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Singapore Budget 2018: Wish upon a budget

With every Budget comes a stack of wish lists from all corners of the economy. Do they serve their purpose?


Wish upon a budget: We take a closer look at what unfulfilled, why organisations continue to make lists, and why public wants and needs should be aired.

"Throughout the year, we regularly engage in dialogues with the government, and vice versa, on the tax developments in the world and how Singapore may need to adapt its tax policy to keep pace with developments in other countries." - Ernst & Young's head of tax services Chung-Sim Siew Moon.

"(The Budget) ultimately did not provide a comprehensive vision to ensure adequate care for families and older persons." - The Association of Women for Action and Research (Aware) which made a strongly worded statement post-Budget.

"(The Budget) ultimately did not provide a comprehensive vision to ensure adequate care for families and older persons." - The Association of Women for Action and Research (Aware) which made a strongly worded statement post-Budget.

ANOTHER year, another list (or several) of wishes, wants and needs. As with any spending plan, a country's Budget allocates funds where they are seen to be needed. Who gets what might be a function of timing, lobbying, or vision. In the wake of Monday's Singapore Budget speech, we see some wishes granted, while others were shelved for another financial year. A long-sought-after increase in research and development tax incentives came to pass, with the tax deduction for qualifying expenses raised from 150 per cent to 250 per cent. But there was no sign of Ernst & Young's wished-for tax incentives to encourage private investment in innovative startups, for instance. Nor the Singapore Chinese Chamber of Commerce and Industry's (SCCCI's) hoped-for funding support for trade associations outside the existing Lead programme.

Over the last couple of decades, public wish lists have become a staple of the annual run-up to the Budget. Submitted by the Big Four accounting firms and trade associations, some appear before Christmas - like well-researched letters to a Santa whose calculations go beyond naughty and nice - while others squeak in a month before the speech is due.

Beneficiaries of hoped-for boons range from multinationals to the tiniest of small and medium enterprises (SMEs); detailed tweaks to long-running tax incentive schemes share space with undefined hopes for help of one kind or another.

One thing these lists have in common, though, is that many of the items on them will go unfulfilled. And in contrast to birthday wish lists or office Santa secret requests, there is no fundamental assumption that these hopes will be met.

Yet at the turn of each year, as predictable as monsoon rains or Lunar New Year music in shopping malls, the pre-February flurry of requests sweeps in.

You can't always get what you want

While some Budget wishes disappear if unmet, others recur over the years - even if to no apparent avail.

Ernst & Young, which has been sharing its Budget wish list for over a decade, continues to hold out hope for some oft-made but not-yet-realised suggestions.

These include broad ideas such as a simplified tax code for small and medium enterprises to reduce their compliance costs.

They also include highly specific ones, which went unfulfilled again this year. For instance, enhancing the writing down allowance scheme for intellectual property (IP) rights, by broadening the definition of IP and allowing these allowances to be claimed automatically so long as taxpayers have economic ownership of the IP, even if they lack legal ownership.

Or enhancing the group relief scheme for the transfer of tax losses among group companies, by lowering the 75 per cent shareholding requirement so more Singapore-incorporated companies can enjoy it.

Similarly, PwC has repeatedly asked for the tax environment to be made friendlier towards businesses - though the details vary each year. Specific suggestions have included liberalising the rules around utilisation of tax losses and capital allowances.

Even as organisations submit their wish lists, they are conscious that certain calls might be more of a long shot than others.

Says PwC Singapore tax leader Chris Woo: "In today's environment, any such measure (to make tax rules friendlier) would need to be closely tied to value creation and promotion of entrepreneurship, to avoid its being viewed as a tax handout."

The Singapore International Chamber of Commerce's (SICC's) recurring requests include raising the cap for deductible medical expenses, and enhancing the loss carry-back relief.

Why make these wishes year after year? Says SICC chief executive Victor Mills: "We live in hope." Whether such hope is justified is another question.

Less of a checklist, more of a plan

The Budget process, after all, is not driven by wishes. Unlike Santa, the government does not start by making a list - nor indeed a list of lists - and checking off items.

Rather, it starts off with a big-picture view of revenue and expenditure. Each year's Budget is built around several major policy focuses (or "themes"). As Senior Minister of State for Law and Finance Indranee Rajah put it in a Money FM 89.3 radio interview earlier this month: "Budget is not about what set of goodies we can have, or just this particular item of expenditure. Budget is actually a strategic financial plan."

