PwC response: A Robin Hood Tax for Singaporeans offering benefits to citizens

Businesses also receive significant help such as through Wage Credit schemes but the Government remains focused on economic restructuring and improving productivity and quality.

Singapore, 25 February 2013 - PwC Singapore consolidated response to the Singapore Budget 2013.

Overall response

As I listened to the Budget speech, I started to get the feeling that as always these are all nice policies, but as always, I fear about the difficulty of implementation as a result of the web of options and the complexity. Will some of this be too micro for its own good and too difficult for businesses to get their minds around? This is quite apart from the fact that some of them may be seen to be somewhat controversial.

- David Sandison, Partner, PwC Services LLP

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Singapore is in a good place. It's churning out budget surpluses and offering benefits to its citizens. Not many countries are doing that.

-Anuj Kagalwala, Partner, PwC Services LLP

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This is the most generous tax credit announced in recent years and should significantly help firms with rising business costs. The Government should allow firms to carry forward the benefit of the tax rebate to future years when the economic outlook maybe brighter.

-Tan Tay Lek, Partner, PwC Services LLP

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Several budget policies have targeted the undercurrents felt in our Singapore Conversations in terms of rising business costs, transportation woes, rising wage gaps, etc. However, the further tightening of foreign labour will no doubt take some shine away from these goodies for businesses.

- Lim Maan Huey, Partner, PwC Services LLP

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This year’s Budget is one that is strategic as it takes aim at the structuring of the Singapore economy for long-term sustainable growth.

Past budgets have seen the government setting the foundation, and laying the bricks for Singapore’s growth. Budget 2013 sees the government pouring the cement to confirm the government’s commitment to raise overall productivity. Hopefully, the cement does not set too quickly for some businesses to fold before they achieve their productivity gains.

The tightening lid on foreign workers and increased workers levies gives companies little choice but to embrace productivity as a driver to remain competitive and achieve quality growth. At the same, there is some soothing balm in the form of the Wage Credit Scheme, PIC Bonus and the Corporate tax bonus that gives companies some help to invest and implement the programmes that would drive productivity and innovation in the business

Overall, the message is clear. Businesses need to see beyond a quick fix – whatever the pain, improving productivity remains the long term goal for Singapore.

- Koh Soo How, Partner, PwC Services LLP

 

Productivity measures

Although this had not been made so explicit in the run up to the Budget, the message seems now to be loud and clear on the productivity front. "Shape up, or ship out. But if you ship out, we will help you if you leave the good bits behind."

- David Sandison, Partner, PwC Services LLP

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Triple package: The government is reinforcing its push towards bringing up productivity gains across all sectors. Recognising the pain in transitioning and the cries of rising business costs, it is putting money into the hands of businesses through a neat triple-package of credit, bonus, and rebate.

- Elaine Ng, Partner, PwC Services LLP

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The finance minister is pushing productivity growth gains at all cost, a clear signal to those who don't improve productivity such as those in construction, service and marine sectors: "Get ready to move out if you don't upgrade".

- Lennon Lee, Partner, PwC Services LLP

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Productivity plus: Only 30,000 of 165,000 SMEs have applied to enjoy the PIC benefits. Today's budget proposals include a PIC bonus which should encourage more SMEs to make an effort in raising their productivity and engage in industry-wide collaboration to address their productivity challenges.

- Abhijit Ghosh, Partner, PwC Services LLP

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Make it simple for SMEs. There were many good announcements, such as those on PIC. It is even more important that the new rules are simple to follow and not attached with complex conditions. Past budget announcements might have prevented the SMEs from attempting to claim the benefits.

- Anuj Kagalwala, Partner, PwC Services LL

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With foreign worker levies going up, the need for productivity increases is evident. The additional financial support here appears unremarkable, but details of the land productivity grant and industry-wide collaboration initiatives are awaited with great interest. Will these be enough to improve our competitive position, I wonder?

