Calls for carbon, plastic credits to be zero-rated among PwC's proposals for Budget 2022

PROFESSIONAL services firm PwC Singapore has called for carbon, plastic and green credits to be zero-rated to better promote the adoption of green initiatives without increasing business costs.

This would relieve buyers from incurring irrecoverable Goods and Services Tax (GST) or reverse charges when they purchase offsets, while allowing registered sellers to recover the GST incurred on their expenses, said PwC.

The suggestion was laid out in the firm's proposals for Budget 2022. Released on Tuesday (Jan 11), this year's list had a focus on green credits and other sustainability-related initiatives.

For instance, PwC also called for the government to provide grants or double tax deductions to companies - especially small-and-medium enterprises - who engage in carbon services, and extend the Land Intensification Allowance to certain agricultural businesses which convert buildings to be used for food farming purposes, among others.

For its business-focused suggestions, PwC asked for the government to consider introducing a tax incentive for companies that are newly-listed on the Singapore Exchange.

This is to encourage companies to tap the public equity capital market, it said, while noting that other countries - such as Indonesia - have created and implemented tax incentives and reduced corporate tax rates for publicly listed companies.

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The accounting firm also called for a tax incentives review during the upcoming Budget.

While it acknowledged that incentive conditions based on local headcount "should be retained for good measure", it argued that tax incentive conditions should be focused on a direct measure of productivity, instead of just looking at business spending.

PwC therefore suggested that the conditions to qualify for incentive schemes to be tied to incremental investments in digital technology or incremental revenue and profit margin growth for the year.

Incentive holders should also be given the option to choose between co-funding or enhanced allowances or deductions, it added.

"This will in turn encourage companies to be more innovative in operations and spur them to look for more efficient ways to allocate resources."

Elaborating further on its proposals to make the purchase of carbon and plastic credits and renewable energy certificates feasible, PwC suggested giving tax deductions to individuals who purchase carbon, plastic or green credits to offset their personal emissions.

Tax deductions could also be given to those who contribute to an environment, social, governance (ESG) fund or project, it said.

"To create greater awareness or the need to safeguard our environment, the government could consider giving double tax deductions to individuals for such offset purchases or contributions, subject to a cap to be determined."

Separately, the government could also consider initiating programmes to incentivise companies to recover used packaging for recycling and allow plastic credits to be generated.

Companies could then choose to acquire such credits to offset their plastic footprint, PwC said, adding that the money spent on plastic credits would then go towards environmental projects that will eliminate an equal amount of plastics that were produced.

"A global exchange marketplace for verified plastic credits could be established in Singapore, which can create more jobs and groom new talent."