In Focus
ECONOMY | Staff Reporter, Singapore
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Everything you need to know about the Big 4's reactions to Budget 2018

Find out what EY, Deloitte, KPMG, and PwC have to say about the Budget.

Finance Minister Heng Swee Keat announced the Singapore Budget 2018 yesterday and implemented a 10% hike in tobacco excise duties, the distribution of a one-off bonus worth $700m, a new ceiling rate for stamp duty, and a GST hike "some time," amongst others.

Here's what the Big Four have to say:

EY

Mrs. Chung-Sim Siew Moon, Head of Tax Services, Ernst & Young Solutions LLP says:
“A multi-faceted Budget that addresses the long-term challenges of the country and lays the foundation for a sustainable future for Singapore.”

Mr. Russell Aubrey, Partner, Tax Services, Ernst & Young Solutions LLP says:
“I was impressed by the multiple references to emerging technologies throughout the budget speech. These will have a major impact on society faster than most realise.”

Mr. Chester Wee, Partner, International Tax Services Leader, Ernst & Young Solutions LLP says:
“With technology advancement and globalisation driving disruption at an unprecedented pace, Singapore businesses should explore cross-sector collaboration, partnerships and acquisitions to compete effectively locally and abroad. The Government recognised this and identified pervasive innovation, deepening capabilities and forge strong partnerships as pillars to building a vibrant and innovative economy.”

Mr. Chester Wee, Partner, International Tax Services Leader, Ernst & Young Solutions LLP says:
“Investment in more efficient and smart solutions will improve productivity when human resources become more constrained with Singapore’s aging population.”

Mr. Panneer Selvam, Partner, People Advisory Services – Mobility (Tax), Ernst & Young Solutions LLP says:
“In YA 2017, a personal income tax rebate of 20% of tax payable, capped at $500, was accorded to both resident local and foreign taxpayers alike. The tax rebate was a direct offset against a taxpayer’s tax payable and largely benefitted an above average income earner. While some may be disappointed that no rebates were announced in this year’s Budget, the SG bonus was a pleasant surprise. The SG bonus will be duly paid out to all Singaporeans aged 21 years and above, and will undoubted be well received by the lower income families regardless of their tax paying circumstances.”

Mr. Yeo Kai Eng, Partner, Indirect Tax Services Leader, Ernst & Young Solutions LLP says:
“The 2 ppt GST increase and the implementation sometime in the period 2021 to 2025 is in line with past announcements that a GST rate hike will not be implemented before 2020.”

A vibrant and innovative economy

Overcoming near-term challenges

Mr. Desmond Teo, Partner, Financial Services Tax, Ernst & Young Solutions LLP says:
“The revision of the partial corporate tax exemption drives the message that all taxpayers, big and small, need to bear their fair share of taxes.

Mr. Chai Wai Fook, Partner, Tax Services, Ernst & Young Solutions LLP says:
“The scaling back of the current tax exemption scheme for start-ups may affect companies that are cash strapped in their initial years of business.”

He adds:
“Besides the extension of the Wage Credit Scheme, we have yet to see measures in Singapore Budget 2018 to help loss-making companies, where cash is key to their survival.”

Mr. Chester Wee, Partner, International Tax Services Leader, Ernst & Young Solutions LLP says:
“It is important for the Government to give extra help to start-ups and SMEs. Instead of reducing the amount of partial exemption which is currently applicable to all companies, an alternative approach would be to restrict such partial exemption to only small companies.”

Mr. Samir Bedi, Partner, People Advisory Services, Ernst & Young Advisory Pte. Ltd. says:
“The Wage Credit Scheme extension will be welcomed by employers and employees, as they undergo transformation efforts and share productivity gains.”

Fostering pervasive innovation

Ms. Tan Bin Eng, Partner, Business Incentives Advisory Leader, Ernst & Young Solutions LLP says:
“The proposed increase of the enhanced R&D deduction from 150% to 250% for R&D activities conducted locally will be greatly welcomed by companies, particularly with the expiry of the Productivity and Innovation Credit (PIC) scheme after YA2018. At 250% tax deduction, this will provide for a tax benefit of 42.5cents per dollar of R&D, which will put Singapore in a globally competitive position. However, areas of improvement in terms of the claim process, eligibility evaluation remains critical to ensure that the deduction is effective in achieving its intended outcomes.”

She adds:
“While the proposed increase of the enhanced R&D deduction from 150% to 250% for R&D activities conducted locally will be welcomed by larger companies that are in a tax-paying position, SMEs that are cash-strapped and in early phases of growth would see limited benefits. Many countries with attractive R&D regimes include a generous cash-payout component to their scheme to cater to this group, which with the expiry of the PIC, such cash payouts will no longer be a possibility for small companies in Singapore.”

