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Reactions to the Singapore Budget 2014 Statement 

Singapore, 21 February 2014
Tham Sai Choy, Chairman of KPMG Asia Pacific and Managing Partner at KPMG in Singapore
Budget 2014 demonstrates the Government's commitment towards addressing feedback from all segments of society. We applaud the Government’s efforts to expand our social safety network for those in need.

Tham Sai Choy, Chairman of KPMG Asia Pacific and Managing Partner at KPMG in Singapore
This year's Budget is focused on the right areas: improving productivity and encouraging innovation. Only Singapore companies with strong brands can fully capitalise on the rapid growth in Asia.

Tay Hong Beng, Head of Tax, KPMG in Singapore
With the extension and enhancement of the PIC scheme, it is now time to look at the administration of the incentive. We ought to adopt a principle-based approach and move away from prescriptive rules so that more businesses spending on genuine productivity initiatives can access the benefits easily.

Tay Hong Beng, Head of Tax, KPMG in Singapore
We are pleased to hear that Singapore Budget 2014 is going to focus on innovation in Quality Growth.

Tay Hong Beng, Head of Tax, KPMG in Singapore
We are happy to finally see a tax incentive specifically tailored to the needs of SMEs. The PIC+ scheme is a good step forward to provide the necessary support to encourage equipment and technology investments for longer-term and more sustainable business performance.

Tay Hong Beng, Head of Tax, KPMG in Singapore
KPMG has been pushing for the PIC scheme to be liberalised for SMEs. It is great to see that the Government has taken this into consideration with the introduction of PIC +.

Tay Hong Beng, Head of Tax, KPMG in Singapore
It is appropriate to have a re-calibrated PIC+ scheme for SMEs but it would have been more complete if a tax allowance for self-generated brands could be introduced. We should have addressed the tax disparity between brand purchasers and brand developers, rather than just encouraging the acquisition of brands.

Chiu Wu Hong, Tax Partner, KPMG in Singapore
Productivity and innovation are once again key points in the agenda. Government realises that productivity and innovation development is a long process that does not happen overnight, and is willing to invest in businesses, especially SMEs, to increase productivity through innovation. This is seen through the continuation of the PIC scheme for a further 3 years, the introduction of the PIC+ scheme, and the extension of the R&D incentive for another 10 years!

Chiu Wu Hong, Tax Partner, KPMG in Singapore
Government is also making enhancements to various incentives. A main push from government seems to be for businesses to adopt and develop ICT solutions to increase productivity. This can be seen through the IPG programme.

Chiu Wu Hong, Tax Partner, KPMG in Singapore
The extension of the additional 50% tax deduction for R&D is a welcome move as this is a strong indication that the government is looking at long term goals for supporting innovation in the industry. We are pleased that the government is able to appreciate that innovation is essential for sustainable economic growth, and that R&D efforts are progressive and may require a longer ramp up period.

Chiu Wu Hong, Tax Partner, KPMG in Singapore
As with other matured economies, R&D is a strong pillar for growth and the 10 year period provides businesses with increased confidence in the Singapore economy. We have seen the intense competition for R&D activities globally where countries are fighting for the best talent and ideas, and the move to extend the R&D incentive for 10 more years is certainly a right step forward.

Chiu Wu Hong, Tax Partner, KPMG in Singapore
The Minister has just announced a new, enhanced PIC Plus scheme for SMEs which will run until the YA2018. In this scheme, SMEs (from YA2016 to YA2018) enjoy a greater expenditure cap of $600,000 per YA, up from the current $400,000 per YA. This means that SMEs can enjoy a higher combined cap of R&D expenditure of $1.8 million over 3 years, from YA2016 to YA2018.

Paul Kent, Director, Economics and Regulation, KPMG in Singapore
Cost pressures in Singapore for businesses and the public are very real. The challenge is to manage these pressures and maintain competitive in an uncertain external environment – slowing emerging economies and limited recovery in the more advanced economies.

Gan Kwee Lian, Tax Partner, KPMG in Singapore
The Government has up ped its ante in its push for SMEs to invest in productivity, by increasing qualifying expenditure from $400k to $600k per year per activity. Qualifying SMEs who invest in productivity will potentially stand to save on their tax bills by $408k, for investing $600k in a qualifying activity. Effectively, the net cost of investment to SME is only $192k.

Gan Kwee Lian, Tax Partner, KPMG in Singapore
This is very much a people’s budget. Almost every Singaporean stands to gain something from this budget – enhanced subsidies for school going children, increase CPF contributions for workers, generous package for the pioneer generation and subsidies for low and middle-income groups.

Toh Boon Ngee, Tax Partner, KPMG in Singapore
In its efforts to pursue quality growth, the Government is now tweaking and fine-tuning the various measures to address specific pockets of challenges faced by the SMEs and specific sectors. The introduction of PIC+ for SMEs is an indication that a more measured, as opposed to a broad-brush approach, is adopted in this Budget.

Toh Boon Ngee, Tax Partner, KPMG in Singapore
This is a heart-warming Budget that not merely addresses the issue of rising business costs, but also the very major problem closer to the hearts of most Singaporeans - the medical costs of the elderly.

