PwC response: A budget of social transformation

Less about tax changes, more about our people

SINGAPORE, 21 February 2014 – PwC Singapore consolidated response to the Singapore Budget 2014 as follows:

Overall response:

A budget of social transformation: Change habits & social practices to elevate our productivity. It demonstrates our embrace of the tight labour market. Witnessing greater shifts of help to our pioneers, better education for all, affordable healthcare and needs of the disabled. This is the start of the reinvention of Singapore. A great start as we turn 50.

- Chris Woo, Partner, PwC Singapore

 

A rainbow budget - spreading colour across social and economic horizon by providing more support for raising productivity, enhancing social equity and achieving quality growth.

- Abhijit Ghosh, Partner, PwC Singapore

 

Productivity & Innovation

The extension of the PIC for another three years and the introduction of the PIC + package is not surprising given this morning's news of MTI data showing zero growth in productivity last year.

The announcement of the Cash Seniors Bonus and the U-Save Special Payment continues the government's use of the GST voucher scheme to deliver funds to the lower income group to help them cope with higher healthcare and living costs.

What is surprising about this year's Budget is the lack of any new 'wealth taxes' given recent renewed interest in the topic. What is not surprising is that the Budget is becoming more and more a social statement and less about tax changes.

- Koh Soo How, Partner, PwC Singapore


Encouraging a self-service culture (e.g. self-checkout at the supermarket) through investment in innovation in the service industry - is this social engineering, Singapore style?

- Yip Yoke Har, Partner, PwC Singapore

 

As we continue the journey to restructure Singapore's economy, Singapore businesses will applaud the extension of the PIC Scheme and introduction of the PIC Plus Scheme. These changes will help Singapore business level up our game to improve productivity and increase GDP growth.

- Lim Maan Huey, Partner, PwC Singapore

 

I would give my 'Like' in this year's budget to the people and productivity initiatives. In particular, the introduction of the Pioneer Generation honours our commitment of the pioneer generation contributions. The extension of PIC scheme and PIC+ scheme will help support job growth and GDP growth.

- Lim Maan Huey, Partner, PwC Singapore

 

In asking all Singaporeans to innovate and drive productivity across the economy, the Government has led by example and introduced innovative measures designed to encourage quality growth.

- Liam Collins, Partner, PwC Singapore

 

With the extension of PIC and a newly introduced PIC+ for SMEs, coupled with other initiatives targeted at helping SMEs to grow and internationalise, there is now no excuse for SMEs to pursue productivity and innovation, and to compete internationally.

- Lennon Lee, Partner, PwC Singapore


It is heartening to know that the Singapore Government introduced a PIC+ targeted only to Singapore SMEs who are the one that needed help to transform and to increase productivity. I hope that the definition of SMEs for this new PIC+ would be inclusive to include even the micro SMEs.

- Lennon Lee, Partner, PwC Singapore

 

While we are pleased with the extension of 50% additional tax deduction for another 10 years, the benign issues remain that the qualifying R&D expenditure and what is regarded to be R&D activity are restrictive. Many local companies would not be able to enjoy the scheme.

- Lennon Lee, Partner, PwC Singapore

 

Message to businesses loud & clear – innovate, share resources and enhance productivity.

- Sunil Agarwal, Partner, PwC Singapore

 

It should come as no surprise to the construction industry that the proposed measures should provide both the carrot and stick for the industry to embrace productivity initiatives and wean itself off over-reliance on foreign labour. The tax benefit of the enhanced PIC incentive should go some way in relieving the industry of these transition pains although more sustained measures would be welcomed as this industry transformation process will not be achieved in the short term.

- Tan Tay Lek, Partner, PwC Singapore

 

Measures to extend PIC, R&D and IP tax deductions are welcomed; however, more could have been done to achieve Singapore's ambition towards a Global IP hub?

- Sunil Agarwal, Partner, PwC Singapore

 

Finance Minister not in favour of long hours and instead emphasised the need to increase the productivity but extends the incentives like PIC, to give further boost to productivity.

- Mahip Gupta, Director, Energy Tax, PwC Singapore

 

The PIC plus scheme targeted to defined SMEs directs the benefit to those most in need of making investments and upgrading, and represents a sound enhancement to original PIC scheme which was enjoyed by all equally.

- Abhijit Ghosh, Partner, PwC Singapore

 

Healthcare:

Affordable and Accessible Healthcare is top of mind to a growing population at older Singaporeans. The long-term commitment by the government to set aside sufficient funds to provide for the full costs of the Pioneer Generation Package, should provide assurance to our senior citizens that their healthcare needs will be met.

- David Mckeering, South East Asia Consulting Healthcare Leader, PwC South East Asia Consulting

 

The 2014 Budget has highlighted a focus on enhancing healthcare affordability for ALL Singaporeans. Managing healthcare costs by rebalancing the system to be less reliant on our hospitals and utilising more home care options, increasing outpatient clinic subsidies for lower and middle incomes and increasing CPF contributions.