Ms. Tan Bin Eng, Partner, Business Incentives Advisory Leader, Ernst & Young Solutions LLP says:
“The harmonisation of the Capabilities Development Grant and Global Company Partnership Grant into Enterprise Development Grant would enable Enterprise Singapore to have an overarching view and enable a one-stop, holistic support for the local Singapore companies across their different phases of growth, from emerging businesses into globally competitive enterprises.”

Mr. Chia Seng Chye, Partner, Tax Services, Ernst & Young Solutions LLP says:
“By granting enhanced tax deductions for licensing, registration and R&D activities for IP, the government has acknowledged the critical role played by IP in this digitalisation age and to incentivise enterprises to continue to innovate and transform.”

Mr. Chia Seng Chye, Partner, Tax Services, Ernst & Young Solutions LLP says:
“The development of a nationwide e-invoicing framework will help to propel Singapore into the forefront of e-commerce and e-tailing in the region and anchor Singapore as a hub for digital businesses.”

Ms. Ivy Ng, Partner, Tax Services, Ernst & Young Solutions LLP says:
“The setting up of an infrastructure office to study the potential of these projects outside the shores of Singapore presents attractive prospects for Singapore enterprises. It would be welcomed if tax incentives and concessions are available to help these enterprises as they navigate projects in jurisdictions outside Singapore and deal with taxes therein to grow and expand into the region.”

Mr. Russell Aubrey, Partner, Tax Services, Ernst & Young Solutions LLP says:
“We welcome the range of more targeted measure to promote productivity and innovation to replace the PIC scheme.”

Building deep capabilities

Mr. Chai Wai Fook, Partner, Tax Services, Ernst & Young Solutions LLP says:
“Proposed measure to increase expenses qualifying for automatic Double Tax Deduction for Internationalisation to $150,000 will encourage local businesses to venture abroad.”

Mr. Samir Bedi, Partner, People Advisory Services, Ernst & Young Advisory Pte. Ltd. says:
“Disruptive technology (artificial intelligence and robotics) will displace jobs. While not all jobs will be affected and not all affected jobs will be eliminated, Singaporeans need to invest in continuous learning and deepen their skillsets to stay relevant.

Forging strong partnerships

Mr. Samir Bedi, Partner, People Advisory Services, Ernst & Young Advisory Pte. Ltd. says:
“The approach to cluster Industry Transformation Maps (ITMs) will break myths of employees that their skills are only relevant to the industry in which they work in. Cluster based ITMs will drive a culture of innovation and allow for industries to learn from each other. The role of industry partners will be enhanced as we require enterprise capabilities and human capabilities to work in tandem.”

A smart, green and liveable city

Carbon tax

Mr. Simon Yeo, Partner, Climate Change & Sustainability Services, Ernst & Young LLP says:
“Carbon emissions now carry a price tag. Time to measure and mitigate emissions. These first steps into a carbon tax regime will pave the way for a more sustainable future to do our part to reduce global emissions and to protect Singapore in the future.”

Ms. Angela Tan, Partner, Tax Services, Ernst & Young Solutions LLP says:
“Singapore comes of age as a developed country in doing its part in climate action and upping the ante in fighting carbon emission.”

Mr. Benjamin Chiang, Partner, Advisory Services and Singapore Government & Public Sector Leader, Ernst & Young Advisory Pte. Ltd. says:
“Deployment of innovative digital technologies are essential in helping Singapore create a sustainable green and liveable city.”

Smart city

Mr. Benjamin Chiang, Partner, Advisory Services and Singapore Government & Public Sector Leader, Ernst & Young Advisory Pte. Ltd. says:
“Heartened to see increased support to help individuals to transition into jobs such as digital transformation, cybersecurity, data analytics relevant to Smart Cities and Industry 4.0. We see increased support for innovation and the development of emerging digital capabilities in corporates and individuals – which are urgent tasks at hand because these take time to bear fruit and are important to anchor Singapore as a Smart Nation.”

Mr. Benjamin Chiang, Partner, Advisory Services and Singapore Government & Public Sector Leader, Ernst & Young Advisory Pte. Ltd. says:
“Initiatives to encourage partnerships beyond our shores and enhance connectivity (both physical and digital) will promote economic growth in the entire region.”

Mr. Benjamin Chiang, Partner, Advisory Services and Singapore Government & Public Sector Leader, Ernst & Young Advisory Pte. Ltd. says:
“Investments in digital infrastructure (e.g., national digital identity, Smart Nation sensor platform, e-payments) will create a platform for companies to build smart applications and pave the way for Singapore to become a Smart Nation.”

A caring and cohesive society

Mr. Panneer Selvam, Partner, People Advisory Services – Mobility (Tax), Ernst & Young Solutions LLP says:
“The extension of 250% tax deduction scheme for donations to qualifying charities can help build a giving society, and should be permanent, as charities’ expenditure needs are recurring and likely to increase.”

Mr. Panneer Selvam, Partner, People Advisory Services – Mobility (Tax), Ernst & Young Solutions LLP says:
“Education is a key method to enable social mobility. Additional funds provided to EduSave accounts of the young is a worthwhile measure.”

