Tax Allowances under Mergers and Acquisitions Scheme

Mr Yee Jenn Jong asked the Deputy Prime Minister and Minister for Finance whether the utilisation of tax allowances by 42 companies in Years of Assessment 2011 and 2012 under the Mergers and Acquisitions (M&A) scheme is within the expectation of the Ministry and if there will be plans to further enhance the scheme to provide greater incentives to stimulate more M&A activities amongst small and medium enterprises to facilitate industry consolidation.

Of the 42 companies which have benefited from the Mergers and Acquisitions (M&A) scheme over the last two Years of Assessment (YAs), 31 are smaller companies with annual revenue of up to $50 million. Such companies are the main target of the scheme. Moreover, the number of companies which utilised the M&A scheme in YA 2012 had more than doubled, compared to YA 2011. This shows that more companies are tapping on the scheme.

MOF regularly reviews all our schemes in consultation with the industry. In response to earlier feedback, MOF enhanced the M&A scheme in Budget 2012 to provide double tax deduction on transaction costs and allowed companies to use more flexible structures to acquire target companies. We will continue to monitor the relevance and effectiveness of the M&A scheme.