Deloitte Singapore’s response to Budget 2019
SINGAPORE, 18 February 2019 — Deloitte Singapore’s subject matter experts share their reactions and comments to the Singapore Budget 2019 announcement.
Low Hwee Chua (刘辉泉), Regional Managing Partner for Tax & Legal at Deloitte Singapore and Southeast Asia:
“As the Finance Minister promised, SG Budget 2019 is progressive and builds on the measures and initiatives put in place in the past couple years. It continues the recent focus on driving enterprise innovation and growth; increasing productivity of Singaporean workers and strengthening the social framework. The Budget also recognises the on-going challenges that impact Singapore’s security and liveability, and this can be seen from the attention paid towards strengthening our total defence, steps to tackle climate change, and measures to help the lower income and elderly, in particular in terms of healthcare and subsidising the cost of living.”
Keeping Singapore safe and secure
Thio Tse Gan (趙思彦), Cyber Risk Leader for Deloitte Southeast Asia:
“As Singapore transforms and embraces Industry 4.0, a strong digital defence is critical. By making digital defence the sixth pillar of the nation’s Total Defence, along with the announcement of the Home Team Science & Technology Agency and significant investments to support our defence, security and diplomacy efforts, it will allow Singapore to strengthen its capabilities and safeguard itself against both physical and cyber threats.”
Skilled workforce, innovative firms, and a vibrant economy
Lee Chew Chiat (李招杰), Government & Public Services Industry Leader at Deloitte Southeast Asia:
“To reduce dependency on foreign manpower, companies must adopt a transformative mindset. The government can fund one-off initiatives to cushion cost impact on the companies. However in order for work processes to change, these companies must challenge their current operating model. For example, they should think about not having, say half of their manpower, and what changes must take place to continue their business.”
”The government is one of the largest employers in Singapore. The government should also transform itself and reduce dependency on manpower where possible.”
Lee Tiong Heng (李忠兴), Tax Partner and Leader of Global Investment and Innovation Incentives at Deloitte Singapore and Southeast Asia:
"The extension of writing down allowances on qualifying IPRs for another five years will certainly aid in deepening Singapore’s IP capabilities and maintaining its attractiveness as a hub for innovation. Though businesses would be a bit disappointed that the scope of qualifying IPRs has not been widened to, for example, include customer lists which are quite critical for digital businesses, and also that there is no automatic waiver of legal ownership requirement. "
Sabrina Sia (佘爱玲) Tax Partner (税务合伙人) and Leader of Global Employer Services at Deloitte Singapore:
“The key focus of Budget 2019 is really on transformation - transformation of the workforce, transformation of SMEs, transformation of organisations to cope with technologies in the new digital world. While the Government will help Singapore and Singaporeans cope with the tide of transformation, it is important that Singapore and Singaporeans stay relevant to keep up with the times.”
“The lapsing of the Not Ordinarily Resident (NOR) is unexpected as that was a scheme which was introduced in Budget 2002 with the objective of attracting foreign talent with regional and global responsibilities to relocate to Singapore. As Singaporeans and Singapore Permanent Residents (SPRs) typically do not benefit from the tax savings available under the NOR scheme, it has been in our Budget wishlist for the Government to consider allowing Singaporeans and SPRs with similar roles to enjoy such concession, so as to provide incentives for them to step up to similar roles. Interestingly, the Government has levelled the playing field for all by removing the NOR tax concessions. This is probably in line with the Government’s intention to ensure and enhance the progressivity of the tax system, as well as to ensure that the foreign workforce acts as a complement to the local workforce.”
Rohan Solapurkar, Tax Partner (税务合伙人), and Consumer Industry Tax Co-Leader Deloitte Singapore:
“The Dependency Ratio Ceiling (DRC) will be phased from the current 40% to 35% by 2021 under a two-stepped approach. In order to assist corporations to adjust to these changes in the foreign worker policy, the Government has enhanced the level of funding support through the Enterprise Development Grant and expanding the scope of the Productivity Solutions Grant.
While it is laudable that the Government recognises that reliance on foreign workforce needs to be reduced in the long term and action steps need to be put into place to mitigate the impact of the reduction address the issue, the Government should perhaps also look beyond these measures and consider how to encourage corporations to shift Singaporeans’ perception and attitude towards working in certain industries currently not commonly taken up by Singaporeans, e.g. via re-designing certain jobs, or deploying technology to increase efficiency, and accord further tax deduction/allowances on costs incurred in this respect. ”
Daniel Ho (何仁奇), Tax Partner and Tax Leader for Public Sector at Deloitte Singapore:
"As the economy marches towards a digital future, the emphasis on developing a world class workforce cannot be understated. The Minister’s attention to both ends of the workforce spectrum in this budget: local and overseas internship opportunities for young students and emphasis on redesigning jobs and reskilling older workers for the digital economy are testament to the fact that the Minister is indeed walking the talk."
“The extension of the fund incentives is expected, but the inclusion of Singapore sourced interest income as qualifying income is welcomed as it provides an added incentive for PE or VC funds to provide loans to Singapore-based borrowers and is in line with the Government's intention to support such companies to innovate and grow internationally.”
A caring and inclusive society
Ong Siok Peng (王淑苹) Tax Partner and Tax Leader for Transportation, Hospitality & Services sector at Deloitte Singapore:
“The extension of Special Employment Credit (SEC)/ Additional SEC signifies the government support for our ageing workforce, to allow them to stay employable and ride together in the fourth industrial revolution. This also ties in well with the Merdeka Generation Package initiatives.”
