Tax exemption for SMEs urged in 2015 budget

Banks should give out more loans to SMEs.

SMEs should get tax exemptions and funding boosts, PriceWaterhouseCooper said today in its Budget Wishlist for 2015.

According to the report, the partial tax exemption was introduced to reduce the effective tax rates of SMEs, but it also benefits all corporate taxpayers including multinational corporations (MNCs), which may not need assistance.

“Instead of the partial exemption, a tax exemption on the first $300,000 of an SME's chargeable income would maximise the tax benefit for SMEs. Again, certain requirements (turnover threshold, number of employees, local ownership, etc.) could be imposed to target the exemption at SMEs,” noted PwC.

To expand the sources of SME funding in Singapore, PwC says that banks can be encouraged to extend loans to SMEs. Lenders should also be given a double deduction for loan losses for loans to SMEs in order to incentivise banking lending to SMEs.

“To promote entrepreneurship, consider reintroducing an incentive for employee share option and stock award schemes (similar to the employee equity-based remuneration incentive scheme for SMEs and start-ups that was previously available under sections 13J and 13M of the Income Tax Act). This could be restricted to employees of start-ups or SMEs,” PwC added,