Enhance tax regime for key sectors in Budget 2021: EY

New tax schemes would help cushion the impact of the pandemic.

Singapore's Budget 2021 should focus on tax deductions, enhancement and extension of tax rebates, and enhanced tax schemes to help key sectors, according to EY.

EY pointed out that cashflow was a key challenge that many companies faced during the pandemic. In 2020, companies had a 25% corporate income tax rebate capped at $15k. To help alleviate the impact experienced by businesses, EY proposed that the corporate income tax rebate be extended throughout 2021 and at the same time increase the cap to $30k.

“With the significant amount drawn from the reserves last year, it is important that the proposals in Budget 2021 are designed with a long-term, prudent view to help Singapore work towards restoring its finances,” said EY Singapore head of tax Soh Pui Ming.

EY also proposed that the government help employers who continue to assist terminated employees in finding new jobs by increasing the tax deduction on outplacement support expenses to 200% from 100%. Additionally, they also want the government to help employees who are receiving allowances or benefits from employers as relief from the pandemic by granting tax exemptions. These benefits can include allowances or reimbursement for purchase of office equipment for use at home.

Meanwhile, EY identified telecommunications and financial services sectors as key industries that would help Singapore’s economy stabilize and emphasize the need to support their growth.

According to EY’s partner Chia Seng Chye, Budget 2021 must make provisions to encourage mobile networks investments, especially as Singapore is driving towards being a Smart Nation with the roll out of 5G initiatives.

“We propose a tax deduction on the upfront payment for spectrum auction fees. If the fees are capital in nature, the authorities can consider allowing capital allowance claims or writing down allowance (e.g., payment for indefeasible right of use),” he said.

The budget should also consider Fintech tax initiatives as financial innovation is critical in the development of financial services in Singapore.

“We propose introducing a targeted incentive offering a preferential tax rate to promote financial innovation-related activities by financial services companies in areas such as digital and mobile payments; authentication and biometrics; blockchain; cloud computing; big data; and robotics,” said EY Asia-Pacific financial services tax leader Amy Ang.