In the good ole budget time,
yes that good old budget time
research material's plentiful and my writing is sublime!
It's my annual opportunity
to write about budgets-three,
It's my once-a-year big chance to poetically enhance
this article on taxation after which.....relaxation!!

Such giddiness! I've taken off from writing TNI-WTD articles during the past few weeks as I got more involved than anticipated with the finishing touches to my new, off-the-wall ( and cynical) eBook for American taxpayers overseas: "Larry's 2011 Tax Guide for U.S Expats and Green Card Holders....in User-Friendly English!" (available, now, through Amazon, Barnes & Noble, Diesel, Kobo and the Apple Store!!!!).

Well, friends, it's time to get back to the realities of Asia and that means it's time to report on the former British colonies and their annual budgets. Singapore , Hong Kong and India , all expatriated and independent from the U.K. , still follow British tradition and issue their budgets at this time of year. All have flexibility to fine tune the nuances of their respective tax systems to the economic needs that they believe have to be met.

I'm in London as I start to write this essay. Prior to coming here and prior to my return to China , I'll pass through Bangkok . Yeah, there are tax changes that have taken place in Thailand and Vietnam that I picked up while in Bangkok but they are (at least as I'm concerned) too trivial to bore you with, so I'll concentrate upon the more 'meaty' information - that of tax changes proposed through the budget introductions emanating out of the former Crown Colonies. Then, I'm going to have a rather unique 'follow-up' to India 's budget: I am speaking on 18 March at Tax India International's conference to be held in Mumbai. I write about U.S. tax matters for this India tax service. While I'll be speaking about U.S. and China tax matters at that conference, the primary emphasis of this conference is about the new India budget and what it foretells about both the transition from common law to civil law, insofar as the direct tax code is concerned.....and the direction of indirect taxation, with the eventual introduction of the nationwide goods and services tax, the GST.

So let us start in order of budget introductions.

Singapore 's first!

Opposition in Singapore ? Not even a chance!

Regardless of your goals for that place to enhance.

Their budget comes first and it isn't a sham.

Thank-you, Finance Minister Tharman Shanmugaratnam!

To my editors: if you do not print that poem, I'll really be disappointed - after all, how often can one find a way to rhyme with Shanmugaratnam???

It was not that far back when I referred to political life in Singapore, paraphrasing Gertrude Stein's 'a rose is a rose is a rose'. Then I got an email from someone (who I assume, had been asked to write me), suggesting not only that I not show up in S'pore for a half year but also that I be more 'prudent' in my choice of allegorical references.

Those were my young, innocent, rather reckless days as a writer. Now I've come to appreciate political life in Singapore . Perhaps, like a fine. aged wine, the practice of politics and government, Singapore style, is an acquired taste. Beauty is certainly in the eyes of the beholder and Singapore 's corruption free government beautifully stands heads and shoulders above the corruption of any of the eight other jurisdictions of Asia that I write about or, for that matter, the U.S. , as well, where corruption certainly exists, but with a finesse that Asian jurisdictions have yet to understand.

True, Hong Kong has its ICAC (Independent Commission Against Corruption) but I really consider this a mask to hide the rampant insider deals that are, at least in my opinion, corruption tainted (and boy, am I likely to get in trouble, once again, for saying things like this!).

Anyhow, 18 February was 'Budget Day' in Singapore and what a pleasure it was, indeed, to read Mr. Shanmugaratnam's presentation!

There was no beating around the bush by Shanmugaratnam. His very first sentence captures the Singaporean economy, both currently and in the immediate future: 'The Government expects Singapore 's economy to grow by between 4 percent and 6 percent in 2011 - if this is not robust, then I haven't got a clue as to what the meaning of 'robust' is!

Singapore has an overall budget deficit. Funds are not saved for that proverbial rainy day, as they are in Hong Kong - they are spent, now. Originally, it was assumed that fiscal year 2010's deficit would be approximately $S3 billion. Shanmugaratnam now believes that FY2010 will be break even. For FY2011, Singaporean corporations will be able to deduct 400 percent (no, this is not a typo - the government is actively encouraging investment) of their expenditures in any of six very broad categories of investment - including jobs creation and job training. This is an increase from 250 percent for the previous fiscal year.

Within the first five minutes of his speech, Shanmugaratnam gave a specific example of a company making investments, this coming year, of $S500,000 - $S400,000 in automation equipment (computers included) and $S100,000 in training for its staff. The tax savings for this will amount to $S340,000.

And things get 'better'! Companies will receive a 20 percent corporate tax rebate up to $S10,000 in FY2011. for smaller Singapore businesses, approximately 85 percent of all Singapore corporations, those who cannot get that full $S10,000 rebate, there will be a FY2011 SME Cash Grant amounting to 5 percent of the company's revenues (not profits!), up to a maximum amount of $S5,000. Companies will automatically receive the higher of either the corporate tax rebate or the SME Cash Grant on a very timely basis, after submitting next year's corporate income tax return, a return that is fast, simple and very easy to eFile. I've always been amazed at clients asking me to prepare their Singapore tax returns for them - these returns and the directions for preparation, while not exactly 'idiot proof' (I've made mistakes on them, too!!), are easily corrected when in error - with friendly assistance by the Singapore government. Sadly, I cannot say the same for the U.S. IRS.

For 'global' Singaporean firms earning a larger share of their income outside of Singapore , foreign tax credit pooling is being introduced to encourage remittance of foreign income to the firm's Singapore base offices. This will offer far greater flexibility in the use of foreign tax credits, reduce taxes payable and really simplify tax compliance. The Singapore government estimates that this will cost them $S22 million a year - a very small cost for such an enticing feature.

