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Deloitte comments on the Singapore Budget Speech 2013

Singapore, 25 February 2013 – The Minister for Finance has unveiled a Budget which continues major structural reforms to the Singapore economy and social fabric. Encouraging structural productivity gains through a continued tightening of foreign worker inflows, while at the same time encouraging productivity and innovation at the enterprise level through further incentives such as the new Productivity and Innovation Credit ("PIC") bonus scheme and helping businesses deal with the increased costs of employing Singaporean labour through the innovative and substantial Wage Credit Scheme, remain central to the economic transformation agenda. The Government has also embarked on significant initiatives to strengthen the social fabric by reducing the income and wealth gaps through increased spending on the lower income Singaporeans and introducing steeply progressive property taxes on investment properties and the top 1% of owner occupied properties.

- Mr Ajit Prabhu, Partner & Head, Tax Services, Deloitte Singapore & Southeast Asia

Corporate Tax

1. The corporate tax rebate of 30% up to a cap of $30,000 for the next three years is a generous measure that will help to rein in escalating business costs, especially for the SMEs. With this rebate and coupled with the existing partial tax exemption regime, companies earning $300,000 of chargeable income, under which most SMEs fall, will have a low effective tax rate of only 5.85%.
- Mr Daniel Ho, Director of Taxes, Deloitte Singapore

2. The Government has finally made it simple for SMEs. The new PIC bonus scheme is itself an innovative idea to incentivise businesses to make productivity investments. A dollar-for-dollar matching cash bonus capped at S$15,000 (over the three years from 2013 to 2015) for businesses that invest at least S$5,000 per assessment year to improve productivity, would certainly benefit SMEs the most. Given the rising business costs, one of the reasons frequently cited by SMEs for not being able to make full use of the current PIC scheme is the difficulty of putting aside cash to fund the investments. The scheme would therefore be most effective if the timing between the investment and the cash bonus is relatively short. Of course, the application process should also be made simple and straight forward.
- Mr Low Hwee Chua, Tax Partner, Deloitte Singapore

Personal Tax

1. Although we were looking forward to the IRAS to simplify the computation of assessable housing benefits (including the assessable value of the furnishing), it is quite unexpected that the Minister has proposed to revise the basis of computing the assessable benefit of accommodation provided by employer to be based on annual value of the property and the full cost incurred on hotel accommodation. This removes a significant tax incentive for employers to provide employees with accommodation rather than a housing allowance. With the proposed change, we expect to see employers reviewing their HR policy relating to the provision of housing benefits versus the payment of allowance to support the housing costs of their employees in Singapore. The tax cost of employer provided accommodation is likely to rise significantly as a result of this change offset somewhat by employers providing housing allowances instead and thereby reducing the administrative burden of managing the housing leases.
- Ms Jill Lim, Tax Partner, Deloitte Singapore

2. It is good news for the Minister to propose the personal income tax rebates for individuals below and over the age of 60 years old, with a greater percentage of the rebate being given to individuals above 60 years of age, demonstrating the Government's objectives of wanting to reward older workers who continue to participate in the workforce. Nevertheless, the cap of S$1,500 on the personal income tax rebate (for all ages) is lower than the tax rebates granted in the past.
- Ms Jill Lim, Tax Partner, Deloitte Singapore

Others

1. The Wage Credit Scheme is an innovative way to quickly raise the wage levels of Singaporeans especially the lower-skilled workers as 40% of the wage increase of workers earning less than S$4,000 per month will be funded by the government. However, businesses should be mindful of the long-term impact on their wage structure as this is only for a 3-year period and furthermore this may raise the wage expectations of non-Singaporean employees with similar skill sets or even employees with higher skill sets.
- Mr Daniel Ho, Director of Taxes, Deloitte Singapore

2. It is clear that several of the budget changes this year are intended to make the tax system more progressive in nature, e.g. the increase in property tax rates for higher-end properties, the increase in ARF for luxury passenger cars and the personal tax rebate of 30% or 50% subject to a cap of $1,500 where middle income groups will see their effective tax rate fall further. This, together with the Wage Credit Scheme and the social spending programs, should help strengthen the social fabric by reducing the income and wealth gaps.
- Mr Daniel Ho, Director of Taxes, Deloitte Singapore

3. Increasing the excise duties on "non-cigarette tobacco" products was not unexpected. The increases, particularly significant on beedies, ang hoon and smokeless tobacco, are in line with the Government's move towards harmonizing excise tax between cigarettes and non-cigarette tobacco products. With the latest increase, non-manufactured tobacco and cigarettes now attract the same rates. We can anticipate that beedies, ang hoon and smokeless tobacco will see further increases in excise rates next year.
- Mr Bob Fletcher, Director of Taxes, Deloitte Singapore

For contact details of Deloitte Singapore's Tax Partners and Directors, please refer to Annex A.

Annex A

Contact details of Deloitte Singapore's Tax Partners and Directors

Ajit Prabhu (for business tax matters)
Partner & Head, Tax Services
Telephone: 6530 5522
Lee Tiong Heng (for business tax matters)
Tax Partner
Telephone: 6216 3262
Low Hwee Chua (for business tax matters including productivity and innovation credit scheme)
Tax Partner
Telephone: 6216 3290
Jill Lim (for personal tax matters)
Tax Partner
Telephone: 6530 5519
Robert Tsang (for GST-related matters)
Director of Taxes
Telephone: 6530 5523
Sabrina Sia (for personal tax matters)
Director of Taxes
Telephone: 62163186
Rohit Shah (for business tax matters inclulding financial services)
Director of Taxes
Telephone: 6216 3205
Steve Towers (for international tax matters)
Tax Partner
Telephone: 6216 3227
See Jee Chang (for transfer pricing matters)
Tax Partner
Telephone: 6216 3181
Steven Yap (for mergers & acquisitions, oil & gas matters)
Tax Partner
Telephone: 6530 8018
Bob Fletcher (for customs duty matters)
Director of Taxes
Telephone: 6216 3338
Chan Huang Chay (for Chinese interviews)
Tax Partner
Telephone: 6530 5536
Linda Foo (for Chinese interviews)
Tax Partner
Telephone: 6530 5562
Daniel Ho
Director of Taxes
Telephone: 6216 3189

 

Contacts

Name:
Marie Li
Company:
Deloitte Singapore
Job Title:
Marketing & Communications
Phone:
+65 6531 5024
Email
meijli@deloitte.com
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