Faced with possibility of global slowdown, they call for Budget moves to ease inflation pressures
TAX relief to help businesses cope with spiralling costs is the key item that just about every company in Singapore is clamouring for in this Friday’s Budget.
Companies are unanimous in calling for more government help to combat rising inflation. The wish list ranges from a further cut in corporate tax rates to rebates for transport and rental costs.
Tax experts also hope to see Budget items such as tax exemption for income received by companies from abroad and ‘green’ incentives.
Still, after last year’s sterling corporate profits and a 2 percentage point cut in corporate taxes to 18 per cent, they do not expect a bagful of goodies this year.
But faced with the spectre of a global slowdown, companies are hopeful that the Government will dish out more measures to minimise the pain of rising costs.
‘What is unique about this year’s Budget is that inflation concerns are the dominant theme,’ noted Singapore Indian Chamber of Commerce and Industry (SICCI) chief executive Predeep Menon.
Fears that rising business costs will erode competitiveness in a global market is one of the key issues keeping the 800 corporate members of SICCI up at night, he said.
This was reflected starkly in a recent survey of 556 companies by the Singapore Business Federation about their Budget wish list. Almost 40 per cent of the companies polled hope to see a cut in corporate tax rates, with some seeking a 1 percentage point cut to 17 per cent.
Another 31 per cent of respondents called for tax measures to help cut rental costs, while 16 per cent wanted help in handling steeper operating costs. Other key concerns are transport, utilities and labour costs.
Tax experts and industry players said the Budget is likely to tackle inflation. But rather than sweeping measures to tackle costs across all sectors, the Budget is likely to target specific sectors to relieve cost pressures.
Lowering the levy for foreign workers to help the manufacturing sector could serve as a means to manage rising labour costs, said Mr Edwin Khew, president of the Singapore Manufacturers’ Federation.
Also, the Budget may grant the shipping industry’s wish for an extension of concessions to companies to get tax exemption on gains from the sale of vessels, due to end this year, said Mr Chiu Wu Hong, KPMG executive director, tax services.
Tax rebates on transportation costs may be offered to logistics companies, which are hardest hit by rising oil costs and road taxes.
Singapore companies may get tax incentives to expand in the Middle East or Eastern Europe to diversify their business away from the United States, suggested Association of Small and Medium Enterprises president Lawrence Leow.
Consumer-related and services companies are also hoping for a cut in personal taxes so that consumer demand would not be too severely dampened by inflation.
Mr Roman Scott, economic spokesman for the British Chamber of Commerce Singapore, called for a tiered reduction of the top personal tax rate from 20 per cent to 18 per cent over two years.
Tax experts also called for measures to enhance the tax regime to attract more foreign companies and build up certain key sectors.
Ernst & Young partner for tax services Choo Eng Chuan suggested that the Government consider using fiscal measures such as providing additional tax depreciation on equipment that reduces pollution or saves energy to complement its national policy to make Singapore an eco-friendly hub.
To promote the wealth management sector, a key growth engine of Singapore’s financial hub, Mr Yeo Kai Eng, Ernst & Young partner for GST services, suggested that the Government allow trusts to recover the GST incurred on their business expenses in full.
GST of 7 per cent is currently levied on fund management services or legal services provided to trusts with Singapore trustees and overseas beneficiaries.
Another bugbear plaguing the industry is estate duties. ‘Many other jurisdictions have already abolished it.
May it rest in peace in Singapore,’ said PricewaterhouseCoopers tax partner David Sandison.
Singapore International Chamber of Commerce chief executive Philip Overmyer called for the removal of a tax that companies in Singapore pay on the income they bring in from overseas units.
He noted that other jurisdictions like Malaysia and Hong Kong have done away with this tax.
Source: The Straits Times 12 Feb 08