CPF changes, tax cuts figure in PwC's Budget 2012 wish list
It offers ideas to tackle issues of ageing and falling birth rate, and to avert downturn
By TEH SHI NING
THE Central Provident Fund (CPF) needs to be strengthened as a retirement savings mechanism, says PricewaterhouseCoopers Singapore (PwC), which hopes the government will raise employers' contribution back to its former 20 per cent rate and halt the use of CPF savings for non-retirement purposes.
More can be done to 'convince an aging population that it needs to take a serious look at retirement needs', said PwC as it unveiled yesterday its wish list for Budget 2012 - a combination of ideas to tackle long-term issues such as Singapore's ageing population and falling birth rate, as well as ones to avert an economic downturn.
To strengthen the CPF, PwC is in favour of raising the mandatory employers' contribution rate back to 20 per cent, while introducing a range of tax-deductible statutory contribution rates for companies who wish to give more. Retirement planning can be simplified, if tax-deductible employee contributions into section 5 pension schemes are allowed too, as is the case with the Supplementary Retirement Scheme, says PwC, which is of the view that compulsory CPF for non-permanent residents can be re-introduced to help anchor foreign talent.
Meanwhile, PwC hopes that the government will 'stop allowing individuals to use CPF savings to finance property, investments and children's education' as this 'results in an asset-rich, cash-poor retirement and contributes to an artificially inflated market for HDB property'.
Also making its wish list for February's Budget are the perennially hoped for cuts in corporate and individual income tax.
PwC argues that 2012 is 'a good time' to cut the already competitive corporate tax rate from 17 per cent to 15 per cent, as the headlines this would make internationally may draw potential foreign investors here at a time when businesses are looking to invest in the Asia-Pacific region.
The 20 per cent top personal tax rate should also be cut (and tax rates for lower-income brackets' tax reduced accordingly) to 'make Singapore even more attractive for executives to relocate here', says PwC.
Singapore's appeal as a location for regional holding companies can also do with one less potential roadblock. 'It is becoming increasingly difficult to obtain certificates of residence for special purpose companies or investment holding companies as IRAS expects companies to be carrying on a business in Singapore in order to be resident,' PwC says, suggesting that all companies incorporated in Singapore be treated as tax resident.
Lack of certainty over whether investors' gains from disposing of investments in shares or real property are subject to tax may also affect Singapore's attractiveness as an investment holding hub, the firm adds.
In the current economic environment, 'measures to improve productivity and innovation will double up as measures to reduce unemployment' and PwC hopes for more clarity as to how R&D projects qualify for tax deduction purposes, which would help companies determine what qualifies for the Productivity and Innovation Credit Scheme too.
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