A fiscally sustainable and secure future

GST rate hike

Mr. Yeo Kai Eng, Partner, Indirect Tax Services Leader, Ernst & Young Solutions LLP says:
“GST rate hike – the worst kept secret is finally out. As expected, the rate increase will only come into effect after 2020. To defray the GST burden from the rate hike, we can expect various GST offset measures. There will be a GST rate hike but only after 2020. While it’s three years away, it provides some certainty that we will not see any rate hike between now and the end of 2020.”

Ms. Chew Boon Choo, Partner, Indirect Tax – GST, Ernst & Young Solutions LLP says:
“The much speculated GST rate hike has finally been confirmed by the Minister. It will however not be immediate but only after 2020 – this is certainly good news to all. After 2020, we will see a GST rate hike as announced by Minister Heng. However, he shared that it will be in a progressive manner – one can only assume that the GST rate increase might be staggered – first 8% then 9%. This would be similar to the staggered rate increase that we experienced in 2003 and 2004.”

GST for online shopping

Mr. Yeo Kai Eng, Partner, Indirect Tax Services Leader, Ernst & Young Solutions LLP says:
“Good news for all – the much anticipated e-commerce tax (GST) on importation of low value goods was not announced. This means that end-consumers can continue to shop online without GST, at least for now.”

GST on imported services

Mr. Yeo Kai Eng, Partner, Indirect Tax Services Leader, Ernst & Young Solutions LLP says:
“As expected with all the advanced warning, the Minister announced that GST will be imposed on imported services. For business-to-end consumer transactions, this would mean that foreign vendors supplying digital services (e.g., online music, movies, and subscription services) might have to register for GST in Singapore come 2020 if their supplies to end consumers in Singapore exceeds certain threshold. If registered for GST in Singapore, these foreign vendors will be charging GST on their supplies to end consumers in Singapore.”

Stamp duty for property

Ms. Goh Siow Hui, Partner, Tax Services, Ernst & Young Solutions LLP:
“The highly anticipated wealth tax took a surprising turn with the introduction of a new stamp duty ceiling rate of 4%, which affects residential property purchases with a value of more than $1m.”

Developing the Singapore bond market

Mr. Desmond Teo, Partner, Financial Services Tax, Ernst & Young Solutions LLP says:
“Singapore continues to push holistically on developing the bond market with the extension of the Qualifying Debt Securities scheme and a broader array of bond product offerings through the borrowings by the agencies. Aligned with the announcement for statutory boards borrowing for long-term projects, the extension of the QDS scheme is part of a holistic push to develop the Singapore bond market.”

Developing the financial services sector

Mr. Desmond Teo, Partner, Financial Services Tax, Ernst & Young Solutions LLP says:
“The announcement of the S-VACC vehicle is long-awaited and broadens the choice of fund vehicles available in Singapore.”

PwC

Vibrant and Innovative economy

Dr. Zubin Daruwalla, Director (Healthcare), PwC South East Asian Consulting, says:
“Whilst Minister Heng clearly stated 3 shifts to do with the economy, all play pivotal roles when it comes to healthcare. It will thus be imperative for business leaders to factor these shifts in when addressing how best to future-proof their healthcare business strategies, with ‘digital’ and ‘innovation’ being integral components.”

Lennon Lee, Entrepreneurial & Private Clients Tax Leader, PwC Singapore, says:
“Finally the end of the PIC scheme. It is welcoming that the Singapore Government is providing more targeted support for companies to embrace innovation including raising tax deduction for IP registration fees to 200%, capped at $100,000 a year. Some licensing payments, such as use of trademarks and brand names, may not lead to innovation. It remains to be seen what the scope of the enhanced deduction scheme is.”

Abhijit Ghosh, Corporate Tax Partner, PwC Singapore, says:
“Laudable tax measures to encourage Singapore’s IP ecosystem. Enhanced tax deduction for Research & Development in Singapore, IP reregistration and licence payments should enable our SMEs to invest more on innovation and embrace greater use of technology to be efficient and effective.”

Elaine Ng, Transport & Logistics Tax Leader, PwC Singapore, says:
“Budget 2018 starts off well for businesses with the much deserved extension of the wage credit scheme for 3 years to alleviate wage costs pressures.”

Tan Tay Lek, Corporate Tax Partner, PwC Singapore, says:
“I had wanted to see the deduction limit raised to 300% but 250% is not bad. It helps put us in a good position to compete internationally for R&D dollars and more importantly, to attract R&D talent.”

Lennon Lee, Entrepreneurial & Private Clients Tax Leader, PwC Singapore, says:
“The adjustment to the start-up tax exemption scheme from exempting 100% to 75% on the first $100,000 of chargeable income and capping it to the first $200k will not likely have significant impact given that many of the start-ups here are not yet in a tax-paying position in the first place.”

