Singapore Budget 2017 Commentary
Covering the tax-related changes in Budget 2017
The Finance Minister, Mr Heng Swee Keat, presented the Budget Statement on 20 February 2017.
With Budget 2017 and its focus on digitalisation, innovation and internationalisation, the Government is focusing on building deep partnerships and developing strong capabilities to help our businesses and society re-position for the future.
Coming on the back of a report issued by the CFE outlining long-term strategies to maximise the chances of Singapore’s success, there was a general expectation that Budget 2017 would contain ‘big-bang’ tax policies to address the challenges ahead. However, from a tax perspective, Budget 2017 is arguably a muted one.
The most notable tax change appears to be the introduction of a ‘BEPS-compliant’ patent box regime that incentivises income from the exploitation of intellectual property. In addition, several tax incentives and measures deemed important to Singapore, including the Global Trader Programme, have either been enhanced or extended. Modest tax rebates were also announced for both corporate and personal income taxes.
Most of the measures in Budget 2017 were introduced in response to the economic strategies highlighted by the CFE. These range from the SMEs Go Digital Programme where SMEs are given advice on the technologies to use at each stage of their growth, to the establishment of a Global Innovation Alliance for Singaporeans to gain overseas experience, build networks and collaborate with their counterparts in other innovative cities.
Our readers will realise that a common theme across the various announcements is the provision of highly-targeted assistance to businesses, in some instances ‘hand-holding’ them so as to provide that vital boost in the innovation value-chain. With the authorities repeatedly stressing that not all businesses will survive as the economy restructures into one that is value-creating, the days of broad-based tax schemes to drive productivity and innovation may be well and truly over.
A very welcome inclusion in Budget 2017, is the multi-faceted measures introduced by the authorities to address climate change. Rising sea levels caused by increased temperatures pose an existential threat to Singapore’s survival. With this in mind, the Government has announced the likely introduction of a tax on carbon emissions. Taxes on diesel, regarded as a highly pollutive fuel, will also be restructured to a volume-based duty to encourage users to reduce diesel consumption.
Finally, the Finance Minister cautioned that rising expenditure in the longer term, especially in healthcare and infrastructure, will require the Government to raise revenue through new taxes or increases to existing tax rates. In addition to the aforementioned ‘carbon tax’, we may see the GST base being broadened with measures taken to ensure a level playing field between local businesses which are GST-registered, and foreign-based ones which are not.
Budget 2017 is, however, coy on the measures that may be taken by the Government to balance the books in the long-term.
What is clear to us is that this Budget signals a clear preference by the Government to concentrate its resources on targeted initiatives. Businesses that are quick to adapt to this ‘new normal’ and proactively take advantage of the various targeted schemes introduced in this Budget will certainly thrive in the future economy.