EY’s reactions to Singapore Budget 2018

Singapore, 19 February 2018

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EY today released its reactions to the Singapore Budget 2018 announcement.

Overall views

Mrs. Chung-Sim Siew Moon, Head of Tax Services, Ernst & Young Solutions LLP says:
“A multi-faceted Budget that addresses the long-term challenges of the country and lays the foundation for a sustainable future for Singapore.”

She adds:
“This is a Budget to make Singapore future ready.”

Mr. Russell Aubrey, Partner, Tax Services, Ernst & Young Solutions LLP says:
“I was impressed by the multiple references to emerging technologies throughout the budget speech. These will have a major impact on society faster than most realise.”

Mr. Chester Wee, Partner, International Tax Services Leader, Ernst & Young Solutions LLP says:
“With technology advancement and globalisation driving disruption at an unprecedented pace, Singapore businesses should explore cross-sector collaboration, partnerships and acquisitions to compete effectively locally and abroad. The Government recognised this and identified pervasive innovation, deepening capabilities and forge strong partnerships as pillars to building a vibrant and innovative economy.”

Mr. Chester Wee, Partner, International Tax Services Leader, Ernst & Young Solutions LLP says:
“Investment in more efficient and smart solutions will improve productivity when human resources become more constrained with Singapore’s aging population.”

Mr. Panneer Selvam, Partner, People Advisory Services – Mobility (Tax), Ernst & Young Solutions LLP says:
“In YA 2017, a personal income tax rebate of 20% of tax payable, capped at S$500, was accorded to both resident local and foreign taxpayers alike. The tax rebate was a direct offset against a taxpayer’s tax payable and largely benefitted an above average income earner. While some may be disappointed that no rebates were announced in this year’s Budget, the SG bonus was a pleasant surprise. The SG bonus will be duly paid out to all Singaporeans aged 21 years and above, and will undoubted be well received by the lower income families regardless of their tax paying circumstances.”

Mr. Yeo Kai Eng, Partner, Indirect Tax Services Leader, Ernst & Young Solutions LLP says:
“The two-percentage point GST increase and the implementation sometime in the period 2021 to 2025 is in line with past announcements that a GST rate hike will not be implemented before 2020.”

A vibrant and innovative economy

Overcoming near-term challenges

Mr. Desmond Teo, Partner, Financial Services Tax, Ernst & Young Solutions LLP says:
“The revision of the partial corporate tax exemption drives the message that all taxpayers, big and small, need to bear their fair share of taxes.

Mr. Chai Wai Fook, Partner, Tax Services, Ernst & Young Solutions LLP says:
“The scaling back of the current tax exemption scheme for start-ups may affect companies that are cash strapped in their initial years of business.”

He adds:
“Besides the extension of the Wage Credit Scheme, we have yet to see measures in Singapore Budget 2018 to help loss-making companies, where cash is key to their survival.”

Mr. Chester Wee, Partner, International Tax Services Leader, Ernst & Young Solutions LLP says:
“It is important for the Government to give extra help to start-ups and SMEs. Instead of reducing the amount of partial exemption which is currently applicable to all companies, an alternative approach would be to restrict such partial exemption to only small companies.”

Mr. Samir Bedi, Partner, People Advisory Services, Ernst & Young Advisory Pte. Ltd. says:
“The Wage Credit Scheme extension will be welcomed by employers and employees, as they undergo transformation efforts and share productivity gains.”

Fostering pervasive innovation

Ms. Tan Bin Eng, Partner, Business Incentives Advisory Leader, Ernst & Young Solutions LLP says:
“The proposed increase of the enhanced R&D deduction from 150% to 250% for R&D activities conducted locally will be greatly welcomed by companies, particularly with the expiry of the Productivity and Innovation Credit (PIC) scheme after YA2018. At 250% tax deduction, this will provide for a tax benefit of 42.5cents per dollar of R&D, which will put Singapore in a globally competitive position. However, areas of improvement in terms of the claim process, eligibility evaluation remains critical to ensure that the deduction is effective in achieving its intended outcomes.”

