Personal taxes

Against the expectations of many, personal tax rates remained unchanged and what was a little surprising was that the 'one-off' rebate, which was a feature of the 1990s and that many expected to be increased, was held at 20 per cent with a cap of $2,000, similar to last year. This will be seen by many as disappointing, as the tradition, and thus expectation, has been for the top marginal rate of personal tax (currently 20 per cent) to chase down to the corporate rate of 18 per cent. Those who had called for a tax holiday will be stunned, although it is not clear how serious their request could have been.

The government again though, demonstrated its ability to listen to industry feedback. For those in loss, some additional relief was given under the loss carry-back provisions which was something that was called for, although the measures announced really only scratch the surface of what was possibly needed. The effective removal of the GST issue that was plaguing Singapore funds was also something that had long been asked for. This, coupled with relaxations in the fund management incentive regime that now allows funds to flow in freely from even Singapore-based investors, will put Singapore head and shoulders above any other city in Asia and possibly the world, as a place to pool and manage funds.

Unusually, the financial services sector (outside funds) hardly get a mention, although most incentives are already well embedded and were extended last year. There was therefore little call for major movements here, although they may benefit from the funds that could flow into Singapore under the one-year amnesty for remitted foreign income.

In all, it was a generous Budget which will have the government dipping into its reserves in a meaningful way. The Resilience Package as it is called, is targeted and well thought out and while it seeks to provide stability in the storm, does not ignore the prospect of a rosier future. Hopefully, it will allow the ship to weigh anchor after the storm and get underway again in good shape.

The writer is a tax partner at PricewaterhouseCoopers Services LLP (Singapore).

This article was first published in The Business Times on January 23, 2009.