Has it been almost a month?
Yesterday was a big day for tax people. Budget Day 2012 was apparently relatively light on tax issues as compared to previous years. The main focus was on increasing productivity and some ways in which that was done was by enhancing the Productivity and Innovation Credit scheme, restricting the dependence on foreign workers and increasing grants for training etc. Viewed from a political angle, it could be also be said that restricting the inflow on foreign workers was actually the end and not the means. The other focus was on senior Singaporean workers. Higher CPF contribution rates should encourage them to continue working, and the Special Employment Credits should ease the higher CPF contribution burden on employers thinking of hiring these older Singaporeans.
I read about some criticism that the labour market was already tight, and restricting the number of foreign workers was thus detrimental to Singapore’s economic growth. While it is true that unemployment rates in Singapore are very low at the moment, Singapore is not projected to have very high levels of economic growth and in fact the economy appears to be slowing down. The government’s argument that these companies should seek to increase the productivity of each worker and not resort to hiring more foreigners is also pertinent in addressing this criticism. The weakness in that argument though is that increasing productivity is a long term solution so in the short term, companies may feel the strain. Then again, there is some time before the changes take effect, so hopefully that reduces the impact of the short term pain.
One significant development is that greater certainty is now being provided to the tax treatment of the disposal of equity investments. If the divesting company holds at least 20% shareholding and maintains it for a minimum period of 2 years just before disposal, the disposal will not be taxed. This cuts out a lot of the constant exchanges with IRAS on whether the disposal is income or capital in nature.
Lots more analysis coming from all corners especially the Big Four, so I’ll be looking out for that.