Lennon Lee, Entrepreneurial & Private Clients Tax Leader, PwC Singapore, says:
“All is not lost with the end of the PIC scheme, SMEs can now tap on the Productivity Solution Grant (PSG) which subsidises up to 70% of approved costs for the purchase and use of new productivity and innovative solutions.”

Abhijit Ghosh, Tax Markets Leader, PwC Singapore, says:
“Whilst an effective tax deduction of 250% for R&D performed in Singapore is helpful, it does not help in undertaking R&D projects which are managed from Singapore but carried out in another country for various commercial reason, including availability of resources with specific R&D skillset.”

Peter Le Huray, Global Tax Markets Leader, PwC, says:
“The government's incentive to base R&D activities in Singapore means a cash net cost (after tax) of $57.50 for every $100 spent. Importantly, there is no cap on this concession. This is attractive but the devil will be in the detail as to what expenditures qualify as R&D.”

Peter Le Huray, Global Tax Markets Leader, PwC, says:
“Riding off the back of unexpected higher growth and productivity outcomes, the Government’s budget is expansive yet targeted to transform the economy through encouraging technology and innovation. This capitalises on Asia’s expanding economic influence and Singapore position as a key business hub.”

Smart, green and liveable city

Elaine Ng, Transport & Logistics Tax Leader, PwC Singapore, says:
“In sharing the longer term view to raise the tax from $5 per tonne of emission to $10-$15 per tonne emission, the Government is sending a strong message to gas emitters to convert to energy efficient alternatives to reduce their carbon footprint. Not surprisingly, there will be funding to support the companies to make this change and increases in U-save to help households defray the new tax which will be passed on to them as consumers.”

Koh Soo How, Asia Pacific Indirect Tax Leader, PwC Singapore, says:
“The introduction of the carbon tax from 2019 not only helps Singapore improve energy efficiency and make us a greener city, but it is another step where we are seeing a shift in Government revenue reliance from direct taxes to indirect taxes.”

Irene Tai, Corporate Tax Director, PwC Singapore, says:
“The Smart Nation Movement will encourage the growth of start-up businesses if it provides common platforms and infrastructure to reduce business costs and improve access to customers.”

Caring and cohesive society

Dr. Zubin Daruwalla, Director (Healthcare), PwC South East Asian Consulting, says:
“Heartening to hear about the introduction of premium subsidies for middle and lower incomes to meet the financial demands for ensuring ElderShield remains an effective avenue for care delivery.”

Fiscally sustainable and secure future - GST

Koh Soo How, Asia Pacific Indirect Tax Leader, PwC Singapore, says:
“Taxing the digital economy from 2020 will make e-commerce tax a virtual reality in Singapore.”

Koh Soo How, Asia Pacific Indirect Tax Leader, PwC Singapore, says:
“The introduction of the e-commerce tax will make Singapore the first country in Southeast Asia to introduce a tax on the digital economy. This is likely to be followed by Thailand, Malaysia and Indonesia which are already considering such a tax.”

Koh Soo How, Asia Pacific Indirect Tax Leader, PwC Singapore, says:
“The fact that the e-commerce tax will only apply to services show the practical difficulties and complexities that various jurisdictions face in trying to introduce an effective collection mechanism to tax low value imports of goods. We expect the Government to take a wait-and-see approach and learn from the experiences of other countries before expanding the new rules to tax low value imports.”

Koh Soo How, Asia Pacific Indirect Tax Leader, PwC Singapore, says:
“It remains to be seen if the proposed e-commerce tax will dent online shopping for digital services from overseas as there are other consumer considerations such as the wider variety of digital products on online platforms.”

Koh Soo How, Asia Pacific Indirect Tax Leader, PwC Singapore, says:
“With the e-commerce market in Singapore expected to grow to more than $7b by 2025 with cross-border transactions making up about 55% of the e-commerce market, the proposed e-commerce tax allows Singapore to broaden the scope of GST and provide a new and sustainable revenue pipeline for the Government.”

Koh Soo How, Asia Pacific Indirect Tax Leader, PwC Singapore, says:
“If there is a question of how the Government would be able to enforce the GST registration for an overseas vendor for Business to Consumer (B2C) transactions, we must bear in mind that the tax authorities have exchange of information arrangements that would enable the jurisdictions to exchange information on overseas vendors which are already registered in the local territories.”

Koh Soo How, Asia Pacific Indirect Tax Leader, PwC Singapore, says:
“The reverse charge mechanism to tax Business to Business (B2B) transactions has long been in our GST legislation but was never effected until the Minister's announcement in Budget 2018. With the increase in cross-border services received by businesses in Singapore, the reverse charge could no longer stay dormant and would impact businesses in sectors such as financial services and residential property development which are unable to fully claim the GST on their business purchases.”

Koh Soo How, Asia Pacific Indirect Tax Leader, PwC Singapore, says:
“There's never a good time to raise taxes but the Finance Minister has reminded us of how our healthcare and social expenditure on education, infrastructure and security has grown over the years. The fact that the Minister has agreed to defer the rate hike to beyond 2021 shows that the Government has been true to what it has said in the past that is, its present revenues and the Net Investment Returns framework would provide sufficient revenue to fund current social spending needs until the end of this decade.”

Koh Soo How, Asia Pacific Indirect Tax Leader, PwC Singapore, says:
“Deferring the GST rate hike to the period between 2021 and 2025 would provide sufficient time for the Government to explain why it is necessary to raise the GST rate for the next decade, which is what the Prime Minister had called on his PAP colleagues to do at last November's PAP Convention.”

Koh Soo How, Asia Pacific Indirect Tax Leader, PwC Singapore, says:
“Raising the rate to 9% still puts us below the regional average of 10.5% and the OECD average rate of 19% which suggests that the Government is keeping its options open on whether the rate can increase further depending on our spending needs.”

KPMG

Ong Pang Thye, Managing Partner at KPMG in Singapore says:
“Minister Heng Swee Keat has delivered a Budget which is strategic, calibrated and confident.
There’s clearly a focus on helping companies to grow, with supportive measures on digital transformation, capability building and internationalisation. The incentives offered will certainly promote the right activity. What may be even more desirable is if there are follow-through incentives to reward positive outcomes. For example, the introduction of the broad-based R&D incentive scheme will encourage certain desired activities by firms. What will make it even more potent is if there is an additional incentive which kicks in when these activities lead to the desired revenue outcomes. In other words, an incentive to encourage action, and an incentive to recognise the success of the action.”

Chiu Wu Hong, Head of Tax at KPMG in Singapore says:
“Singapore has already been preparing for the three major shifts: the rise of Asia, emerging technologies and an aging population as mentioned by Finance Minister for some time. This Budget takes a significant step forward by setting a targeted strategy for the next decade, especially on the need for businesses to move away from cost competition and differentiate through innovation.

An all-round inclusive Chinese New Year Budget with a SG Bonus “Ang Pow” for all adult Singaporeans, three more years of 250% tax deduction on donations to Institutions of a Public Character (IPCs) as well as the Business and IPC Partnership Scheme to encourage businesses to contribute specialised skills and services to IPCs.”

Harvey Koenig, Tax Partner at KPMG in Singapore says:
“The strength of Singapore’s fiscal policy is our hallmark. Long-term planning is what gives global businesses the confidence to continue investing in Singapore, and this year’s fiscal surplus has given the nation further leeway to make Singapore even more attractive to businesses and global talent.”

Tay Hong Beng, Tax Partner and Head of Real Estate at KPMG in Singapore says:
“The focus of this year's Budget is very much on internationalisation, innovation and enhancing digital capabilities to grow Singapore businesses. The next step is to look into how we can onshore more of such activities into Singapore using technologies and innovation. Any increase in the level of such activities will lead to a broader and more sustainable tax base rather than tax rates increase going forward.”

Toh Boon Ngee, Tax Partner at KPMG in Singapore says:
“This Budget marks an important milestone for Singapore. Not only does it take stock of the achievements of the nation made possible by the past Budgets, it also sets out the longer term nation building plans for the future. Overall, it provides a good helicopter view of what the future nation will look like at the macro level while examining the needs of each component at a micro level.”

Larry Sim, Tax Partner at KPMG in Singapore says:
“The increase in support for education especially for lower income families is a welcome move. This would foster and strengthen Singapore as a caring and cohesive society.”

Innovation and Digital Capabilities

Harvey Koenig, Tax Partner at KPMG in Singapore says:
“The government has responded to the call of Singapore businesses to support innovation with the enhancement of the research and development (R&D) tax incentive and enhanced deductions for IP registration and licensing. These schemes compare well with other countries, and encourage businesses to embark on continuous and sustained innovation which is critical in face of increased digital disruption. Together with other existing measures to spur innovation such as the Industry Transformation Maps and the $19b Research, Innovation and Enterprise (RIE) 2015 Plan, these measures will enhance Singapore’s position as a global innovation hub.”

Pauline Koh, Tax Partner at KPMG in Singapore says:
“The refinement of the Tech Skills Accelerator (TESA) signifies the government’s commitment to equip our workforce with digital skills and new capabilities to remain competitive in the digital economy.”

Enterprise

Jonathan Ho, Head of Enterprise at KPMG in Singapore says:
“The restricted tax exemption for smaller companies and start-ups will inevitably add on to their costs. I think the underlying intention for this is that profitable companies which may have benefitted from previous grants, schemes or tax rebates should also have a share in contributing back to the system. This allows more SMEs to benefit from current grants and schemes that the government has put in place to prepare them to cope with the challenges of today’s business climate.

The effective tax rate is still very much lower compared to the headline corporate tax rate.

The Enterprise Development Grant to replace the current IE Singapore and SPRING Singapore grants will provide a more holistic one-stop shop for SMEs to develop local capabilities and internationalise. An outreach program to the SMEs that could benefit from this scheme will be crucial.”

Toh Boon Ngee, Tax Partner at KPMG in Singapore says:
“An attractive carrot is hung out to the SMEs and start-ups for them to benefit from lower effective tax rates from the corporate income tax rebate, the enhancement of start-ups tax exemption and the partial tax exemption schemes.”

Larry Sim, Tax Partner at KPMG in Singapore says:
“The Budget has continued to be forward-looking for enterprises as the government looks to deepen Singapore's capabilities in intellectual property (IP) generation and encourage the adoption of technologies and the spending on innovative solutions.”

Corporate Tax

Ajay Sanganeria, Tax Partner at KPMG in Singapore says:
“Enhancing tax deductions for R&D from 150% to 250% will increase Singapore’s competitiveness to attract R&D investments by multinational corporations (MNCs). This is in line with other Asian countries such as Hong Kong which has recently introduced enhanced tax deductions for R&D.”

GST & E-Commerce Tax

Lam Kok Shang, Head of Indirect Tax at KPMG in Singapore says:
“It is heartening to hear that the Finance Minister has deferred the introduction of the reverse charge and overseas vendor GST registration to 1 January 2020. This gives more time for businesses that cannot claim all its input tax to minimize the additional non-claimable tax. Overseas vendors providing services to non-GST registered persons can consider cost-effective options to comply with the GST collection.”

Gan Hwee Leng, Tax Partner at KPMG in Singapore says:
“The implementation of GST for imported services aligns our GST framework with those of other countries. It places local and overseas service providers on a level playing field but translates to higher cost for local consumers.”

Carbon Tax

Alan Lau, Tax Partner at KPMG in Singapore says:
“The introduction of a new carbon tax will help to diversify the source of revenue collection for Singapore, and build a more robust taxpayer base for the future. This augurs well against the backdrop of rising healthcare and social spending needs for a greying local population, and also achieves the twin benefit of controlling greenhouse gas emissions.”

Leonard Ong, Tax Partner at KPMG in Singapore says:
“The introduction of a carbon tax across all sectors of the economy will help position Singapore as a green and liveable city. This tax is aimed at encouraging less harmful greenhouse gas emissions, thereby improving our environment and our living conditions as a whole.”

Property

Tan Chee Wei, Tax Partner at KPMG in Singapore says:
“The 1 percentage point increase in buyer stamp duty indicates that property cooling measures will not be lifted in the immediate short term. Instead, it shows that the government is ready to rein in measures, if necessary, to ensure that the property market does not overheat.”

Tay Hong Beng, Tax Partner and Head of Real Estate at KPMG in Singapore says:
“A new tier of buyer’s stamp duty at 4% for residential properties above $1m will be introduced for consideration with effect from 20 February 2018. As most private residential properties are generally above this quantum, purchases in this category will be affected by the adjustment. However, as total stamp duty collection constitutes only about 6% of the total tax collected, this new introduction may not have an impact on the total tax revenue. Notwithstanding this fact, the increase in the stamp duty shows that the burden of taxes are meant to be progressive, and are targeted at the wealthier group.”

Healthcare

Karen Lee, Audit Partner at KPMG in Singapore says:
“Managing future demand from the aging population − living longer with increased disease complexity and multiple illnesses − will require new ways to keep people healthy and out of hospital. To achieve this, greater integration is needed not only between the primary, acute, intermediate and long-term care facilities but also from allied social support services. The proposed consolidation of aged care functions under MOH and AIC is a step in the right direction and will enable better coordinated service delivery to our seniors.

The ramp-up in healthcare spending is timely and almost a necessity given our rapidly aging population and the need for more healthcare subsidies. The investment in building more step-down care facilities to cater for the elderly in the community is a welcome step by the government.

Singapore’s healthcare system is regarded as highly efficient and has surpassed that of many developed countries despite reasonably low levels of GDP spending. While the spending on healthcare is expected to increase significantly over the next decade to about 3% of GDP, it is still considerably low as compared to other developed countries.”

Infrastructure

Satya Ramamurthy, Partner and Head of Infrastructure, Government & Healthcare at KPMG in Singapore says:
“The idea of using debt financing to fund large long-term infrastructure projects is welcome as it will deepen the debt markets in Singapore and act as a catalyst for financing regional projects. It will also address the intergenerational characteristics of such assets.”

Sharad Somani, Partner, Infrastructure Projects Advisory Practice at KPMG in Singapore says:
“We believe the government has taken a holistic view after factoring in industry feedback, and has positioned the carbon tax as one of the tools in addition to other initiatives like green buildings and the Energy Conservation Act to lay the foundation of a low carbon Singapore economy.

An infrastructure office to be set up in Singapore to develop, finance and execute infrastructure projects will provide the necessary platform for infrastructure players to effectively contribute in ASEAN infrastructure growth and to leverage on opportunities arising from the Belt & Road initiative of China.”  

Deloitte

Low Hwee Chua, Regional Managing Partner for Tax at Deloitte Singapore and Southeast Asia says:
“While the various investments announced will perhaps not draw the focus this year due to some of the headline tax changes, there are welcome boosts for the environment, healthcare, infrastructure, charities and social services. It’s another steady budget from a Government that prides itself on providing financial and fiscal stability to attract investors and this approach will help position Singapore for the challenges of the new decade.”

Developing a vibrant and innovative economy

Lee Tiong Heng, Tax Partner and Leader of Global Investment and Innovation Incentives at Deloitte Singapore and Southeast Asia says:
“Whilst not as generous as the 400% tax deduction under PIC for licensing payment and IP registration, it is heartening to hear that the Government has retained some elements of support for innovation and value creation through a 200% tax deduction support. We wish that the $100,000 expenditure cap could be higher. The qualifying expenditure cap under the PIC is $400,000.”

Ong Siok Peng, Tax Partner at Deloitte Singapore says:
“Budget 2018 balances both short-term and long-term business needs – the extension of the Wage Credit Scheme will help businesses cope with wage increases in the short term while the grants and enhanced tax deductions will support businesses that invest in innovation and internationalisation to enhance long-term competitiveness and sustainable growth.”

Daniel Ho, Tax Partner and Mergers & Acquisition (Tax) Leader for Deloitte Southeast Asia says:
“Although the Double Tax Deduction for Internationalisation is useful to fund overseas marketing expenses, we would have liked to see more measures encouraging overseas M&A and internationalisation efforts such as interest deductions on qualifying overseas acquisitions, subject to certain limits in line with BEPS recommendations.”

Lee Tiong Heng, Tax Partner and Leader of Global Investment and Innovation Incentives at Deloitte Singapore and Southeast Asia says:
“Though short of our request for a 300% tax deduction for R&D, the 250% tax deduction for R&D is a step in the right direction to support innovation and value creation. This measure should be welcomed by businesses and would help enhance Singapore’s competitive position in attracting R&D activities.”

Daniel Ho, Tax Partner and Tax Leader for Public Sector at Deloitte Singapore says:
“The Government has listened to industry feedback and has enhanced the tax deductions for IP & R&D payments with the expiry of PIC scheme. This is a welcome boost especially for SMEs that need support to fund their research projects. However, the definition of qualifying R&D projects may need to be relaxed to allow more companies to benefit from the scheme. In the wake of the global trend of declining corporate tax rates, the scaling down of the startup tax exemption and partial tax exemption schemes is a clever way of raising additional tax revenue without affecting the headline corporate tax rate of 17%, but it is also a pre-cursor to further scaling down in future.”

Lee Tiong Heng, Tax Partner and Leader of Global Investment and Innovation Incentives at Deloitte Singapore and Southeast Asia says:
“The increase of qualifying expenses without prior approval under the Double Tax Deduction Scheme for Internationalisation from $100,000 to $150,000 would be a much welcome move by small and medium-sized companies seeking to venture overseas. Small and medium-sized companies typically face resource challenges to do the paper work needed to obtain approval for government support before embarking on projects. Also, the lack of communication between the business development unit and the finance unit makes seeking prior approval before project another challenge. This measure will help address some of these challenges.”

Building a smart, green and liveable city

Wong Meng Yew, Tax Partner and Global Trade Advisory Leader at Deloitte Singapore and Southeast Asia says:
“The reduction in the proposed rates of carbon taxes from between $10 to $20 per tonne of greenhouse gases (GHG) to $5 per tonne of GHG as announced in Budget 2018 will be a relief to industries who are heavy emitters of GHG, or more likely their consumers further down the supply chain who would inevitably bear the effects of the new tax.”

Fostering a caring and cohesive society

Low Hwee Chua, Regional Managing Partner for Tax at Deloitte Singapore and Southeast Asia says:
“The 3-year extension of the 250% tax deduction for donations made to IPCs and the 250% tax deduction under BIPS sends a strong signal that all of us play a part in helping to build a caring and cohesive society.”

Lee Chew Chiat, Deloitte Southeast Asia Public Sector Leader says:
“Consolidation of social and health-related services under MOH and merger of the Silver Generation Office under AIC put the person’s needs in the centre. They enable seamless service provision across the Public Service. Such a move not only enables better service delivery, but also reduces overlap between agencies, thus improving efficiency. This seamless service can be further extended in the future to also provide services to caregivers, such as respite care, which can be very useful to caregivers with challenging caregiving needs.

“The Community Silver Trust Fund has been a critical funding source for many Voluntary Welfare Organisations (VWOs), helping them to expand their services and cover their costs. The top-up from the Government will give a confidence boost to the VWOs.”