She adds:
“While the proposed increase of the enhanced R&D deduction from 150% to 250% for R&D activities conducted locally will be welcomed by larger companies that are in a tax-paying position, SMEs that are cash-strapped and in early phases of growth would see limited benefits. Many countries with attractive R&D regimes include a generous cash-payout component to their scheme to cater to this group, which with the expiry of the PIC, such cash payouts will no longer be a possibility for small companies in Singapore.”

Ms. Tan Bin Eng, Partner, Business Incentives Advisory Leader, Ernst & Young Solutions LLP says:
“The harmonisation of the Capabilities Development Grant and Global Company Partnership Grant into Enterprise Development Grant would enable Enterprise Singapore to have an overarching view and enable a one-stop, holistic support for the local Singapore companies across their different phases of growth, from emerging businesses into globally competitive enterprises.”

Mr. Chia Seng Chye, Partner, Tax Services, Ernst & Young Solutions LLP says:
“By granting enhanced tax deductions for licensing, registration and R&D activities for IP, the government has acknowledged the critical role played by IP in this digitalisation age and to incentivise enterprises to continue to innovate and transform.”

Mr. Chia Seng Chye, Partner, Tax Services, Ernst & Young Solutions LLP says:
“The development of a nationwide e-invoicing framework will help to propel Singapore into the forefront of ecommerce and e-tailing in the region and anchor Singapore as a hub for digital businesses.”

Ms. Ivy Ng, Partner, Tax Services, Ernst & Young Solutions LLP says:
“The setting up of an infrastructure office to study the potential of these projects outside the shores of Singapore presents attractive prospects for Singapore enterprises. It would be welcomed if tax incentives and concessions are available to help these enterprises as they navigate projects in jurisdictions outside Singapore and deal with taxes therein to grow and expand into the region.”

Mr. Russell Aubrey, Partner, Tax Services, Ernst & Young Solutions LLP says:
“We welcome the range of more targeted measure to promote productivity and innovation to replace the PIC scheme.”

Building deep capabilities

Mr. Chai Wai Fook, Partner, Tax Services, Ernst & Young Solutions LLP says:
“Proposed measure to increase expenses qualifying for automatic Double Tax Deduction for Internationalisation to S$150k will encourage local businesses to venture abroad.”

Mr. Samir Bedi, Partner, People Advisory Services, Ernst & Young Advisory Pte. Ltd. says:
“Disruptive technology (artificial intelligent and robotics) will displace jobs. While not all jobs will be affected and not all affected jobs will be eliminated, Singaporeans need to invest in continuous learning and deepen their skillsets to stay relevant.

Forging strong partnerships

Mr. Samir Bedi, Partner, People Advisory Services, Ernst & Young Advisory Pte. Ltd. says:
“The approach to cluster Industry Transformation Maps (ITMs) will break myths of employees that their skills are only relevant to the industry in which they work in. Cluster based ITMs will drive a culture of innovation and allow for industries to learn from each other. The role of industry partners will be enhanced as we require enterprise capabilities and human capabilities to work in tandem.”

A smart, green and liveable city

Carbon tax

Mr. Simon Yeo, Partner, Climate Change & Sustainability Services, Ernst & Young LLP says:
“Carbon emissions now carry a price tag. Time to measure and mitigate emissions.”

He adds:
“These first steps into a carbon tax regime will pave the way for a more sustainable future to do our part to reduce global emissions and to protect Singapore in the future.”

Ms. Angela Tan, Partner, Tax Services, Ernst & Young Solutions LLP says:
“Singapore comes of age as a developed country in doing its part in climate action and upping the ante in fighting carbon emission.”

Mr. Benjamin Chiang, Partner, Advisory Services and Singapore Government & Public Sector Leader, Ernst & Young Advisory Pte. Ltd. says:
“Deployment of innovative digital technologies are essential in helping Singapore create a sustainable green and liveable city.”

Smart city

Mr. Benjamin Chiang, Partner, Advisory Services and Singapore Government & Public Sector Leader, Ernst & Young Advisory Pte. Ltd. says:
“Heartened to see increased support to help individuals to transition into jobs such as digital transformation, cybersecurity, data analytics relevant to Smart Cities and Industry 4.0.”

He adds:
“We see increased support for innovation and the development of emerging digital capabilities in corporates and individuals – which are urgent tasks at hand because these take time to bear fruit and are important to anchor Singapore as a Smart Nation.”