Lee Chew Chiat (李招杰) Government & Public Services Industry Leader at Deloitte Southeast Asia:
“The Social Ministry spending has doubled in last decade. To be more effective, the government should take the view of health and social together – meaning from citizen’s and family’s standpoint. A family with disadvantaged person typically has more pronounced healthcare expenditures.”
“First we had Pioneer Generation Package to honour the pioneers who built SG. Now, we have Merdeka Generation Package to recognise those who were the first few batches to serve NS, built the public services and modernised our economy. Will Singaporeans expect other “packages” in the future? The country can only afford these if our economy continues to thrive and our people are valued in this ever-changing world.”
“Healthcare cost has crept up from S$10.6B to S$11.7B. It’s now time to go beyond healthcare to having good health to buck the trend. ”
Richard Mackender (马克德), Tax Partner and Indirect Tax Leader at Deloitte Singapore and Southeast Asia:
“The Minister has confirmed the proposed increase in GST to 9% between 2021 and 2025, while highlighting that 9% is low compared to many other countries. The Government shows that it hears public concern on the increase of GST, but also offers a bigger picture view on rates elsewhere. It is pertinent that the Minister mentioned that the Government will continue to absorb GST on subsidised health and education costs, so helping to reduce the overall impact of the eventual increase. It is clear that the Government remains committed to the rate increase after 2021.”
Daniel Ho (何仁奇), Tax Partner and Tax Leader for Government & Public Services Industry at Deloitte Singapore:
“The government’s initiative to provide dollar-for-dollar matching for donations made to IPCs in FY 2019 under the Bicentennial Community fund is expected to motivate organisations to give more generously back to society, as every dollar of their donations made will translate to twice the amount given to IPCs, while continuing to enjoy 2.5 times tax deduction on the amount donated. Although the 2.5 times tax deduction for qualifying donations made was extended in the Budget 2018, perhaps more could be done by also increasing such tax deduction to 300%, similar to the 2015 SG50 budget, to further encourage corporations to donate. This would then certainly be a win-win-win situation for organsations, IPCs and beneficiaries alike.”
Sabrina Sia (佘爱玲) Tax Partner (税务合伙人) and Leader of Global Employer Services at Deloitte Singapore:
“The announcement of the 50% personal income tax rebate, subject to a cap of S$200, for the Year of Assessment 2019 was interesting. The cap of S$200 is the lowest in the history of individual tax rebates granted, and really demonstrates the intention to ensure and enhance the progressivity of the tax system, since the middle income earners will be the biggest beneficiaries of the rebate.”
A global city and home for all
Wong Meng Yew (王明耀) Tax Partner and Global Trade Advisory Leader at Deloitte Singapore and Southeast Asia:
“The increase in excise duty rate for diesel is significant and will weigh in on business operators and diesel car owners’ decisions on whether to make a switch to petrol vehicle ownership. Taking an example of private vehicle owners who have vehicles with full tank capacity of 45 litres to 65 litres, a $0.10 increase will amount to an additional $4.50 to $6.50 per full tank filled. Assuming further a full tank of diesel a week, this works out to between $18.00 to $26.00 per month or $216.00 to $312.00 a year. Whilst this may not immediately push a private vehicle owner to switch out his diesel vehicle, this increase will certainly become a factor to consider during the next vehicle purchase. In relation to taxi companies, the financial impact of the increase will be compounded due to the number of vehicles operated and refueling frequency. However, there is already a trend of taxi companies moving towards more energy efficient and less polluting vehicles, due to various factors (e.g. additional costs of ownership though the tariff structure and maintenance costs) and as such, the increase in excise duty rates will now likely further accelerate the preference to shift out of diesel cars.
The reduction in annual special tax for diesel cars and taxis is likely meant as a cushion against the impact of the increase in excise duty rates. However, since the increase in excise duty rate is significant (i.e. a 100% increase), the reduction in annual special tax will cushion only a minor cost arising from the overall annual increase in costs, especially for commercial vehicle operators. The reduction in annual special tax is however a welcomed move towards helping diesel vehicle owners transition out to more energy efficient and less polluting vehicles during the interim period.”
“As Mr Heng has aptly pointed out, responsibility of a sustainable future is on both Singapore’s corporate and individual citizens. Although the increase in excise duty rate on diesel will result in increased costs for businesses and individuals, it is a step towards ensuring that Singapore’s current green cover is not taken for granted. This measure will also complement Singapore’s efforts to further build and rely on the public transportation infrastructure.”
A fiscally sustainable future
Richard Mackender (马克德), Tax Partner and Indirect Tax Leader at Deloitte Singapore and Southeast Asia and Danny Koh (许建兴) Tax Partner Deloitte Singapore:
“The extension of the GST remission for expenses incurred by S-REITS and Singapore listed RBTs and for expenses incurred by qualifying funds managed by prescribed fund managers in Singapore, beyond March 2019 to 31 December 2024 and 31 December 2025 respectively will be welcomed by the Financial Services Industry. The extension shows Singapore's continued focus on ensuring a competitive environment for funds and fund managers.”
Richard Mackender (马克德), Indirect Tax Leader, Deloitte Singapore & Southeast Asia:
“For e-commerce taxes on goods, whilst there was no announcement in the budget, we understand that IRAS is continuing to look into the best way to effect any change. Countries such as Australia have removed the low value import threshold completely, but Singapore is studying the options to make sure that any change can be effectively administered and policed. It is notable that the travelers GST free allowance was reduced in this budget, so it would seem likely that any change will be by way of a reduction and not an easement in the threshold values.”
“The reduction in the value of goods that travellers can import into Singapore from S$150 to S$100 if the trip is 48hrs and from S$600 to S$500 if the trip is longer is expected. Travellers should be aware that Singapore Customs will be paying close attention over the coming holiday season.”
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