Whilst the government introduces measures to further deepen the restructuring of the economy with the view to creating a better future for Singaporeans, it has not forgotten the needs of the pioneer generation which have contributed to the Singapore economy over the past decades.

Toh Boon Ngee, Tax Partner, KPMG in Singapore
In its efforts to pursue quality growth, the Government is now tweaking and fine-tuning the various measures to address challenges faced by SMEs and specific industry sectors. The introduction of PIC+ for SMEs is an indication that a more measured, to a broad-brush approach, is adopted in this Budget.

BJ Ooi, Head of International Executive Services, KPMG in Singapore
It is good to hear that the government is focusing on a new social strategy of changing mindsets and social norms.

BJ Ooi, Head of International Executive Services, KPMG in Singapore
The revised CPF Medisave contribution rate to increase 1% point starting 1 Jan 2015 for all workers is a welcome move to defray rising medical costs.

BJ Ooi, Head of International Executive Services, KPMG in Singapore
We hope to see more support for other older Singaporeans who are not in the Pioneer Generation group: Medisave top-up for 5 years.

BJ Ooi, Head of International Executive Services, KPMG in Singapore
CPF contribution rates to increase by 1.5% for older workers to help with their retirement nest egg.

Gan Hwee Leng, Tax Partner, KPMG in Singapore
This Budget has no surprises, focuses once again on productivity and Singaporeans' immediate concerns like rising healthcare cost.

Gan Hwee Leng, Tax Partner, KPMG in Singapore
No change in the GST rate is expected but the GST voucher paves ways for future increase as it addresses regressivity of GST.

Gan Hwee Leng, Tax Partner, KPMG in Singapore
Increasing duties for tobacco, liquor and betting sends the right message of discouraging undesirable habits, particularly among youth.

Gan Hwee Leng, Tax Partner, KPMG in Singapore
It’s reassuring that GST rates have not been increased despite the slew of subsidies for the lower and medium income households and the pioneer generation.

Lau Kam Yuen, Head of Insurance, KPMG in Singapore
There are many insurers with experience in managing healthcare costs that can be brought into the market.

Lau Kam Yuen, Head of Insurance, KPMG in Singapore
The private insurance industry can help play a role in keeping healthcare costs manageable over the long term.


GST on SPVs:

Lam Kok Shang, Head of Indirect Tax, KPMG in Singapore
We applaud MOF’s acceptance of our proposal to allow qualifying funds that hold their investment through multi-tier structures to claim tax remission for the GST incurred on the setting-up costs of their various tiers of SPVs.

Doing so will consolidate Singapore’s position as a funds management hub as it eases the administrative burden on the part of the qualifying funds in identifying and excluding the expenses attributable to their SPVs.

As this concession already exists for S-REITs, extending it to qualifying funds will send a strong signal to the business community that the Government fully intends to support Singapore’s growth as a regional funds management and REITs hub.

Trading in precious metals:

Lam Kok Shang, Head of Indirect Tax, KPMG in Singapore
We are disappointed that IRAS did not act on our recommendation to provide greater clarity on the criteria for which precious metals in the form of a bar, ingot, wafer can qualify as investment precious metals (IPM) and hence, be exempt from GST.

One of the current criteria of having the precious metal to be traded ‘at a price largely determined by reference to the prevailing spot price’ is subjective and poses compliance issues for suppliers of IPM.

Our proposal was for MOF to prescribe a list of precious metals that would qualify as IPM, similar to its prescribed list of IPM coins which qualify for GST exemption. Alternatively, MOF could prescribe a band of prices (e.g. 100 percent to 150 percent of the prevailing spot rate) within which the precious metals are traded in order to qualify as an IPM. Such measures would have given the industry greater clarity and encouraged the growth and trade in this sector.

Andrew Tinney, Partner, Financial Services, KPMG in Singapore
Singapore could be virtually cashless in ten years with investments in technology and communications.

Andrew Tinney, Partner, Financial Services, KPMG in Singapore
The Government’s support for shared services could drive material efficiencies for banks and other financial services companies by allowing the set up of industry utilities for lower value activities.

Andrew Tinney, Partner, Financial Services, KPMG in Singapore
Crowd funding is an exciting innovation and will help smaller firms raise capital at a time when the banks are capital constrained. However, it must have appropriate safeguards for investors.

Lim Li Peng, Tax Partner, KPMG in Singapore
It is heartening to know that as we progress as a nation, the Government has not forgotten the contribution of our pioneer generation and has extended meaningful measures to our pioneer generation to ensure they are not neglected.

Lim Li Peng, Tax Partner, KPMG in Singapore
The Government has heard the voices of Singaporeans, whether individuals or companies, and has responded by extending assistance to individuals in terms of education, transport and healthcare, and to local SMEs in enhanced PIC benefits.

Leonard Ong, Tax Partner, KPMG in Singapore
Budget 2014 honours and pays tribute to our first generation of Singaporeans who helped transform Singapore into a world class city state. A generous Budget for a well deserved generation.

Leonard Ong, Tax Partner, KPMG in Singapore
A transformational Budget aimed at helping businesses to level up and increase productivity.