Dr. Loke Wai Chiong, Deloitte Southeast Asia Heath Care Sector Leader says:
“The ageing population will be a top-of-mind issue for Singapore and the enhanced Eldershield scheme to cover more elderly with needs will be very well received. The enhanced proximity housing grant will be welcomed as many seniors growing old would prefer to “age in place”, and have their children and families staying nearby to provide the support needed, when they do need it. Similarly the Community Networks for Seniors (CNS) mobilises social networks and social capital in neighbourhoods – what may be needed is to formalize the support (including funding) for such networks to do their good work effectively.”

He adds: 

“The integrated health and social support under MOH (and AIC as implementation agency) makes a lot of sense and is laudable. This has been talked about before and has also been tried in various countries – a high profile example being UK in recent years. The easier part is defining the patient flows and information flows. The trickiest step is trying to integrate or combine budgets, since healthcare generally costs a lot more than social care, and hence will often attract disproportionately more attention whenever there is a tension between the two. However, with a whole-of-government approach, Singapore might have a better chance at achieving this integration.”

Preserving a fiscally sustainable and secure future

Low Hwee Chua, Regional Managing Partner for Tax at Deloitte Singapore and Southeast Asia says:
“After all the expectation, the GST hike came – but not in the way we expected, with a promise of a 2% increase somewhere off in the future. Meanwhile, the initial GST on overseas services is a first step in addressing the digital economy and increasing e-commerce. Carbon taxes, tobacco excise taxes and increased stamp duty will all boost the revenues as the Government went to great lengths to emphasise that while the surplus looks good, there are no guarantees beyond 2020.”

Richard Mackender, Tax Partner and Indirect Tax Leader at Deloitte Singapore and Southeast Asia says:
“The big budget surplus from 2017 at $9.6b is unlikely to be sustainable on a year to year basis. To build a fiscally sustainable and secure future for Singapore, the Government needs to ensure that there is a stable revenue flow, considering the ageing population and the need to invest in infrastructure, security and education. Hence relying on one budget surplus is not a sound basis for a sustainable fiscal model. Singapore’s approach to a sustainable fiscal budget has been to always bank the good returns, while being prudent in ensuring that tax revenue continues to be stable and reliable to support Singapore’s future needs. This includes not only tax rate increases, but also structural changes to how the tax is applied, a good example of this being the introduction of GST on imported services for businesses and consumers, which is scheduled to take effect on 1 Jan 2020. This change will also help to level the playing field for local businesses supplying similar services to those imported, as they have to charge GST whereas the imported services are currently purchased GST free.”

Shantini Ramachandra, Tax Partner and Deloitte Private (Tax) Leader for Singapore and Southeast Asia says:
“The introduction of the new top marginal rate of 4% for Buyer’s Stamp Duty for residential property applicable to market value in excess of $1 million, was unexpected in view that recovery in the residential property market has only recently started. Although the middle income group will be impacted, we believe that the carefully calibrated adjustment in the rate should not significantly dampen the housing market.”

Richard Mackender, Tax Partner and Indirect Tax Leader at Deloitte Singapore and Southeast Asia says:
“The plan to raise GST, from 7% to 9% sometime in the period from 2021 to 2025, gives businesses a long lead-time on the impacts and system changes. The reverse charge to be introduced from 1 Jan 2020 on imported services, also offers a long lead time for businesses to adapt and make the necessary adjustments. The reverse charge should not be a surprise for business as IRAS has been consulting the industry for some months.”

Daniel Ho, Tax Partner and Tax Leader for Public Sector at Deloitte Singapore says:
“The Government is sending the right message in that it will look to control its spending and defer any tax increases as a last resort. The deferral of the widely expected GST increase to 2021 and beyond is welcoming news, and the key revenue raising measures this year appears to be a minor increase in stamp duty rate to 4% for residential property and imposition of reverse GST charge on imported services.”

Richard Mackender, Tax Partner and Indirect Tax Leader at Deloitte Singapore and Southeast Asia says:
“GST will also be introduced on digital services purchased from overseas suppliers in 2020. This will help level the playing field for local businesses supplying digital services to local consumers, since they currently charged GST if they are registered.”

Lee Tiong Heng, Tax Partner and Leader of Global Investment and Innovation Incentives at Deloitte Singapore and Southeast Asia says:
“As per our expectation, there is no corporate tax increase in this year’s Budget and this move is also consistent with global trends. At 17%, Singapore’s corporate tax rate still remains as one of the most competitive in the region. No increase in corporate tax is good news.”

Richard Mackender, Tax Partner and Indirect Tax Leader at Deloitte Singapore and Southeast Asia says:
“The Government announced that they will make a one-off contribution of $2b to the GST Voucher fund for FY18, which is used to help ofoffsethe impact of GST on lower income families. The current disbursement is around $800m, so the size of the top-up suggests that the Government is using some of its surpluses to help fund bigger disbursements once the GST rate increase and the introduction of GST on digital services change is implemented.”

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