She added: "It's not about separate little items, it's about what's the plan for Singapore as a whole."

The official account of the Budget process, as set out for instance in this year's handy YouTube explainer, is that the government starts by considering national priorities. And one clear sign that the Budget goes beyond wishes is how it sometimes surprises with unexpected moves.

This year, these include the raising of the top-tier Buyer's Stamp Duty rate for residential properties from 3 per cent to 4 per cent, for the portion of property value that exceeds S$1 million, and the 10 per cent rise in tobacco excise duty.

(There are, too, surprises on the positive side, such as the timing of the widely anticipated Goods & Services Tax increase. With the GST hike now delayed till 2021 at the earliest, number crunchers are bumping up forecasts for private consumption - and GDP growth - this year.)

Hardened cynics might point out that with wish lists appearing as late as end-January, it might be unrealistic to expect the Ministry of Finance to take these suggestions into account for a speech to be delivered less than a month later.

But KPMG head of tax Chiu Wu Hong, for one, believes that changes at the eleventh hour are not unthinkable. "I don't think that by the time we give the wish list, there is nothing we can contribute," he says. Their wish list is released at the start of January.

National University of Singapore (NUS) associate professor Tan Ern Ser says that feedback could result in "some tweaking, without fundamentally changing the direction of the decision-makers' preferred position".

He adds: "I'd speculate that some measures may be deferred as a result of feedback where they do not differ markedly from the fundamentals or where a delay in implementation is possible, thereby boosting the symbolic value of consultation."

In his speech on Monday, Finance Minister Heng Swee Keat prefaced some announcements with little nods to industry partners.

Measures to support innovation, for instance, were introduced with this line: "Industry partners, like the Singapore International Chamber of Commerce and the Big Four accounting firms, have given us useful suggestions. We have studied and will implement some of them."

It is unclear when these suggestions were made. But there is an obvious related point: even if a suggestion is not taken up this year, it might well make it into the next year's Budget instead.

The virtue of patience

The waiting game has paid off, on occasion, for the SCCCI. Says president Roland Ng: "Some of our recommendations were not accepted the first time they were put in, but the Chamber continued to table those of relevance or importance.

"Many were finally accepted and implemented by the government. For example, in 2009, the SCCCI recommended to the Economic Strategies Committee to have a single agency to assist businessmen instead of leaving them to face several of them.

"We are heartened to know that in April this year, the government will be merging International Enterprise Singapore and Spring Singapore to form Enterprise Singapore."

KPMG, too, called for estate duty to be axed several times before it was finally abolished in 2008. This year, their wish for streamlined productivity and capability development grant schemes were also granted.

This year's increased tax deductions for R&D have also been on PwC's, KPMG's and SICC's wish lists for several years.

Admittedly, even when suggestions are taken up, they may "not (be) in the exact shape or form ... proposed," as PwC's Mr Woo puts it. PwC would have liked to see an enhanced deduction for R&D activities conducted overseas, for instance.

Similarly, Ernst & Young's head of tax services Chung-Sim Siew Moon notes that making innovation-related tax deductions permanent or setting an expiry date beyond the announced 2025 would help firms take a longer-term outlook.

Still, wish list writers are willing to keep asking. Mr Woo sums up this dogged approach: "We take a longer-term view towards the hoped-for adoption of the changes we think are necessary.

"So while our recommendations may not be adopted in the year they are first proposed, we will repeat them with tweaks as needed as long as we consider them to be relevant."

Open letters, closed doors

Consultants also make the point that their feedback is not restricted to the pre-Budget season, and not all wishes may be reflected in the public arena. "Throughout the year, we regularly engage in dialogues with the government, and vice versa, on the tax developments in the world and how Singapore may need to adapt its tax policy to keep pace with developments in other countries," says Mrs Chung-Sim.

Mr Woo notes that although the earliest record of PwC sharing a public wish list is from 2004, the practice of giving feedback to the authorities goes back much further.

"Then, feedback was channelled directly to the government and through industry or professional associations," he adds. PwC makes recommendations during the course of the year, not just ahead of the Budget.

Besides their public wish list, the SICC also submits a separate letter to the government. This letter, detailing the concerns of SICC members and the Chamber itself, is shared "well before the Budget", says Mr Mills.

