Singapore Budget 2015: Fine-tuned policies reflect forward looking approach, says tax expert

SINGAPORE - Major enhancements and fine tuning to various policies were announced in Budget 2015, aimed at sustaining growth in the economy, says KPMG's tax partner Toh Boon Ngee.

Ms Toh told The Straits Times the moves "reflected a measured, holistic, multi-faceted and forward-looking approach in recaliberating the pace of change, which are very much needed to sustain the longer term growth".

She added that the drive for productivity has broadened to include "not just hardware but heartware", with a strong focus on skills deepening and lifelong learning at every level, which are pivotal to the long-term transformation of the economy.

Deputy Prime Minister Tharman Shanmugaratnam had said that the tax allowance for acquisition costs will increase, from the current 5 per cent to 25 per cent of the value of acquisition.

Companies can also claim mergers and acquisitions (M&A) benefits for acquisitions resulting in at least 20 per cent shareholding in the target company, down from 50 per cent shareholding.

Ms Toh said: "These will allow more flexibility for small and medium enterprises (SMEs) restructuring in M&A exercises. This will enable them to merge and grow for common benefits."

Mr Tharman also said the double tax deduction under the internationalisation scheme will be enhanced to cover salaries incurred for Singaporeans posted overseas.

"Mr Tharman has responded to calls of SMEs to provide support for internationalisation, especially in the area of double tax deduction for salary costs," said Ms Toh, adding that the effectiveness of this initiative will depend on details to be announced.

The Wage Credit Scheme will also be extended, and over the next two years, for instance, the Government will co-fund 20 per cent of wage increases given to Singaporean employees earning a gross monthly wage of $4,000 and below.

Ms Toh called it a "welcoming move", to help address the rising labour cost of businesses, and added that the gradual phasing out of the Transition Support Package will also help businesses to restructure and manoeuvre in the tight labour market.

The top marginal rate will be raised by two percentage points, from 20 to 22 per cent for the highest income earners, with a chargeable income of more than $320,000.

Ms Toh said this provided an avenue for the government to raise revenue to fund expenditure with minimal impact on the vast majority of taxpayers.

She praised the Jubilee Budget for addressing many concerns of Singapore, adding that it meets the needs of many.

"Mr Tharman has laid out the well-thought-out measures. What is now needed is a detailed roadmap for successful and effective implementation, without compromising the need to simplify rules and ease compliance."

rachaelb@sph.com.sg