Mr. Benjamin Chiang, Partner, Advisory Services and Singapore Government & Public Sector Leader, Ernst & Young Advisory Pte. Ltd. says:
“Initiatives to encourage partnerships beyond our shores and enhance connectivity (both physical and digital) will promote economic growth in the entire region.”

Mr. Benjamin Chiang, Partner, Advisory Services and Singapore Government & Public Sector Leader, Ernst & Young Advisory Pte. Ltd. says:
“Investments in digital infrastructure (e.g., national digital identity, Smart Nation sensor platform, e-payments) will create a platform for companies to build smart applications and pave the way for Singapore to become a Smart Nation.”

A caring and cohesive society

Mr. Panneer Selvam, Partner, People Advisory Services – Mobility (Tax), Ernst & Young Solutions LLP says:
“The extension of 250% tax deduction scheme for donations to qualifying charities can help build a giving society, and should be permanent, as charities’ expenditure needs are recurring and likely to increase.”

Mr. Panneer Selvam, Partner, People Advisory Services – Mobility (Tax), Ernst & Young Solutions LLP says:
“Education is a key method to enable social mobility. Additional funds provided to EduSave accounts of the young is a worthwhile measure.”

 A fiscally sustainable and secure future

GST rate hike

Mr. Yeo Kai Eng, Partner, Indirect Tax Services Leader, Ernst & Young Solutions LLP says:
“GST rate hike – the worst kept secret is finally out. As expected, the rate increase will only come into effect after 2020. To defray the GST burden from the rate hike, we can expect various GST offset measures.”

He adds:
“There will be a GST rate hike but only after 2020. While it’s three years away, it provides some certainty that we will not see any rate hike between now and the end of 2020.”

Ms. Chew Boon Choo, Partner, Indirect Tax – GST, Ernst & Young Solutions LLP says:
“The much speculated GST rate hike has finally been confirmed by the Minister. It will however not be immediate but only after 2020 – this is certainly good news to all.”

She adds:
“After 2020, we will see a GST rate hike as announced by Minister Heng. However, he shared that it will be in a progressive manner – one can only assume that the GST rate increase might be staggered – first 8% then 9%. This would be similar to the staggered rate increase that we experienced in 2003 and 2004.”

GST for online shopping

Mr. Yeo Kai Eng, Partner, Indirect Tax Services Leader, Ernst & Young Solutions LLP says:
“Good news for all – the much anticipated e-commerce tax (GST) on importation of low value goods was not announced. This means that end-consumers can continue to shop online without GST, at least for now.”

GST on imported services

Mr. Yeo Kai Eng, Partner, Indirect Tax Services Leader, Ernst & Young Solutions LLP says:
“As expected with all the advanced warning, the Minister announced that GST will be imposed on imported services. For business-to-end consumer transactions, this would mean that foreign vendors supplying digital services (e.g., online music, movies, and subscription services) might have to register for GST in Singapore come 2020 if their supplies to end consumers in Singapore exceeds certain threshold. If registered for GST in Singapore, these foreign vendors will be charging GST on their supplies to end consumers in Singapore.”

Stamp duty for property

Ms. Goh Siow Hui, Partner, Tax Services, Ernst & Young Solutions LLP:
“The highly anticipated wealth tax took a surprising turn with the introduction of a new stamp duty ceiling rate of 4%, which affects residential property purchases with a value of more than S$1m.”

Developing the Singapore bond market

Mr. Desmond Teo, Partner, Financial Services Tax, Ernst & Young Solutions LLP says:
“Singapore continues to push holistically on developing the bond market with the extension of the Qualifying Debt Securities scheme and a broader array of bond product offerings through the borrowings by the agencies.”

He adds:
“Aligned with the announcement for statutory boards borrowing for long-term projects, the extension of the QDS scheme is part of a holistic push to develop the Singapore bond market.”

Developing the financial services sector

Mr. Desmond Teo, Partner, Financial Services Tax, Ernst & Young Solutions LLP says:
“The announcement of the S-VACC vehicle is long-awaited and broadens the choice of fund vehicles available in Singapore.”

-ends-

Notes to Editors

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