- Alan Ross, Head of Tax, PwC Services LLP

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Immigration is becoming an increasingly political issue around the world and a further raising of the bar in Singapore was widely anticipated. However, there is a faint line between driving productivity with local workers and driving businesses overseas to reduce costs.

- James Clemence, Partner, PwC International Assignment Services

 

Wage credits

It's loud and clear: Employers in the construction process and services sector have to review how best to survive under the new rules while tapping on all support provided by the government, whether in the form of wage credit or productivity innovation credit.

- Ho Mui Peng, Partner, PwC Services LLP

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The 40% wage credit to offset higher wages for 3 years is a pleasant surprise for employers with a high labour workforce in the manufacturing and service sectors. The Minister has also been generous with his 30% corporate tax rebate (up to $30,000) where the previous rebate has been up to $10,000.

- Ho Mui Peng, Partner, PwC Services LLP

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The 3-year transition support package though aimed at reducing the pain felt by SMEs, could turn out to be an unexpected windfall for larger companies. The wage credit scheme, PIC bonus scheme and the Corporate Income Tax Rebate are all generous handouts that appear to be equally available to both small and big enterprises.

- Yip Yoke Har, Partner, PwC Services LLP

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“BOSSES BEWARE” - While 3-year transitional wage credit scheme is a welcome measure, I hope this does not encourage entrepreneurs to lay off the costlier , older Singaporean workers in order to hire Singaporeans whose gross monthly wage is $4,000 or less.

- Abhijit Ghosh, Partner, PwC Services LLP

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What after 2015 - The wage credit scheme incentivises employers to raise wages. Wage increases hit the bottom line of companies but ultimately, many of these companies should consider what it means after 2015 when WCS expires.

-  Lennon Lee, Partner, PwC Services LLP

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Wage inflation

The wage credit scheme will be most welcomed by businesses but one wonders about the knock on effect on wage inflation.

- Alan Ross, Head of Tax, PwC Services LLP

 

Foreign workforce (Expats)

Although nobody really wanted to go there, the somewhat archaic basis of valuing accommodation benefits provided by employers (which is restricted to 10% of the employee's remuneration), has finally been rumbled. From Year of assessment 2015, the value of the benefit will be more aligned with the true economic value. This could lead to a noticeable increase in the tax take from high earning expatriates. It is perhaps difficult to justify shedding a tear in logic; but it may mean the remuneration package of expats will come a little bit less interesting.

- David Sandison, Partner, PwC Services LLP

 

SMEs

SME Boost - The trinity of Work Credit, PIC Bonus and Corporate Income Tax Rebate over 3 years should be a welcome boost to SMEs who can expect real cash savings.

- Elaine Ng, Partner, PwC Services LLP

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Lower the hurdle: While the government is looking to establish a one stop shop for SMEs to access government-assisted schemes, it is equally important to lower the hurdle for SMEs to qualify for these schemes.

- Lennon Lee, Partner, PwC Services LLP

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A targeted budget which encourages certain industries to transform but with assistance to lessen the short term transitional pain.

-Ng Siew Quan, Partner, PwC LLP

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Linking quality growth in businesses to creating an inclusive society will ensure greater acceptance and success.

-Ng Siew Quan, Partner, PwC LLP

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Promoting industry-wide collaboration for SMEs will only make a difference if SMEs start working together to make that difference.

- Darryl Wee, Executive Director, PwC LLP

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The SMEs hire more than 50 percent of the labour force in Singapore. The decreased DRC and increased foreign worker levies will no doubt create more pressure in this tight labour market. The Quality Growth package with incentives such as WCS, PIC bonus, CIT rebate will be helpful but may not be sufficient to help SMEs to increase productivity, reinvent and re-energise.

