SINGAPORE: Improving effectiveness of fiscal policies, enhancing tax treaties and looking for new tax revenue options are among the top subjects of Singapore Budget 2016.
The budget will be released by the government in March, according to a report by Ernst & Young (EY), one of the world’s four largest audit firms on Wednesday.
Preliminary estimates indicate that Singapore’s economy grew by 2.1 percent last year, the weakest since 2009.
Against an uncertain global economic outlook and China’s slowing economy, Singapore, by virtue of its open economy, remains vulnerable.
In its report, EY said in order to be future-ready, Singapore must enhance its core competitive capabilities and build new ones, leveraging the strengths of a resourceful and innovative population and an agile and pro-business stance that is oriented towards global markets, so as to transform into a value creation economy with inclusive opportunities for all.
Therefore, EY points out four broad themes for this year’s budget, which includes sharpening the focus of fiscal policies for improved effectiveness, enhancing tax treaties for international competitiveness, exploring new tax revenue options to support government spending as well as building a more inclusive Singapore society.
“We propose that Singapore’s income tax system be simplified and made more competitive to promote Singapore as Asia’s business and financial hub, while tweaking certain policies to ease business costs and promote business growth,” Chung-Sim Siew Moon, Head of Tax Services, Ernst & Young Solutions LLP said.
“As an open economy, we need to continue to improve the international competitiveness of our tax treaties, whether refreshing them, providing for tax arbitration clauses and greater clarity on the interpretation of tax treaties, or adding new treaties…Also, to support government spending, we suggest ways to capture new streams of tax revenue through lowering the GST registration threshold and imposing GST on the digital economy.”
What Chung proposed also contains the enhancement of the foreign-source income exemption scheme. Currently, foreign-sourced dividends, overseas branch profits and service income derived by a Singapore resident company are exempted from tax.
“Extending the current foreign-sourced income exemption to royalties will incentivise companies to generate new intellectual properties or house their intellectual property (IP) management hub here, which aligns with Singapore’s ambition to be Asia’s IP hub,” she said.
Other incentives include more support for corporates and individuals and improvement on personal tax reliefs.
