Singapore will need to demonstrate how it can bolster its fiscal resources while protecting prospects for growth as it enters challenging times. To stay ahead, the country should also step up its support for businesses to digitalise, transform and seize new markets.
(a) Decisive measures for Singapore to remain attractive to multinational corporations (MNCs) (p.25)
Ajay Kumar Sanganeria, Partner, Head of Tax, KPMG in Singapore, said:
“In the coming months, policymakers in Singapore will need to move more decisively to restructure its incentives to attract and retain investments from MNCs impacted by global tax developments that will gain momentum in 2023.
“KPMG proposes that a percentage of collections from Pillar Two measures be channelled into a pool of funds that would be used to attract and retain investments not just from global MNCs, but also local MNCs affected by the rules. This pool of funds can provide flexibility to economic agencies to provide targeted programmes to both global and local multinationals.
“There can also be an increase in the number of expenditure-based tax incentives (offered in the form of Qualified Refundable Tax Credits rather than enhanced tax deductions). These can take the form of expanding the list of intellectual property categories that can qualify for writing down allowances. Existing R&D tax incentives should also be redesigned to a Qualified Refundable Tax Credit scheme so that there will be minimal impact under the rules, alongside the increase in grant caps of existing programmes.”
(b) Boost Singapore’s digital asset ecosystems (p.29)
KPMG’s research has shown promising use cases and innovation of digital assets, including non-fungible tokens (NFTs) and Decentralised Finance (DeFi), to boost digital connectivity and economic integration. Singapore should carefully study the changing landscape and look at providing certainty on the regulatory and tax treatments of these new investment products to strengthen its digital asset ecosystems. To further fuel growth, Singapore should also promote the use of digital accelerators or hackathons that allow industry advisory boards to guide and sponsor fintechs to solve industry-wide problems.
(c) Targeted grants for GST-registered businesses (p.27)
Some businesses are likely to be impacted by the staggered Goods & Services Tax (GST) hike over the next two years, with top concerns on compliance costs. The Government can offer grants to specific businesses, such as small and medium enterprises (SMEs) which are more concerned about the cost of complying with the two-step GST rate hike.
(d) Provide certainty on new wealth taxes (p.27)
Ongoing speculations on whether Singapore will see new forms of wealth taxes have led to market uncertainty, in particular for the wealth management sector and high-net-worth individuals contemplating if they should move their assets here. The Government should clarify if it will be introducing wealth taxes in the near future, and what this might mean for the country.
Ajay Kumar Sanganeria, Partner, Head of Tax, KPMG in Singapore, said:
“Singapore has been raising the progressivity of its tax policies in a calibrated manner. However, the market continues to have concerns over the possibility of a new wealth tax or a reintroduction of estate duty or inheritance tax. Budget 2023 will need to be decisive in addressing these speculations.”
(e) Tax rebates and incentives to cope with rising costs
Amid concerns over inflation and rising costs, enterprises will benefit from support as they strive to be more innovative and future ready. We recommend the following measures:
A one-off 10 percent corporate income tax rebate and an increase in the number of installments that companies can take to pay their income tax liabilities (p.32)
Expand coverage of the enhanced R&D tax deduction to include costs incurred for overseas R&D activities, beyond its current scope of activities performed in Singapore only (p.32)
Help businesses invest in the local talent pool with an additional 100 percent deduction on training expenses, with similar conditions to the Productivity and Innovation Credit (PIC) scheme for qualifying training expenditure (p.32)
Increase Enterprise Development Grant support for overseas mergers & acquisition activities to up to 90 percent for SMEs and up to 70 percent for non-SMEs for an initial period of two years to drive internalisation efforts (p.31)
Up to 80 percent of funding support under the Productivity Solutions Grant for companies to adopt advanced manufacturing solutions, along with a two-year extension of the 100 percent investment allowance to encourage the sector to shift towards automation. (p.31)
(f) Enable businesses to transform supply chains and embed ESG (p.30)
Ong Pang Thye, Managing Partner, KPMG in Singapore, said:
“Beyond economic factors, Singapore has also had to contend with climate change. However, even as carbon markets are set to expand significantly, carbon trading is not a long-term solution to reducing carbon emissions. Ultimately, large emitters will need to adopt greener and more cost-efficient solutions and the Government has a critical role in driving a mindset change.”
That said, in response to supply chain disruptions and the push towards ESG, more companies are looking to invest in digital transformation to be more efficient and sustainable, and could benefit from these measures:
