Adjust Singapore tax laws ‘to retain foreign talent for long term’
By Grace Ng
REASONS TO STAY: Give expats longer periods of tax breaks and amend laws to encourage firms to develop private pension plans for their foreign staff, says Mr Banerjee. — ST FILE PHOTO
AS SINGAPORE becomes increasingly reliant on foreigners for its economic success, more measures should be taken to encourage this group to stay here for the long term.
Nominated MP Gautam Banerjee urged the Government to explore the use of a simple pension scheme to help attract and retain foreign talent, which comprise more than 30 per cent of the country’s workforce.
He suggested that Singapore may be a ‘less attractive tax environment than some of its competitors’ as it is encumbered by existing tax rules such as the Not Ordinarily Resident (NOR) scheme.
This is intended to attract talent but actually deters them from staying for the long term, he said.
Locally employed expatriates are not allowed to make contributions to the Central Provident Fund (CPF) and typically cannot participate in the pension schemes in their own country, as Singapore is considered their home country.
Under the NOR scheme, foreigners enjoy tax breaks initially - but only for the first five years.
Participating in the Budget debate, Mr Banerjee said this five-year time limit should be removed to provide longer-term incentives for foreigners to stay in Singapore.
He also suggested that Section 5 of the Singapore Income Tax Act be made more expat-friendly.
This section allows tax-free employer contributions to a pension plan, without differentiating between Singaporeans and foreigners. But the catch is that employees themselves cannot contribute to this plan and will also be taxed on the final payout that they withdraw on retirement.
In recent years, organisations such as the Singapore International Chamber of Commerce have been lobbying the Government to amend tax laws to encourage companies to develop private pension savings plans for their foreign employees.
Mr Banerjee suggested that both employers and employees be permitted to contribute to Section 5 pension plans.
He also advocated that the gains and investment income earned within the Section 5 pension plan be made tax-free when expats withdraw their final payout.
Source : Straits Times - 26 Feb 2008
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