 2016.

Overall response

Low Hwee Chua (刘辉泉), Regional Managing Partner, Southeast Asia Tax and Legal:

“This budget is focused on bringing Singapore together through partnerships in community and industry to help boost productivity and to support the needy – but there is little short-term relief for those concerned about possible tough financial times ahead. Having said that, we saw more assistance for SMEs through various tax allowances, grants and loans – plenty of initiatives to support targeted groups including the Special Employment Credit scheme and Workfare enhancements.

Unlike most Singapore budgets, there was very little focus on the overall tax base, sin taxes and changes in the tax burden for individuals and families. It was very much a budget focused on infrastructure and societal development – it was all about schemes for productivity and community support to build a solid base for the next 20 years or so for Singapore’s future.”

Daniel Ho (何仁奇), Tax Partner, Deloitte Singapore:

“As expected, the Finance Minister has planned for a prudent budget this year. No doubt the Government will be ready to lend a helping hand if the economy deteriorates further. I believe this is a prudent approach.”

Ong Siok Peng (王淑苹), Tax Principal, Deloitte Singapore:

“While this year’s budget is a prudent one, it is very well targeted at providing more assistance to SMEs and the less privileged.”

Lee Chew Chiat (李招杰), Public Sector Leader, Deloitte Southeast Asia:

“Minister Heng’s theme of partnership to transform Singapore is in the right direction - stakeholders working together to grow Singapore’s economy and build resilience in the fabric of our society. Businesses, workers and the government must work hand in hand to grow our enterprises; our corporates, communities, people and the government must work together to strengthen our nation.

With increased budget of S$5b over last year, more effective and targeted spending is required to achieve intended outcomes. Targeted choices must be made in utilising the Industry Transformation Programme, amounting to S$4.5b. A balanced framework is needed to distribute the funds. This way we maximise growth chances.

The key for our SMEs is innovation. They must grow into markets beyond our shores. We must help companies grow and sink their roots in Singapore. This way, we have sustainable employment for the long term.

While larger budgets for healthcare and transport are planned this year, it is imperative these sectors transform themselves to be more cost effective, doing more with less.

With technology, companies must leverage opportunities beyond physical boundaries. They can tap on markets that could not be reached in the past. Our government policies must help these companies capitalise on these opportunities.

We should find ways to retrain our workers, including PMETs, before they lose their jobs. Could vulnerable jobs and sectors be identified early?

We will have a successful model for aging if we are able to create a vibrant silver economy that can be replicated in other cities.”

Press contacts:

Carie-Anne Bak
Tel: +65 6531 5203
Email: cabak@deloitte.com

Marie Li
Tel: + 65 6800 3717
Email: meijli@deloitte.com

Jeanette Juay
Tel: +65 6531 5050
Email: jjuay@deloitte.com

Property cooling measures

Low Hwee Chua (刘辉泉), Regional Managing Partner, Southeast Asia Tax and Legal:

“As hinted by various Government officials, the Finance Minister has confirmed that it is too early to relax the current property cooling measures. It is a double whammy for property developers as manpower costs will increase due to the non-deferment of the previously announced increase in foreign worker levies for the construction industry.”

Value creation

Low Hwee Chua (刘辉泉), Regional Managing Partner, Southeast Asia Tax and Legal:

“The extension of the non-taxation of the gains on disposal of equity investments to 31 May 2022 is well received. However, it is disappointing that the scheme has not been extended to quasi-equity investments such as convertible bonds, preference shares etc.”

Business

Daniel Ho (何仁奇), Tax Partner, Deloitte Singapore:

“From the business perspective, SMEs and Innovation are the big winners of Budget 2016. This is not surprising, as restructuring and value creation have been the 2 big themes coming into this year's Budget. There is also a clear sense that the Government is trying to move away from broad based schemes to more targeted help and funding for SMEs and certain industries such as ICT.”

Labour

Sabrina Sia (佘爱玲), Tax Principal, Deloitte Singapore:

“The focus on lifelong learning for our people to adapt to the future continues to be emphasised.  SkillsFuture is intended to be our long-term game plan to grow and develop our people.  However, this can only be successful if our people also take ownership of their own learning and development.”

SMEs

Rohan Solapurkar, Tax Principal, Deloitte Singapore:

“As expected, the SME sector has been the beneficiary of significant grants with a view to boost the SME segment.  However, the restriction of the Corporate Income Tax Rebate to S$20,000 is disappointing.”

Daniel Ho (何仁奇), Tax Partner, Deloitte Singapore:

“SMEs are clearly the beneficiaries of this year's budget, with easier access to funding and higher corporate tax rebate. It would be better if the cap for the tax rebate could be increased specifically for SMEs though.”

Productivity & Innovation

Daniel Ho (何仁奇), Tax Partner, Deloitte Singapore:

“With the reduction of cash payout rate to 40%, firms that value the cash funding may wish to consider to accelerate planned qualifying spending to before 1 August 2016 to take advantage of current PIC cash payout rate of 60%.”

Mergers & Acquisitions

Daniel Ho (何仁奇), Tax Partner, Deloitte Singapore:

“The increase in the M&A tax allowance cap from S$20M to S$40M is indicative of the Government's wish to encourage bigger and stronger Singapore companies in order to compete globally. The doubling of the government support in the form of tax deductions from $5M to $10M is a significant enhancement as compared to Budget 2015.”

