Friday, January 2, 2015
Deloitte Singapore has released its annual tax policy wish list, which has been compiled in response to an ongoing Ministry of Finance pre-2015 Budget consultation on tax and spending measures.
Deloitte said the list focuses on achieving "sustainable, inclusive growth and a forward-looking, competitive business environment for Singapore," and, to that end, the Government should "consider revisiting" some of the tax incentives currently available for investors.
For example, the wish list proposes an increase in the partial tax exemption on chargeable income for small- and medium-sized enterprises (SMEs) to the first SGD600,000 (USD452,700) from the current SGD300,000. The effective tax rate for SMEs with chargeable income of SGD600,000 would then drop to 7.8 percent, from the current 12.7 percent.
To raise productivity and innovation, Deloitte believes that the administrative burden of the Productivity and Innovation Credit (PIC) scheme could be lowered by combining the cap for a PIC cash payout, which is currently limited to SGD100,000 per year of assessment (YA), across the relevant YAs until 2018, similar to the provision available for PIC enhanced deductions.
In addition, to offer more support for SMEs, it suggests that the PIC cash payout conversion cap should be increased to SGD200,000 per YA, while an enhanced deduction for qualifying PIC spending for SMEs could be increased to 400 percent (from 300 percent), making a total of 500 percent tax deduction.
The wish list also proposes a number of GST changes, including the introduction of a reverse charge mechanism. It also proposes waiving the requirement to report zero-rated purchases and increasing the value threshold for simplified invoices from SGD1,000 to SGD3,000.
The firm has said Singapore should also undertake a review of the measures in place for key industries, including for financial services, shipping, telecommunications, and real estate investment trusts. Last, Deloitte recommended that there should be a reduction in domestic interest withholding tax rates from the current 15 percent to 10 percent, so as to reduce the cost of financing for Singapore companies. A thin capitalization rule could be implemented to mitigate the possible impact of this change on the Singapore tax base, it said.