He adds: "We are very blunt behind closed doors."

Given these alternative feedback mechanisms, however, the question arises: Why produce Budget wish lists at all?

In public, for the public

One answer is that the intended audience extends beyond the government. It includes, for a start, the general public.

Mrs Chung-Sim acknowledges that their wish list items may already have been raised to the government through other channels. But she adds: "Sharing the wish lists with a wider audience helps to inform and contribute to healthy public engagement on budget issues that matter."

Similarly, Mr Woo sees PwC's annual wish list exercise as the compilation of earlier-made suggestions "into a single document for the public, with a view to public education and knowledge sharing".

Another implied audience: the very firms whose hopes are being conveyed.

Many of the wish lists are based on feedback gathered from companies, whether through informal discussions, or polls and surveys.

In 2011, KPMG first began to augment their wish lists with research in the form of pre-Budget forums and audience polls.

"Our wish lists therefore evolved to become the business polls we now conduct, and the Budget proposals where we put forward what we think represents the concerns of our local business community," says Mr Chiu.

Mrs Chung-Sim echoes this view: "The wish lists lend a voice to the business community and practitioners, reflecting their hopes and concerns, and offering ideas on how these may be addressed from the industry perspective."

Perhaps, what matters is not just that firms' hopes are conveyed, but that they are seen to be conveyed.

Bringing wishes into the public sphere can also be of practical use. Mr Chiu notes that by publicly and repeatedly voicing concerns, the government might feel obliged to explain its rationale for rejecting an idea.

Public wish lists might also be a platform for conveying criticism or addressing the bigger picture. This year, the Association of Women for Action and Research (Aware) made a strongly worded statement post-Budget, saying it was "painfully disappointing that the Budget speech - though earlier touted by the Minister as 'strategic' - ultimately did not provide a comprehensive vision to ensure adequate care for families and older persons.

"Previous Budgets have announced bold moves to support Singapore's ageing population - such as the Pioneer Generation Package, which Aware has recently recommended should be extended to all cohorts of older persons," it said.

In contrast, the measures in this year's Budget targeted at the elderly and their caregivers appear "relatively piecemeal", Aware added.

For PwC's Mr Woo, one recurring unfulfilled wish of theirs is of particular public interest: "Our recommendation for measures to encourage saving for retirement and healthcare needs continues to be the elephant in the room."

Third-party observers also note that wish list providers get a boost to their reputation. NUS's Prof Tan observes: "I suppose they have both the responsibility to give their expert views as well as the desire to showcase their expertise by presenting well-researched and well-argued recommendations.

"Doing so would, whether or not intended, boost their visibility."

Professor Chua Beng Huat, an NUS sociologist, puts it more bluntly: "It is public relations for... those, particularly organisations, that need to demonstrate that they have represented the interests of their constituencies by speaking up."

Reading into it

It might be tempting to see the Budget wish list tradition as yet another sign of the relationship between Singaporeans and the State.

Like children without the (spending) power to fulfil our own dreams, we ask for the fiscal equivalent of a game console or pet hamster, while the parental state smiles indulgently - already wrapping up this year's present of assessment books.

The enduring use of the term "wish list" does not help to mitigate this perception of a petitionary relationship. (In fact, the Singapore Business Federation-led SME Committee eschews this choice of word, instead presenting its Budget "recommendations" each year.)

This is without even touching upon another sort of wish: ordinary Singaporeans' expectations of handouts to complement the festive season.

This year's Budget delivered on that front, with Mr Heng announcing the one-off SG Bonus of S$100, S$200 or S$300 for Singaporeans aged 21 and above - and specifically calling it a "hongbao" or red packet.

Yet, the fact is that Singapore is far from alone in its reaction to government budgets, whether at the lindustry level or the average citizen.

Britain's Budget season draws a similar slew of wish lists - yes, that is the exact word used - from familiar sorts: accountancy firms and think-tanks, charities and business groups.

And from Malaysia to Hong Kong, electorates do expect the occasional sweetener of Budget goodies, not least during election years.

Rather than dismissing Budget wish lists as a mere wayang exercise, or taking them as evidence of a typically Singaporean citizen-state dynamic, perhaps one can take a more charitable view: seeing them as an example of how hope springs eternal each new year.

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