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Singapore Tax Cuts for Growth

All accounting experts agree unanimously that ‘Singapore’s competitiveness remains a key concern’ and to draw more foreign talent to Singapore by lowering the tax rates will significantly help solve the issue. According to them, “Singapore needs to lower the top personal income tax rate – to something closer to the 17 per cent which is the current corporate tax rate – to draw more talent to its shores.” Singapore’s current personal income tax rates, especially income above S$160,000, are higher than the corporate tax rate which is 17% for 2010.
Both Owi Kek Hean, head of KPMG tax services (Singapore) and David Sandison, PwC Services LLP, are convinced that it will be a huge attraction for top-notch, high-income talent overseas who are faced with the super-tax to move to Singapore. Owi Kek Hean believes the top income tax rates for individuals can be lowered to about 16% in order to stay competitive with Hong Kong.

This will also serve as a huge incentive for sole proprietors who are taxed at personal income tax rate, according to Wu Soo Mee, partner, human capital, Ernst & Young Solutions LLP (EY). Sole proprietors will not be forced to corporatized and they will be able avoid the big expense of corporatization

Besides lowering of personal income tax rates, the accountants believe the government can do more with incentives packages for businesses. By extending and/or expanding tax incentives such as Regional Headquarter to encourage more foreign businesses to set up their regional or global headquarters in Singapore will boost Singapore’s economy tremendously.

Deloitte points out that the government can attract more foreign investment by expanding on existing incentives such as the Standard Tier Financial Sector Incentive Scheme, the Global Trader Programme and the Financial Treasury Centre Incentive. Deloitte also says that it will lessen the tax burden for SMEs if the tax exemption on chargeable income goes from S$300,000 to S$400,000. It will help with the cash flow during this hard economic times and provide more room for growth for local SMEs.

Another possibility can be an extension on tax amnesty on the remittance of foreign-sourced income, which ended on January 21, 2010. Lim Gek Khim, tax partner at EY, explains that “full liberalization of Singapore’s foreign-sourced income exemption regime will finally put us on par with Hong Kong and Malaysia. Lifting the conditions imposed on the repatriation of foreign-sourced income will encourage the internationalization of Singapore companies, allow them to mobilize foreign funds and ease cash flow concerns.”

Choo Eng Chuan of Ey Tax opines that to encourage more entrepreneurship Singapore government can extend a tax deduction for pre-commencement costs incurred in the six months prior to the date when income is first derived. It would be “a fairer solution for start-ups’” as the current system “penalizes companies which start generating income early, as opposed to late, in the financial year.’
But CIMB economist Song Seng Wun thinks the government is unlikely to reduce taxes this year given the huge budget deficit in the past year. He told the Business Times that it more likely consideration for 2011.

Singapore Tax Article by Rikvin
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