- David McKeering, South East Asia Consulting Healthcare Leader, PwC South East Asia Consulting

 

Pioneer Generation Package:

A caring budget using the surplus with some smart initiatives. The Pioneer Generation Package to subsidise outpatient specialist treatment will hopefully help to reduce the demand to access subsidised hospital beds and give the authorities more time to address our current capacity constraint.

- Abhijit Ghosh, Partner, PwC Singapore

 

The approach to provide full provision for Pioneer Generation Package in 2014 itself is a very mature approach as it provides much needed 'assurance' (on top of insurance) to old Singaporeans that they will continue to receive benefits irrespective of cyclical changes in the economy. There is no better time than now to take this approach to save for the 'rainy days' which are looking more likely to come for Singapore in the area of healthcare as the population age and healthcare costs are expected to rise.

- Ajay Sanganeria, Director, Healthcare & Pharmaceutical, PwC Singapore

 

Of late, the element of surprise on budget day has been low due to the government releasing announcements ahead of Budget on honouring pioneer generation, need for incentivising quality growth and innovation, managing healthcare costs, etc.

- Ho Mui Peng, Partner, PwC Singapore

 

A Plethora of handouts: ranging from encouraging productivity and innovation, supporting the less privileged, and paying tribute to our pioneer generation.

- Anita Louis, Director, PwC Singapore

 

CPF:

Zero sum game. The SMEs and local businesses who employed a significant portion of Singaporeans and PRs are bearing the costs for healthcare through a 1% increase in Employers' CPF contributions on top of rising industrial rentals and wages due to tightening of foreign labour policy and higher foreign labour levies.

- Lennon Lee, Partner, PwC Singapore

 

1% CPF increase equates to a maximum incremental cost for employers of $50 per employee with 50% coming back in the form of an Employment Credit but in year one only.

- James Clemence, Partner, PwC Singapore

 

SMEs:

Though targeted at SMEs, the productivity incentives will be equally welcomed by Multinationals and bigger local companies.

- Yip Yoke Har, Partner, PwC Singapore

 

The extension of enhanced bonus COE period for replacement of old commercial diesel vehicles is welcomed. It is very common to find commercial vehicles spewing black fumes on our roads - the haze is bad enough and returning soon. Hopefully old diesel taxis are covered under this scheme as well.

- Ho Mui Peng, Partner, PwC Singapore

 

Hoping for R&D enhanced claims to become a permanent feature in our legislation.

Didn't happen but at least there is an extension of time where the 50% enhanced claim is extended for another 10 years and the intellectual property rights allowances extended.

- Tan Ching Ne

 

Alcohol Taxes:

How to damage an already overpriced F&B industry: Raise alcohol excise duties by 25% when you look at the economic benefits bestowed on Hong Kong by the abolition of drinks or wine, this is a baffling move.

- David Sandison, Partner, PwC Singapore

 

Financial Services Taxes:

According to the 2012 Singapore Asset Management Industry Survey by MAS, Singapore based managers managed S$1.62 trillion of assets. Hopefully the extension of the fund management tax incentives and the enhancements will help us breakthrough the 1.62 trillion figure quickly and establish greater market share in the global asset management area.

The confirmation that tax deductions are available for distributions paid on Basel III Additional Tier 1 instruments that are not shares will allow Singapore-incorporated banks additional capital raising options for boosting their capital base. It would be interesting to see what type of instruments will be covered. For example, one would expect contingent convertible (CoCos) to be considered as such instruments has been popular with global banks looking to boost Tier 1 capital requirements under Basel III after the global financial crisis(GFC).

- Lim Maan Huey, Partner, PwC Singapore

 

On more intensive efforts to upgrade the construction industry:

In a sense, the measures address the root causes of low productivity in the construction sector which has long taken the easy road by importing foreign labour to meet its needs. Given that it accounts for a significant portion of the total spending in the industry, the government is wielding its clout to both enforce and encourage the industry to use more productive construction methods and invest in advanced technologies. While the industry would obviously like to see more incentives than punitive steps when the details are announced in due course, I am personally not too optimistic of that.  Construction companies need to take immediate steps, within their business constraints, to achieve these higher standards and stricter limits on basic skilled foreign labour.

- Tan Tay Lek, Partner, PwC Singapore

 

On Enhancing the Foreign Sourced Income Exemption Scheme for Listed Infrastructure Registered Business Trust:

As the removal of the need for pre-approval by the Minister for the RBT to enjoy the tax exemption on its foreign income is to enhance tax certainty for the RBT, it is hoped that the IRAS will be practical in the way it will administer this exemption. The devil, as they always say, is in the details.

- Tan Tay Lek, Partner, PwC Singapore

 

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Alan Lee, PwC LLP Singapore (Tel:+65 6236 3961 Email: alan.ec.lee@sg.pwc.com)