Leonard Ong, Tax Partner, KPMG in Singapore
The REIT market is both surprised and dismayed that the Budget did not address the foreign income exemption incentive for REITs which is due to expire on 31 Mar 2015. REITs will need to restructure their holding of overseas investments between now and then as they cannot wait for the next Budget announcement in 2015. Any restructuring exercise could mean a significant increase in transaction and tax costs for the REITs.

Anna Low, Tax Partner, KPMG in Singapore
A social and compassionate Budget aims to build an inclusive society - investing in building capabilities of our people, extending support to the pioneer generation and sectors of society that need assistance.

Anna Low, Tax Partner, KPMG in Singapore
The PIC plus and support extended to SMEs to encourage adoption of ICT solutions is much welcomed. These would provide much needed assistance to SMEs to improve their capabilities and position themselves competitively to advance up the value chain.

Sharad Somani, Head of climate change and sustainability services, KPMG in Singapore

I think a move to incentivise the uptake of Higher Euro standard vehicles and retirement of older commercial vehicles is a positive move. The health impact from more, older, polluting vehicles is a cost to society which the incentive more than compensates for. The result is a cleaner environment which in turns promotes the livibility of Singapore both as a place to visit, live and do business.

Paul Kent, Director, Economics and Regulation, KPMG in Singapore
An increase in alcohol excise would have an impact on the hospitality sector. This will have an impact on food and beverage establishments, which in turn has implications for tourism. It will also have an impact on the retail of wine and beer, both of which are lifestyle businesses. For example, wine trading is quite a big business in china and Hong Kong. We will have to await more details to understand the full impact.

David Lee, Tax Partner, KPMG in Singapore
The 2014 Budget recognises that economic and social enhancements need to go hand in hand for sustainable long term economic progress.

David Lee, Tax Partner, KPMG in Singapore
The Budget provides a cradle to grave financial support low and middle income families.

Harvey Koenig, Tax Partner, KPMG in Singapore
We welcome the enhanced PIC scheme for SMEs but it is important to ensure that the administration of qualifying conditions will not be onerous.

Harvey Koenig, Tax Partner, KPMG in Singapore
The Budget surplus puts Singapore on a firm footing to fund increased social spending, as well as initiatives to spur productivity and innovation-led growth.

Harvey Koenig, Tax Partner, KPMG in Singapore
The 10-year extension of the R&D incentive shows that the Government has responded to calls by businesses for longer-term support of innovation efforts. This extension will give businesses a significant boost in building up their business capabilities. It will also support businesses in the improvement of existing products and services, and in the development of new ones.

Harvey Koenig, Tax Partner, KPMG in Singapore
The extension of the PIC scheme and R&D tax incentives are important measures to continue support of the economic restructuring of Singapore. However, the cash payout limit was not increased, and this may not provide sufficient support for cash-strapped innovative businesses.

The renewal of the R&D tax incentives provides strong long-term support to businesses to build and strengthen capabilities, develop new products and services and improve existing ones.

Mak Oi Leng, Tax Partner, KPMG in Singapore
The PIC+ scheme for SMEs is a welcome change for SMEs who also look forward to simplifications of the current compliance process.

Lyon Poh, Partner, Management Consulting, KPMG in Singapore
The continued focus on ICT investment to enable transformation is critical as businesses can expect to reap more benefits of maturing technologies which were in their infancy 3 years ago. These include mobility, data analytics and cloud. The various funding and incentive schemes to encourage adoption of ICT to transform business are helpful, especially for SMEs which lack the means to invest for future.

Loke Wai Chiong, Director, Global Healthcare Practice, KPMG in Singapore
Concerns over long-term sustainability and costs of healthcare are very real.

Loke Wai Chiong, Director, Global Healthcare Practice, KPMG in Singapore
Reshaping the healthcare system so that it moves away from hospital care will require innovations in care delivery and role re-design for healthcare staff, especially with the manpower crunch.

Loke Wai Chiong, Director, Global Healthcare Practice, KPMG in Singapore
Increasing subsidises for lower-income groups and the Pioneer Generation will not deal with increasing costs- shifting care away from hospitals to providers in the community will.

Leung Yew Kwong, Principal Tax Consultant, KPMG in Singapore
Basically, the stamp duty change introduces a computation of the stamp duty by using a percentage of the consideration (be it rent or purchase price) which simplifies the computation. The old system is slightly more complicated. It uses a fraction (e.g. 1 over 250) to compute the stamp duty, and with the use of the words "or part thereof" effectively rounded up the consideration for the computation of the stamp duty.

The simplification of the computation does not result in a significant change in the stamp duty payable in the case of (1) transfer of immovable property (2) transfer of shares and (3) mortgages. The change for stamp duty on tenancies is slightly more significant. The stamp duty for tenanciesup to 4 years, is now strictly on a pro-rata basis.

Tenancies of less than a year, will now have a lower stamp duty, as the old system imposed a minimum stamp duty equivalent to that for a tenancy of a year.
On the other hand, tenancies of 3 years will now attract a higher stamp duty, as the old system imposed the same amount of stamp duty whether the tenancy is for 2 or 3 years.

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