ECONOMY | Staff Reporter, Singapore

Government urged to introduce sugar tax

EY says in its Budget 2019 wishlist that the revenue may be used to subsidise healthcare costs.

Accounting and professional services firm EY called on the government to introduce a sugar tax as part of an effort to push Singaporeans to healthier lifestyles and broaden the tax base. 

Singapore has the second highest proportion of people with diabetes amongst developed nations in 2015, data from the International Diabetes Federation show.

Also read: Tax cuts and deduction schemes will provide relief for business growth in 2019: PwC

In its Wishlist for Singapore Budget 2019, EY believes the time may be right to put a sugar tax in place to influence the short- and long-term buying behaviours of consumers.

“It also allows the government to deploy the additional tax revenue collected to subsidise health care costs and support healthier lifestyles,” the firm said, adding that a positive spillover effect could also come as businesses may be compelled to innovate and develop new products to be able to enjoy enhanced R&D deduction.

Also read: Healthcare boosted Singapore's capital markets in 2018

In relation to healthcare, EY notes that there is no standalone tax relief available for premiums paid on medical-related or health insurance policies, highlighting the need for a tax deduction for medical-related insurance policies. 

“Allowing a tax deduction that is not tied to CPF contributions, subject to a cap of say S$5,000 for premiums paid for medical-related insurance paid by individuals for themselves or their family will encourage taxpayers to be more responsible for their health and wellbeing,” explained Panneer Selvam, Partner, People Advisory Services at EY.

The deduction rules used to compute deductible medical expenses should also be reviewed as they can result in additional compliance and admnistrative costs for taxpayers disproportionate to the amount of medical deduction claim, said Chai Wai Fook, Partner, Tax Services, at EY. “[T]he provision of medical benefits is a staff recruitment and retention tool by businesses. It is therefore timely to revisit the income tax rules for medical costs and simplify the deduction rules, especially for SMEs.”

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