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The Business Times

Helping firms continue to hire S'poreans

Here's a wishlist of fiscal measures that could be introduced in the forthcoming Budget

SINCE the days of Sir Stamford Raffles, Singapore has attracted immigrants from China, the Malay Peninsula and India. Many of these foreigners, who came looking for a better life, worked hard and decided to settle down in Singapore.

The current generation of Singaporeans are, to a large extent, descendants of these migrants, whose efforts helped to build Singapore into what it is today.

Even today, Singapore continues to attract foreigners who can contribute towards the development of the city-state. Some of them eventually put down roots as Singaporeans or permanent residents (PRs) and make it their home.

To maintain the economic momentum in a globalised environment, this will be a never-ending cycle. However, in the recent past, the issue of employment, or perhaps more accurately, unemployment, has become a hot topic of debate here.

Declining salaries and ever-increasing competition from foreigners for fewer available jobs have made it difficult for certain segments of the Singaporean population to find jobs.

Furthermore, there are indications that the debt crisis in the West is likely to continue to affect the local job market in 2012 and beyond adversely.

While various measures were put in place to raise the bar in employing foreign workers, in the forthcoming Budget, the government should consider introducing the following fiscal measures to alleviate the concerns of citizens and encourage companies to recruit and retain more Singaporeans and PRs:

Create a level playing field for hiring Singaporeans and PRs

Currently, in order to employ Singaporeans and PRs, employers are required to bear an additional cost of 16 per cent in the form of the employer's contribution to CPF - for employees aged 50 years or less. Perhaps employers should be allowed to claim a double deduction for these costs, to help level the playing field for Singaporeans and PRs looking for work.

Double tax deduction for hiring and training local talent

Under an existing tax scheme, employers are entitled to claim a double tax deduction for qualifying recruitment and relocation costs incurred when hiring foreign talent and Singapore citizens/PRs returning from overseas. This scheme may be expanded to allow employers to claim a similar enhanced tax deduction for costs incurred in hiring local Singaporeans and PRs, as well as providing them with in-house training (such training programmes may not be certified by the Singapore Workforce Development Agency or the Institute of Technical Education).

Reintroduce the Jobs Credit Scheme

The dark clouds of a continuing global economic crisis are making employers nervous about their business prospects. Unfortunately, in their bid to cut costs and stay lean, they may be forced to consider the option of reducing their workforce to help them ride out the storm.

To encourage businesses to preserve the jobs of employees for whom CPF contributions are made, the Jobs Credit Scheme should be reintroduced. The earlier scheme provided cash grants to employers and played a significant role in retaining existing employees, and employing new ones where the opportunity presented itself.

Reduction in personal tax rates and relief for additional CPF contributions

To encourage savings for future years, the personal tax rates for residents should be calibrated downwards with the top marginal rate being reduced from 20 per cent to at least 17 per cent, which is where the corporate tax rate now rests.

In addition, Singaporeans and PRs should be allowed to claim tax relief in respect of any additional contributions (over and above statutory contribution rates) made by them to their CPF accounts, particularly to their Special and Medisave accounts. This would help address the next issue looming - an ageing population that is unable to support itself.

Encourage investments in life and medical insurance products

In view of Singapore's ageing population, increased life expectancy and, therefore, the need for more medical attention, Singaporeans and PRs should be encouraged to invest in approved life and medical insurance products. This can be achieved by delinking life assurance relief from the CPF relief and allowing them to claim tax deductions for expenses incurred by them to buy such policies.

Allow a tax deduction for medical expenses without caps

Currently, an employer is allowed to claim a tax deduction for his employees' medical expenses subject to a cap of 1 per cent of the total remuneration payable for the year. Where the Portable Medical Benefits Scheme (PMBS) or Transferable Medical Insurance Schemes (TMIS) are implemented and qualifying conditions under the schemes are met, the cap is enhanced to 2 per cent of the total remuneration.

In today's business world, employers offer attractive medical (and other) welfare facilities to retain talent and keep them motivated. Against this backdrop, it should be prudent to allow employers to claim, without any restriction, tax deductions for medical expenses incurred by them for their Singaporean and PR employees.

Allow double deductions for internship expenses

To gain commercial exposure and experience, many graduates these days are keen to take up internships with reputable business organisations during their term breaks or gap years. Such programmes offer an opportunity for the interns to gain valuable on-the-job experience, as well as present an opportunity for them to join the same organisation on a full-time basis after their graduation.

Businesses should be encouraged to develop and offer structured internship programmes to Singaporeans and PRs by allowing them to claim double tax deductions for the expenses incurred to run such internship programmes.

While the above fiscal measures will provide the necessary support to Singaporeans and PRs working here to ride out the future economic turbulence and build a better future for Singapore, they should on their part continue to retain a strong work ethic, uphold a positive attitude and learn to live and work with foreign talent.

The writer is Tax Partner, PwC LLP Singapore

Abhijit Ghosh