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KPMG Budget Wishlist 2014 

Singapore, 08 January 2014
A sustainable future with inclusive growth for all
This information can be attributed to Mr Tay Hong Beng, Head of Tax, KPMG in Singapore

Inclusive, sustainable economic growth remains the best option for all Singaporeans. Singapore Budget 2014 will likely incorporate many ideas from 2013’s 'Our Singapore Conversation', but inclusive growth must contain measures to grow the economy and groom our businesses.

As one of the pillars for future growth, opportunities for innovation remain largely untapped, even as Singapore businesses have begun to embrace increasing productivity.

Mr Tay Hong Beng, Head of Tax, KPMG in Singapore, says: "Beyond productivity, innovation is vital for Singapore's sustained growth. With more Singapore businesses seeking growth overseas, capitalising on regional and international opportunities will require a combination of strong local brands, and increasing leadership in innovation."

He adds: "With the implementation of the ASEAN Economic Community on the horizon, efforts to position Singapore as an attractive destination for investment must also continue. Renewed measures to build sound business infrastructure remains critical to positioning Singapore as a competitive location for international business."

KPMG's 2014 wishlist focuses on how the Government can help Singapore businesses pursue sustainable growth. In all, the four key themes KPMG hopes to see in Budget 2014 this year are:

I: Pursuing a pan-Asian strategy
II: Enhancing productivity through innovation
III: Simplifying incentives and regulations
IV: Inclusive growth


I: Pursuing a pan-Asian strategy

Singapore is internationally well-regarded as an attractive springboard to Asia. This uniquely "Singapore brand" must be maintained and nurtured to stay ahead of competitors in the region.

The "head east" policies of many international businesses caused by the stagnant growth in Europe and the US have continued unabated. Together with the establishment of the ASEAN Economic Community in 2015, this provides a unique opportunity for Singapore to leapfrog ahead of its competitors, such as Hong Kong, to become the preeminent investment location in Asia.

Mr Tay says: "To enhance its relevance to global businesses, Singapore needs to reposition itself and pursue a pan-Asian strategy. It urgently needs to review its tax treaty network, benchmark its tax incentives and grants to ensure continued relevance. Identifying and customising support schemes to entrench and grow specialised industry clusters are important. We hope to see decisive measures introduced in this Budget that help differentiate Singapore from its competitors while presenting unique propositions to global businesses."

Key proposals are:

a) Growing cross-border trade and investment flows by enhancing and widening the tax treaty network.

b) Establishing tax-free zone in the ASEAN Economic Community by eliminating all withholding taxes and indirect taxes within ASEAN to encourage freer flow of capital and technology.

c) Enhancing Double Tax Deduction for Internationalisation scheme to cover relocation costs to encourage Singaporeans to gain international business exposure and experience.

d) Growing specialised industries such as fund industry, insurance sector, Real Estate Investment Trusts (REITs) industry and shipping industry.

e) Having a conducive environment for businesses to grow by neutralising GST impact on inter-company loans and business travelling expenses, enhancing the Regional Headquarters (RHQ) Incentive and Global Trader Programme (GTP) to make them more relevant and having more liberal tax deductions to encourage listing in Singapore.


II: Enhancing productivity through innovation

The current drive for productivity improvements has been mostly through process and cost efficiency improvements. For sustainable, long term business performance, business investments should focus on adding new value to companies.

"While process and cost review investments improve the efficiency of inputs, investments in value creation measures help drive demand for a firm's products and services and in turn improve long-term and international competitiveness," says Mr Tay.

Key proposals are:

f) Encouraging pervasive innovation by addressing the continuity and tax administration aspects of the research and development (R&D) tax incentive to help businesses.

g) Creating value through brands by allowing companies to claim tax allowances on the value of their brands, to encourage companies to develop their brands thereby increasing the competitiveness of Singapore businesses.

h) Extending the Productivity and Innovation Credit (PIC) scheme beyond Year of Assessment (YA) 2015 as the productivity journey is a long and continuous one.


III. Simplifying incentives and regulations

Boosting Singapore’s international competitiveness continues to remain highly relevant to ensure that Singapore is “top of mind” among investors. With regulatory regimes and business transactions becoming more complex, global and regional businesses appreciate business locations that have less complex business regulations and minimise tax uncertainty.

"More streamlined and effective business regulations and easily accessible tax incentives are particularly important for SMEs. Successful ones are growing rapidly, but do not yet have the resources or capabilities to deal with complex regulations. The PIC scheme needs revisions to make it less prescriptive and simplified, using principle-based rules," says Mr Tay, "The tax administration of the PIC scheme can also be improved, providing more leeway for companies to voluntarily disclose and correct honest mistakes in claims made."

Key proposals are:

i) Simplifying the PIC rules by employing more principle-based rules instead of making it prescriptive.

j) Providing more leeway to taxpayers to correct mistakes as majority of taxpayers wish to be compliant.

IV: Inclusive growth

Inclusive growth - to encourage rootedness in individuals, reduce the income gap and recognise new social trends - cannot be neglected.

Mr Tay adds: "In this time and age, it is crucial that we encourage the ‘rootedness’ of Singaporeans. Our suggestions this year include measures both to support the family unit and to encourage individuals to work and excel. We have also included proposals that could form part of the Pioneer Generation Package announced by the Prime Minister at the National Day Rally Speech 2013."

Key proposals are:

k) Introduce more measures to encourage individuals to work and excel by increasing the earned income relief by $5,000 for all age groups

l) Supporting the family unit by extending the foreign maid levy relief to singles who may have to employ domestic workers to help look after their aged parents.

m) Encourage more retirement planning by enhancing the Supplementary Retirement Scheme by raising the annual contributions cap and removing the taxation on withdrawal.

n) Supporting the elderly by providing double tax deductions for taxpayers paying medishield insurance premiums for parents and grandparents

Download the pdf for details to these proposals and more are in the appendix section.

Visit the KPMG Budget 2014 microsite.