EY’s Budget 2023 wish list prioritises business growth and innovation, upskilling, sustainability

POLICY tweaks that support companies’ growth and innovation, workforce upskilling and reskilling efforts and sustainability are included in the Budget 2023 wish list Ernst & Young Solutions (EY) released on Tuesday (Jan 3).

The professional services firm proposed a raft of measures in line with the six pillars of the Forward Singapore road map, an exercise to review the country’s social compact.

“While the pandemic is behind us, Singapore continues to face a highly volatile and uncertain global environment,” said EY’s Singapore head of tax, Soh Pui Ming.

Having the right tax measures is “paramount” to attracting foreign investments and empowering local businesses and individuals, she said, noting that the Organisation for Economic Co-operation and Development’s global minimum tax rate to address base erosion and profit shifting risks (BEPS 2.0 Pillar 2) are “just around the corner”. 

The firm suggested enhancing the mergers and acquisition (M&A) scheme to relax conditions on acquiring subsidiaries. Currently, regulations require that subsidiaries do not carry on a trade or business and are wholly-owned or incorporated for the primary purpose of acquiring and holding shares in other companies.

It also called for M&A allowance on transaction tax costs to be transferable to other Singapore group companies as part of the group relief system, “as strategic acquisitions are integral to a group’s growth strategy”. It added that this can be limited to 100 per cent-owned group companies to prevent abuse.

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EY suggested extending the existing enhanced research and development (R&D) tax deduction of 150 per cent to beyond year of assessment (YA) 2025, while considering a qualified refundable tax credit (to take into account the territorial effective tax rate computation proposal under BEPS 2.0), cash-out benefits and expansion to cover overseas R&D.

To help businesses invest in staff training, EY suggested that small and medium enterprises should receive an enhanced 300 per cent tax deduction scheme for qualifying staff costs. It also proposed increased training subsidies and support for unemployed individuals, and more absentee payroll support so more employers can send employees to upskill and a top-up of SkillsFuture for Enterprises Credits (SFEC). 

Samir Bedi, EY Asean workforce advisory leader, said: “Notably, enterprises were provided with S$10,000 of SFEC in 2020; a top-up of S$50,000 can be provided to encourage more to adopt large-scale and significant workforce improvement efforts.”

For individuals, EY called for an increase in the current S$5,500 relief cap that supports those undertaking courses to support their employment or to gain an academic, professional or vocational qualification. This could possibly be differentiated by sector “to give an added incentive for individuals to train in industries of focus”.

Highlighting the growing importance of environmental and fiscal sustainability, EY also said that investors are taking a keen interest in carbon credits, and sought to include them as designated investments for funds tax incentive schemes.

Noting that any expense incurred on private cars has been disallowed for tax deduction since 1998 and that input tax paid on private cars are also not goods and services tax (GST) claimable, EY Asean indirect tax leader Yeo Kai Eng suggested that exceptions be made for electric vehicles so as to encourage their adoption.

Other measures on the EY wish list include extending reliefs for working mothers to their spouses; extending foreign maid levies to single people and married men; temporarily enhancing deductions for refurbishment and renovation costs for workplace transformations; making permanent the 250 per cent tax deduction on approved donations made to qualifying institutions; and providing tax relief for volunteering time.