Find out more at btsub.sg/btdeal
You are here
Singapore Budget 2017: More for innovation, new regional players and health among EY's wish list
MORE fiscal measures to encourage enterprise innovation, attract new regional players, sharpen enterprise support and sector competitiveness, as well as promote responsibility for health and wellbeing. These are the main themes surrounding Ernst & Young Solutions LLP's (EY) wish list for Singapore Budget 2017.
EY said on Thursday that 2016 was a tough year for Singapore's economy, especially for its workforce where third-quarter labour figures indicated that the resident long-term unemployment rate rose from 0.6 per cent in September 2015 to 0.8 per cent in September 2016 - the highest for the month since the global financial crisis in 2009.
"To remain agile in the current economic conditions with an eye on seizing the upsides of the future economy, enabling local enterprises to thrive on innovation as a source of growth, injecting fresh regional players to boost growth sectors in Singapore and ensuring that the population continues to be competitive and resilient from a socio-economic perspective are critical," Chung-Sim Siew Moon, head of tax services, Ernst & Young Solutions LLP said.
She added that Budget 2017 is "an opportunity to take stock of existing tax legislation to encourage businesses to put growth at the top of their agenda and ease business costs - whether by tweaking their business models, going overseas or through mergers and acquisitions".
To encourage innovation, EY has suggested that the government consider the introduction of patent box regimes, which offers preferential tax rates on income derived from intellectual property to attract research and development (R&D) activities into a country.
"The introduction of a patent box or similar tax regime in Singapore that provides lower effective tax rate to IP-related income, and is tied to the performance of R&D activities and commercialisation of the output of these activities, can drive the proliferation of value creation activities in Singapore," said Tan Bin Eng, partner, Business Incentives Advisory, Ernst & Young Solutions LLP said.
EY has also proposed enhancing writing down allowance for intellectual property (IP) rights to align with other places. Currently, such costs can be eligible for a writing-down allowance only if the company acquires both the economic and legal rights to the IP. For companies that create IP in Singapore, such costs can only be deductible if they fall within the R&D criteria.
The government can also consider granting enhanced deduction claims on training costs incurred by businesses for their employees, with the option to convert qualifying training deductions into a non-taxable cash benefit.
To attract new regional players to set up business in Singapore, EY suggested that Singapore adopt a pure territorial taxation system.
"In the long run, it can boost Singapore's position as a launch pad for new industries with base operations in Singapore, including digital service sectors such as media, travel, fintech (financial technology) and gaming," Mrs Chung said.
To enhance the Singapore real estate investment trust (S-Reit) regime, EY has suggested that the government tie the tax exemption to the life of S-Reits. This will allow tax exemption to apply as long as the S-Reits are listed on or before March 31, 2020, and continue to be listed on the Singapore Exchange.
Currently, the 10 per cent concessionary tax rate, foreign-sourced income tax exemption and goods and services tax (GST) concessions granted to S-Reits will expire on March 31, 2020. EY argued that as these concessions have a shelf life, uncertainty in the market would exist when the sunset date looms.
To continue encouraging the adoption of work-life practices, EY said that the government can consider further reliefs such as allowing individual taxpayers to claim a tax deduction for costs incurred in running a home office, if these costs are not reimbursed by employers.
It has also called for a fine-tuning of the Supplementary Retirement Scheme (SRS), a voluntary scheme to encourage individuals to save for retirement, in addition to their CPF savings.
"A drawback of the SRS is its illiquidity, as premature withdrawals of the monies from an SRS account may incur a 5 per cent penalty and 100 per cent of the withdrawal sum will be subject to tax. This not only negates the tax savings but contributes to additional costs for savings into the SRS," said Panneer Selvam, partner, People Advisory Services - Mobility (Tax), Ernst & Young Solutions LLP.
"We welcome the tax law to be changed such that only the amount equal to the tax deductions allowed in respect of the contributions made to the SRS is taxed."