Don't expect hefty rebates this year.
With just over two weeks to go before the release of Budget 2016, Singapore Business Review caught up with Lee Tiong Heng, Tax Partner, Deloitte Singapore, to know his thoughts on what Singaporeans should expect on March 24.
Lee boasts over 19 years of tax experience experience serving local, multinational and listed companies as well as private equity firms including 4 years with the Inland Revenue Authority of Singapore (Iras). He leads Deloitte's RDGI (Research & Development and Government Incentives) service-line in Singapore and South East Asia. He is also Deloitte’s Technology, Media and Telecommunications (TMT), Manufacturing, and the middle market/ growth enterprise leader for tax in Singapore.
Lee is among the panelists at the upcoming SBR Budget Breakfast Briefing, which will be held on March 28 at The Fullerton Hotel.
1. In your opinion, what will be the key differences between this year’s budget and the Jubilee Budget?
Budget 2016 marks a clean fiscal slate for the 13th Parliament of Singapore as surpluses accumulated by the previous term of government are now protected as past reserves. Barring possible extreme global economic situations, the government is expected to be very prudent in its spending as it moves towards achieving a balanced budget for its 5-year term of government. If global economy were to tank and greatly affect Singapore, off-budget measures may be necessary.
I therefore do not expect major spending initiatives to be introduced in Budget 2016. This would be unlike the previous two Budgets, where major schemes such as the Pioneer Generation Package, MediShield Life, SkillsFuture initiative and the Silver Support Scheme were introduced.
This could also be, in part, because the new term of government has yet to accumulate big surpluses for spending, and also because The Future Economy committee, which is tasked with charting Singapore’s future economic direction, would be delivering its recommendations only at the end of this year.
That said, I expect Budget 2016 to build on key themes of boosting productivity, encouraging innovation and providing assistance to businesses to capture middle and long term growth opportunities while also helping businesses to manage immediate challenges of a potentially slower local economy.
In recent years, the focus of the Singapore Government is to achieve growth via creating value, instead of merely adding value. Whilst boosting productivity is important and remains a challenge for certain sectors of the economy, I expect encouraging innovation and the creation of a thriving environment for entrepreneurship to be the focus of Budget 2016 and future Budgets. I also expect the government to set aside budget to continue helping the less fortunate but perhaps not to the same extent as before.
2. What are the key issues which Budget 2016 should address?
My take are the following:
· Managing immediate challenges of rising business costs faced by businesses (rental, manpower, etc.). Also, middle and back office jobs in the country are under threat from lower cost locations and disruptive technology. For businesses to remain competitive and to retain good jobs in Singapore, there is a need to innovate and achieve significant breakthroughs in the way business is being done, instead of merely improving productivity in order to stay competitive.
· Certain business sectors such as the oil and gas sector have been battered by the recent slide in oil prices and targeted help may need to be directed to these businesses
· There is a need to keep tax rates competitive while meeting increased social spending obligations in the years to come. We may need to review and tweak unproductive policies including tax policies; those of which removal should not materially influence investment decisions by companies, has a weak nexus in achieving the policy intention behind implementing the scheme, or is generally outdated.
- Enhancing capabilities in our companies and provide targeted assistance to help businesses capture middle and long term opportunities regionally and globally.
3. What initiatives will likely be rolled out to help businesses cope with slowing economic growth?
I expect only minor to moderate tweaks to the corporate tax system, largely due to the fact that The Future Economy committee has just been convened and will take time to come up with their recommendations. My take is that there will be no further change to the corporate tax rate of 17%. An increase could affect Singapore's competitiveness and a decrease is not likely in view of rising social costs.
In the meantime, a huge question on everyone’s mind is whether the Productivity and Innovation Credit Scheme will be extended beyond 2018. It may however be too early to say now since the scheme has another 3 years to run. The Government has for the past five years been providing generous funding for businesses to transform, either at a company level or at the sector level. We may see elements within the PIC scheme that encourages innovation and value creation (such as research and development incentives) being enhanced or extended in one form or another to provide more targeted support to companies that innovate and value create.
I also expect government to dish out further support to encourage domestic enterprises to internationalize and to tap on growth opportunities overseas.
4. What should households expect from this year’s budget?
This budget should have something for the household but my take is not to expect too much. The focus is likely on the economy.
Concerns about the cost of living in Singapore has always been high on the agenda for Singapore households. We may once again see a tax rebate being introduced in the YA 2016 to help the ‘sandwiched’ class cope with the rising cost of living.
Other perennial concerns would be escalating healthcare costs, especially with an aging population, and childcare benefits to make the formation of a family a more achievable life goal.
In relation to the former, all Singapore Citizens and SPRs are automatically included in MediShield Life. With better coverage, the premiums payable on MediShield Life have been increased accordingly which increases the burden for individuals who pay the premiums on the same for their elderly parents and dependent children. The Government should consider providing a tax relief for individuals who pay the MediShield Life premiums for their elderly parents and dependent children.
In relation to the latter, we hope to see the Working Mother Child Relief (“WMCR”) be extended to working spouses (i.e. made gender neutral). There is an increasing trend for married men to leave the workforce to care for their children at home instead. In this regard, to recognise that both spouses need encouragement to stay in the workforce, to consider to extend the WMCR to working spouses. Both parents may share the WMCR based on their mutually agreed proportion.
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