Singapore Budget 2015: Reactions from Baker Tilly TFW's specialists

Singapore Budget 2015: Reactions from Baker Tilly TFW's specialists

Reactions to The Singapore Budget 2015 speech have been made in response to key points delivered by Deputy Prime Minister and Finance Minister Tharman Shanmugaratnam in Parliament on Feb 23, 2015.

Here is a compilation of the reactions from Baker Tilly TFW's senior partners and tax specialists. Baker Tilly is one of the 10 largest accountancy and business advisory firms in Singapore.

General thoughts

"A measure like the 'Silver Support Scheme' to help needy elderly Singaporeans, requires precious budgetary resources and reveals a heart of gold."

- Sim Guan Seng, Managing Partner, Baker Tilly TFW

"A #BUMPER package, which I try to represent with the first alphabets of the following hashtags: #Budget2015
#UmbrellaSilverSupport
#MiddleclassCheer
#PICbonusNoMore
#ElectionSpeculations
#ResilientFuture

P.S. Thank you, social media (for making brief Budget descriptions excusable)!"

- Loh Eng Kiat, Tax Partner, Baker Tilly TFW

For individuals and employers

"Increase in top marginal tax rates, affecting chargeable income in excess of S$160,000

- presently, the marginal tax rates are between 17 per cent and 20 per cent

- with effect from the YA 2017, will be between 18 per cent and 22 per cent

May once again provide a reason to incorporate a business instead of operating as a sole proprietor or partnership, since the corporate income tax rate remains at 17 per cent plus there is the partial tax exemption on the first S$300,000 of chargeable income."

- Boey Yoke Ping, Tax Practice Leader, Baker Tilly TFW

"Foreign domestic worker (FDW) levy concession with effect from 1 May 2015

- Reduction of concessionary FDW levy rate from S$120 to S$60

- Extension to households with children below 16 instead of the present below 12 condition

Considering the present full levy rate is S$265, the full-year saving can be as much as S$2,460 for households with children who are not yet 16 years old."

- Boey Yoke Ping, Tax Practice Leader, Baker Tilly TFW

"CPF change:

Salary ceiling for CPF contributions will be raised from S$5,000 to S$6,000 plus restoration of contribution rates for older workers with effect from 1 January 2016 Employers can expect their payroll costs to increase slightly when it comes to employing Singaporeans and permanent residents, especially if they are above 50 years of age."

- Boey Yoke Ping, Tax Practice Leader, Baker Tilly TFW

SME considerations

"Despite recent reports of Singapore experiencing deflation, SMEs' concerns over cost pressures (especially rental and manpower-related) remain unabated. Whilst benefits accorded by recurring PIC claims could help, it would have been endearing if the SME cash grant that was introduced a couple of years back, got revived. This has not been mentioned in the Finance Minister's main Budget speech, but would especially benefit loss-making companies who cannot benefit from the extended corporate tax rebate."

- Sim Guan Seng, Managing Partner, Baker Tilly TFW

"There is increasing empirical support that many SMEs are concerned about regulatory and tax issues that they could encounter in venturing overseas. Thus the need for professional services to address these issues, naturally intensifies. Perhaps too granular to fall within the Finance Minister's keynote speech today, but it is hoped that fiscal measures to support such needs can ultimately be announced. Possibly in the form of further specific grants to SMEs to defray costs of engaging professional advisors and/or more benign tax deduction rules for such fees."

- Loh Eng Kiat, Tax Partner, Baker Tilly TFW

"The lack of a distinct and bespoke tax incentive scheme for substantive IP owners, had been mildly surprising for some. Some experts have been urging for a targeted scheme like an 'IP box' regime to be introduced, a tax feature gaining traction in many established economies including some of Singapore's competitors. In our context such a regime can also potentially catalyse (much needed) development of some Singapore brands, including those of smaller businesses.

Well, the wait for such an 'IP box' regime looks set to continue for another year, given that the Finance Minister's main speech on tax changes contains no noticeable reference to this area."