Industry

Robert Tsang, Indirect Tax Leader, Deloitte Southeast Asia:

“Singapore is not alone in transforming its national trading platforms, which amongst other things are key enablers to Customs and IRAS in tracking imports and exports of goods, ensuring duty and GST are accounted for correctly. Many countries in ASEAN and across the world are also working on improving and integrating trading systems – the aim is to simplify movements of goods cross-border.  Nice idea, difficult to achieve – it needs to balance country requirements, security in the supply chain and differing practices across countries and trading blocs.

In the long term, if NTP is an open global platform it should be good for businesses and drive down costs.  Who is going to pay for the upgrade though?  Businesses will be pressing for grants, rebates and enhanced deductions to defray the short term costs and share the short term pain.

This change should not have a direct impact on banks’ trade finance business. In the longer term and with a “bigger picture” perspective, we would expect this enhancement to be welcomed by all.”

Bob Fletcher, Customs & Global Trade Leader, Deloitte Singapore & Asia Pacific:

“TradeNet is the current platform for making Customs declarations, whereas TradeXchange is a trade platform that facilitates the exchange of data within the trade and logistics community.

Details on The National Trade Platform have yet to be released publicly, but our understanding it that NTP will merge these two platforms together into a single trade portal which will also support businesses offering trade finance, and wider support services associated with the global movement of goods.

The NTP will effectively become a one-stop shop for companies trading globally.  Streamlining processes through electronic data sharing will result in operational efficiencies and reduction in lead times and costs.  This will be of particular benefit for SMEs venturing into international trading.”

Michael Kee, Shipping Sector Leader, Deloitte Southeast Asia:

“With the recent downturn in the oil sector showing no immediate signs of reversing, combined with the global economic slowdown affecting international trade, Singapore’s maritime and offshore sectors have been badly hit due to low demand and overcapacity in supply. The MPA has already put in place some schemes to help, but any incentives will be welcome as companies navigate their course through these troubled waters.”

Personal tax

Jill Lim (林丽金), Global Employer Services Leader, Deloitte Singapore:

“The capping of the personal tax reliefs to S$80,000 comes as a surprise and appears to be contradictory to the Government effort to encourage procreation. Typically it is the female individual taxpayers with Singapore citizen children who are able to enjoy personal tax reliefs that may be in excess of S$80,000, as they get to enjoy Working Mother’s Child Relief (WMCR) with a cap of S$50,000 on each qualifying child. However, with this cap, this seems to send a message that such high-income earning females are not encouraged to have more children, or should not return to the workforce after they have children.”

Sabrina Sia (佘爱玲), Tax Principal, Deloitte Singapore:

“Despite hopes that there may be a personal tax rebate announced for the Year of Assessment 2016 (income year 2015) in view of the slowing economy and potential tough times ahead, none had been announced. Somewhat disappointing, but guess not totally unexpected since the objective of this year's Budget appears to be more targeted in providing assistance to those who really need support, for e.g. our low-income seniors.”

Jill Lim (林丽金), Global Employer Services Leader, Deloitte Singapore:

“The Singapore Government has announced the removal of the administrative concession of taxing only 20% of the value of home leave passages provided to foreign employees (subject to capping limits) with effect from the Year of Assessment (YA) 2018 (income year 2017). After the removal of the generous administrative concession previously available for the provision for housing accommodation prior to income year 2014, this is another measure that will increase the tax liability of foreign employees working in Singapore.”

Goods and Services tax

Richard Mackender, Indirect Tax Leader, Deloitte Singapore:

“For FY16 the GST has contributed an increased percentage of the overall revenue for Singapore as compared to FY15.  However, the tax is now very stable and there were no changes announced in the 2016 Budget. This reflects Singapore’s aim of providing predictability and certainty for business.”

Tech and innovation measures

Daniel Ho (何仁奇), Tax Partner, Deloitte Singapore:

“The 100% investment allowance for automation equipment is definitely welcomed as it provides for additional tax deductions to help companies digitise and embrace automation. Given that it is urgent and critical for companies to restructure and improve productivity, as mentioned by the Finance Minister, it may be better to also offer similar additional tax deductions for labour and consultants costs incurred for such projects.”

Jobs

Low Hwee Chua (刘辉泉), Regional Managing Partner, Southeast Asia Tax and Legal:

“For the second year running, there was a big focus on increasing adaptability and employability for Singaporeans, particularly those in industries being disrupted by technology. The particular focus on developing ICT skills will be welcomed by technology companies.”

BEPS

Ben Pickford, Tax Director, Deloitte Singapore:

“It is slightly surprising that the Finance Minister did not make any announcements in his speech on Singapore's adoption of Base Erosion and Profit Shifting (BEPS) minimum standards proposed by OECD. Groups operating internationally will hope for more clarity soon on Singapore's approach.”

Childcare/Infant care relief

Sabrina Sia (佘爱玲), Tax Principal, Deloitte Singapore:

"In line with the Singapore Government’s aim to continue to increase our birth rates, and also possibly take advantage of the boost in birth rates that had been enjoyed during the SG50 Jubilee year, the Singapore Government has announced the introduction of the Child Development Account (CDA) First Step grant of S$3,000 for Singaporean children born from today (24 March 2016). The Government will also match dollar-for-dollar (up to S$3,000 each for the first and second child) for co-savings made by parents into the CDA.

While the above will go a long way to help parents financially with procreation, more impetus needs to be put on the development of infrastructural support (for e.g, having enough good-quality infant care and childcare centres) to provide dual-working parents with support to take care of their children, especially if they have no family support. Often times, this may be the more important factor that impacts the decision to have children, rather than mere financial support. That said, any financial support that is given by the Government will always be welcomed.”

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