The last element of corporation tax enticements that Shanmugaratnam is offering next year is that of assistance to new, Singapore start ups. New businesses will now be allowed to claim tax deductions on pre-commencement expenses incurred in the accounting year immediately before the year in which they earn their first dollar of trade receipts. Immediate write offs instead of amortization - that's nice!

Insofar as individual income taxes are concerned in Singapore , only 44 percent of the resident workforce pays any income tax. Yet Shanmugaratnam opts for significantly reducing middle and upper-middle income taxpayer taxes. Those with chargeable income of $S60,000 at the end of next year will be paying 25 percent less tax. Those with chargeable income of $S160,000 at the end of next year will be paying 10 percent less tax....AND....there's going to be a personal income tax rebate of 20 percent for individual resident taxpayers for FY2011, up to a maximum of $S2,000.

All of this was announced on 18 February, giving Hong Kong Financial Secretary John Tsang 5 days to come up with an attractive alternative in the ongoing Singapore-Hong Kong economic rivalry. Read on, to see what Tsang offered.....

It's time for Hong Kong !

Can you sing 'East Side, West Side , All Around the Town'? If so, then here's my lyrics:

Hong Kong, Hong Kong , the place the I call home

Yet I criticize Hong Kong openly, no matter where I roam.

With all its faults - there are many

This place is still the best

Their leaders cringe when I comment -

I love to put them to the test!

On 23 February, Financial Secretary John Tsang, Harvard educated, and a person I consider far more capable than he is 'permitted' to be, announced the 2011-2012 Hong Kong budget. This was his fourth budget and while it addresses public concern about the rising living costs of Hong Kong (due to the frighteningly rapid rise in real estate prices - and EVERYTHING in Hong Kong has to do with real estate!), is not what I consider to be 'innovative'.

Tsang announced that there will be an $HK80 billion surplus due to 'unanticipated' stamp tax revenues from property sales. Only recently, the Hong Kong government was talking $HK60 billion, while I was writing $HK70-75 billion. Anyone want to bet about the final amount being closer to $HK90 billion when the books are closed for the year?

While the business community and the Hong Kong Institute of CPAs have been calling for both individual and corporate tax rate reductions, these 'demands' have not been met. Rather, Tsang's proposed budget calls for the following tax rebate-like items:

* A residential electricity subsidy of $HK1,000 per household, which will serve as a tax refund of $HK4.7 billion. The previous two electricity subsidies did not have to be utilized in the fiscal year - they were allowed to be carried over and I certainly carried them over: It is only the past couple of months that I've paid electric bills in Hong Kong , after having gone electricity bill-free for a few years - how nice it was!

* A property tax payment exemption for homeowners for the 2011-2012 tax year, subject to a maximum of $HK1,500 per quarter. The government estimates that this will cost $HK9.9 billion.

* An increase in the tax exemption ceiling for taxpayers maintaining dependent parents and grandparents, aged 60 years or older, to $HK36,000 per year, an increase of $HK6,000 over last year.

* An increase in the deduction ceiling for elderly residential care expenses to $HK72,000 from the current $HK60,000

* An increase in both the child allowance, as well as an additional 'incentive' allowance for a child in the year of birth from $HK50,000 to $HK60,000.

* A one-off 'injection' of $HK6,000 into all workers MPF accounts. The MPF, the Hong Kong Mandatory Provident Fund, is Hong Kong 's social security. I've learned that if you cannot say anything good about something, then keep your mouth shut....so I will not say anything about the MPF!

A substantial portion of Hong Kong 's Legislature consists of functional constituencies. Paul Chan is the Accounting Sector's elected legislator. Paul and I have differed in the past but in yesterday's Ming Pao Daily, Paul stated, regarding Tsang's budget: 'I expressed my disappointment to the absence of new ideas in their articles, which are full of smugness, clichés, obscurity, and invalid arguments put up in defense of their rigidity and over-conservatism.' Bravo, Paul, I'm in total agreement with you on this one!

Last year, Paul introduced - and Legco passed a motion to urge the government to establish a tax policy unit to be staffed by full-time tax experts. The Secretary for Financial Services and the Treasury (another governmental unit - quite possibly redundant to the Financial Secretary's office) has a special unit set up to review and formulate tax policies but no one knows who the members are of this unit, what their qualifications are or, over the past 10 years, what the topics were of their research studies, what articles they have released or what proposals they have recommended. A further comment from Mr. Chan regarding this matter: "We may be ignorant but the Administration should have publicized such related information for public discussion. If the attitude displayed by the Administration is one of disdain and to side-step the valid questions raised by Legco members, how were they able to convince the public through reason?"

If any members of Hong Kong's Executive Council are 'listening' - and I am told that I do have their 'ear', then I volunteer to serve on either the current, silent and invisible - or proposed - tax policy committee - I do believe that I have the qualifications and experience.....and as a permanent resident of Hong Kong, I do believe I am eligible for appointment.

Obviously, I'd be quite surprised if I were appointed!
Enough, enough of budgets and tax!
You've had your fill of folly and facts.
Next article? China 's Five Year Plan
policies set for the Dynasty Han.
Of this I'm sure - Rudyard Kipling I'm not
thanks, anyway, TII, for giving me a shot!
And you, tax readers - from you I'd like to hear
do you like my poems, occasionally, during the year?
If you like them oh, please, please, do tell.....
If not........don't tell me where to go!