By Fiona Chan

THE Budget is less than three weeks away and speculation is rife over what the Government will unveil on Jan 22 to help companies and households cope with the recession.

Opinion is divided on whether the fiscal package will focus on immediate relief measures such as one-off tax rebates and handouts, or take a longer-term view with structural changes, such as reducing tax rates.

At least one tax expert is advising a 'quick fix' Budget to cushion the impact of a sharply worsening global economy.

'I think the Government has no choice but to go for quick, potentially temporary fixes to help businesses and individuals get through the very difficult and unusual circumstances they may find themselves in,' said PricewaterhouseCoopers (PwC) tax partner David Sandison.

'Timing is of the essence here as many businesses are about to reach their tipping point and survival or failure can be decided almost overnight.'

A tax reduction would take time to work through the system, unlike remedies with immediate effects on cash flows, he added.

One 'quick-fix' measure PwC recommends for businesses is more generous terms on which firms can 'carry back' losses to offset against the taxable income for previous years, to further reduce the amount of tax they have to pay.

Speedy relief for individuals could come in the form of one-off income tax rebates, or a scheme to defer income tax payments for those who have been retrenched, Mr Sandison suggested.

He also sees no need to lower tax rates, as some experts have suggested. 'We already have one of the lowest headline corporate tax rates in the developed world,' he said.

As for income tax cuts, they 'are of little use to someone with no income, or for the majority of the workforce who pay little or no tax in the first place'.

But Mr Ajit Prabhu, tax partner at Deloitte Singapore and South-east Asia, believes there should be an equal focus on one-off measures and long-term steps aimed at maintaining the competitiveness of Singapore's tax system.

Even as it raises spending, Singapore should also lower taxes to keep pace with other governments around the world that are doing the same, he said.

Deloitte suggested that the Government reduce the corporate tax rate further to attract more investors to Singapore, a move that would create jobs and boost housing demand, among other things. Personal income tax rates should also be cut in line with corporate tax reductions.

Another accounting giant, KPMG, has also recommended both immediate and long-term measures, including reducing the headline corporate tax rate from 18 per cent to 17 per cent and giving a one-off tax rebate of 10 per cent to help businesses cope with the downturn.

KPMG's head of tax services, Mr Owi Kek Hean, paid special attention to firms in the property and financial service industries, which have been hit particularly hard.

Among his suggestions are that the Government provide a one-off property tax rebate of at least 30 per cent this year for industrial and commercial properties, and exempt interest payments from withholding tax for financial institutions.

Prime Minister Lee Hsien Loong said recently that the Budget would not 'restore our economy to high growth overnight', but would help to moderate the downturn's impact on Singaporeans and the economy.

In the meantime, it would also contain measures to 'build up new and long-term capabilities' by helping companies expand their operations and encouraging new businesses to grow, he added.

This article was first published in The Straits Times on January 06, 2009.