Tax Jab against the novel coronavirus

The writers are Liew Li Mei and Chua Kong Ping, Deloitte Singapore International Tax Leader and Singapore Tax Director (currently on secondment in the USA) respectively. The above are their personal views and may not represent the views of the firm.

The ink on the Finance Minister’s Budget 2020 statement would likely be moist when he delivers the speech next Tuesday, as measures to manage the novel coronavirus (Covid-19) situation in Singapore are continually refined to help businesses and Singaporeans tide over this difficult period.

Some of these measures may be retrieved from the 2003 playbook. That was the year when Singapore was affected by an outbreak of severe acute respiratory syndrome (Sars). As recently stated by Minister for Trade and Industry, Chan Chun Sing, help will be directed to the hardest hit tourism and transport related sectors. Such assistance may, as they have during Sars period, come in the form of property tax rebates for commercial property (particularly hotels), a reduction in the foreign worker levy for unskilled workers employed by hotels and the easing of working capital through a temporary bridging loan for tourism-related small and medium enterprises. 

The broader impact of Covid-19 on non-tourism and non-transport related business may be equally severe, if the spread of the virus is not contained and evolves into a global pandemic. Supply chains, already under stress from the ongoing trade war between the United States and China, would suffer major disruptions if Covid-19 cannot be contained. The impact of a worldwide pandemic on global business hubs such as Singapore will be acute.

On top of any broad-based measures that could be introduced to support businesses cope with a volatile economic outlook, some immediate targeted support for businesses and Singaporeans to cope with Covid-19 could come in the form of: -

Incentives to encourage employees to work remotely

Most businesses have schemes in place that allow employees to work remotely. In the coming days and weeks, it is expected that more employees would be requested to avoid congregating in the office and instead work remotely from home as part of business continuity measures. 

Beyond containing the spread of Covid-19, potential longer-term benefits of working from home include helping businesses contain expenses through reduced need for  office space, minimised congestion on our roads and public transportation, and the attendant decrease in pollution – all long-term concerns that space-constrained Singapore are trying to address.

The authorities have established grants to employers that support flexible-work arrangements (FWA), which includes flexi-place arrangements. The scheme is currently limited to local employees (Singaporeans or permanent residents) that adopt FWA and the grant amount effectively covers a maximum of 35 employees per employer over a two-year period. To ‘move the needle’ in respect of working from home, the authorities can perhaps consider relaxing the local employee criteria and, instead, provide a tax credit to businesses based on the number of employees that are required to work from home. Structuring assistance in the form of tax credits may also alleviate incidences of abuse that is usually more prevalent when cash is handed out.

For employees, the increased consumption of utilities, such as electricity and internet usage, and where relevant, capital expenditure incurred to facilitate working remotely, such as turning part of the home into an office, should be granted either as a deduction or allowance.

Temporarily increasing medical expenditure deduction caps

Since Year of Assessment 2005, deductions for medical expenditure incurred by a business is typically capped at 1% of its total employee remuneration. Where a business adopts certain portable medical schemes, that cap is increased to 2%. Businesses have long lamented that the deduction limits for medical expenditure have not kept pace with the cost of medical care, but it is perhaps for the same reason that the authorities have been reluctant to increase medical expense deductions to avoid a vicious cycle of ever increasing costs due to an overconsumption of healthcare. That said, the Covid-19 situation represents, pardon the pun, a novel situation for Singapore and businesses would be expected to incur increased medical expenditures as more employees seek medical treatment during this period. The authorities may consider temporarily increasing the medical deduction cap for the Year of Assessment 2021 (and beyond, if necessary) to provide some relief for businesses in these trying times.

Tax exemption of remuneration received by persons involved in epidemic prevention and control

A broad spectrum of personnel, from medical and healthcare workers to persons serving quarantine orders, are currently down in the trenches combatting Covid-19. In China, the epicenter of the outbreak, measures have been introduced to exempt from individual income tax, contingent remuneration derived by medical personnel and workers involved in epidemic prevention and control. The Singapore authorities may consider introducing similar benefits as a form of appreciation for those that risk their lives daily to keep the wider populace safe.

It is hoped that these suggestions will be considered and will provide some relief to those whose lives and livelihoods are impacted by the Covid-19 situation. As a nation, Singapore was not expected to survive from the very day it obtained independence but has since overcome many existential challenges in the last 55 years. This too shall soon pass. Singapore jia you! 

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