- Lim Maan Huey, Partner, PwC Services LLP

 

A Robin Hood Tax

The minister is riding through Singapore's Sherwood Forest to tax the rich who own high-end property and drive luxury cars. He is listening to Warren Buffet who said "If anything, taxes for the lower and middle class and maybe even the upper middle class should even probably be increased further. But I think that people at the high-end should be paying a lot more taxes." The new proposals tax consumption and those who enjoy property benefits in Singapore.

- Chris Woo, Partner, PwC Services LLP

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A "Robin Hood" like budget - taxing the rich through increased property tax and ARF, and redistributing to the poor, disabled and needy.

- Lennon Lee, Partner, PwC Services LLP

 

CPF

The increase in CPF contribution rates for older workers, while understandable in its social objective, may potentially lead to higher business costs for SMEs already reeling from the impact of higher foreign worker levies.

- Tan Tay Lek, Partner, PwC Services LLP

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Increases to the CPF contribution rates may not be welcomed by employers or employees but will reduce the burden on Government to bankroll retirees in the future.

- James Clemence, Partner, PwC International Assignment Services (Singapore) Pte Ltd

 

Education

Improving Social Mobility - Salary grants for pre-school teachers

The suggested scheme recognises that quality teachers are critical role models for instilling the right values in our young ones. I hope this will be a step towards attracting more of our best graduates to consider a career in early childhood education.

- Tan Tay Lek, Partner, PwC Services LLP

 

Housing

Removing the tax break for housing benefit in kind is a surprise but may have the unexpected benefit of reducing the rental cost of high-end property as employers negotiate harder with landlords or move to cheaper rental property.

- James Clemence, Partner, PwC International Assignment Services (Singapore) Pte Ltd

 

Rich-Poor Divide

This budget is about anchoring Singaporeans at the core, improving their employability and moderating increases in foreign workers. The widening income disparity is managed somewhat with loading property tax increases, to the high-end property owners and increase in ARF for high-end cars.

- Ho Mui Peng, Tax Partner, PwC Services LLP

 

Tax: Big Signal

For the first time, our budget signals a move to a progressive system of tax for those in the higher income bracket. They are the ones who can afford expensive properties and cars and hence will pay more for owning these assets by way of higher property tax (both for owner occupied and investment) and ARF for cars.

- Ho Mui Peng, Tax Partner, PwC Services LLP

 

Corporate Income Tax

The newly proposed 30% Corporate Income Tax rebate (capped at $30,000) will help to reduce the effective tax rate to around 10% for a company earning taxable income of around $800,000. This may help SMEs to survive and grow as Singapore gets ready to embrace significant structural changes.

- Abhijit Ghosh, Partner, PwC Services LLP

 

Budget Surprises

The corporate tax rebate of 30% up to $30,000 per annum is surprising. Could it have been better focussed on SME’s rather than applying to all?

- Alan Ross, Head of Tax, PwC Services LLP

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I am surprised that the government is further reducing the MYE, reducing the DRC, and increasing foreign workers' levies in the sectors that have felt the most pain and made the most noise. This shows the government's steely resolve to push ahead in the productivity game for the good of all of Singapore.

- Elaine Ng, Partner, PwC Services LLP

 

Budget Misses

While the $3 billion pre-school benefit is laudable, there is a lot more that needs to be done to help those who cannot afford the supplementary education available to the rich. The budget could have addressed the provision of help to fund a decrease in the teacher-student ratio. More needs to be done to fund students. More needs to be done to fund students from middle and lower income families. The Edusave Endowment fund should be extended to help kids survive the bell-curve phenomenon.

- Chris Woo, Partner, PwC Services LLP

 

Conclusion

Although the white paper was likely to have stolen the Budget's thunder on the lack of patter of little Singaporean feet, the issue was not really mentioned at all, which is a bit of a surprise. It can only be assumed that any marriage and parenthood package detail will be rolled out in due course once the relevant policy studies have been examined in detail.

- David Sandison, Partner, PwC Services LLP


ENDS

 

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