- Loh Eng Kiat, Tax Partner, Baker Tilly TFW

"In my view, this Budget (and perhaps the upcoming ones) needs to be more explicit about fostering a conducive climate for succession planning. This is especially vital for many family businesses and a clear roadmap (including a conducive tax framework) needs to be cultivated as we enter the next 50 years of our nation's growth."

- Sim Guan Seng, Managing Partner, Baker Tilly TFW

"It is somewhat disheartening (albeit not unexpected) that the Government appears to remain firm on the notion of subjecting S Pass holders to the maximum force of foreign worker measures - imposing levies, foreign employee quota and minimum qualifying wage. As a business owner myself, this (approach) has made it less practical for my firm to hire S Pass holders and will likely continue to influence our hiring policies for the foreseeable future."

- Sim Guan Seng, Managing Partner, Baker Tilly TFW

"Without a doubt, SMEs determined to grow and advance from some of Budget 2015's initiatives, can probably reap the gains. To do so they will likely have to engage with various agencies, well, perhaps too many. SPRING (and its network of SME centres), IE Singapore, IRAS, IDA, STB, MOM are just some of Singapore's plentiful outfits that work closely with and support SMEs. Now that the SGX is co-developing an equity crowdfunding platform (which can help SMEs raise funds), the list is set to expand. Therefore, apart from rolling out new (and consolidating some existing) Budget measures, it would be equally uplifting if the Government could assertively endorse a focal support agency to sponsor SME needs. One that has SME interests as its sole (and not ancillary) mandate."

- Loh Eng Kiat, Tax Partner, Baker Tilly TFW

Tax aspects in general, plus some hits and misses

"On balance, for many corporates Budget 2015 continued a trend of "little surprises" in relation to tax changes. In such times of great uncertainty in the global tax environment accentuated by the Base Erosion and Profit Shifting (BEPS) developments, such relative stability experienced in Singapore taxation can be a boon rather than a bane for companies with a significant footprint in Singapore."

- Sim Guan Seng, Managing Partner, Baker Tilly TFW

"A general theme of resilience, had been reflected in some recent Budget announcements by Singapore's competitors. For example in the Irish Budget announced late last year, their Finance Minister referred to their 12.5 per cent corporation tax rate as "settled policy, it will not change". Closer to home, it has been pointed out that for over 4 decades, Hong Kong's tax system has not been strategically reviewed.

Along with other factors, such yardsticks fuelled the expectation that Singapore would similarly adopt a "status quo" approach on key tax markers such as its 17 per cent headline corporate tax rate - an expectation duly realised in today's Budget."

- Loh Eng Kiat, Tax Partner, Baker Tilly TFW

"Apparently, as a productivity strategy, Singapore finance leaders have a preference for motivation over innovation. As a result they could favour training of their employees (to motivate them), over adopting better technology. Why then, does the Government continue to rigidly ring-fence the PIC expenditure categories? For a large company, an annual S$400k expenditure cap in relation to PIC benefits, generally applies for each of the 6 separate categories. In an extreme example, merging of the 6 respective expenditure caps can potentially accord that company a S$2.4m expenditure cap on which it can have the latitude of claiming PIC benefits, solely for training. More exhilarating calculations if this happens, but a company with 240 employees can send 50 per cent (a very high proportion!) of its employees for a 2-year NUS MBA course, and (based on my 'back of the envelope' calculations) have the MBA course fees largely covered by PIC benefits. Very motivating stuff (for some)!

Nevertheless, a pipe dream for now, since the main speech in Budget 2015 did not address any loosening of the PIC expenditure capping."

- Loh Eng Kiat, Tax Partner, Baker Tilly TFW

"In many Western economies, their Budget speeches these days often contain a "song and dance" segment on combating tax avoidance. Sometimes a climax rather than a cameo. International observers may misconstrue the distinct silence by the Finance Minister on tax reputational issues as a lack of emphasis on major international tax developments - but this would be harsh. It would be worth noting that pre-Budget 2015, there had been important transfer pricing guidelines issued by the IRAS that are broadly consistent with the global theme and framework of tackling aggressive tax schemes."

- Loh Eng Kiat, Tax Partner, Baker Tilly TFW

Get all the updates from Budget 2015 here.

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