Ernst & Young Solutions (EY) has released its wishlist ahead of Singapore Budget 2026, which will be presented on Feb 12.
In its Jan 5 release, the professional services firm said its proposals are aimed at helping Singapore and Singaporeans navigate global uncertainties while addressing domestic priorities.
The recommendations are grouped under three broad themes: accelerating broad-based artificial intelligence (AI) adoption and the green transition, maintaining a relevant tax system and empowering workers and families.
Liew Nam Soon, EY Asia East deputy regional managing partner and Singapore managing partner, called Budget 2026 a “pivotal” opportunity for Singapore to position itself for inclusive growth in an AI-driven economy.
“In the new world order where uncertainty is a norm, Singapore must strategically position itself for inclusive growth and compete to lead in an AI-driven economy,” he says, adding that this will require stronger enterprise support, infrastructure investment, ecosystem partnerships and workforce upskilling.
EY’s Singapore head of tax, Amy Ang, says a “core part” of a country’s success depends on an effective tax system. “As Singapore refines its policies, it must also ensure that its tax regime remains relevant and effective to support Singaporeans and businesses to navigate the challenges ahead.”
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Building Singapore as a trusted AI hub
On AI, EY called for a coordinated whole-of-nation strategy spanning business enablement, talent development and infrastructure and digital readiness.
Among the proposals is to reinvigorate the startup ecosystem through larger, more targeted investments in high-potential AI startups. “This includes increasing funding and grants to help local ventures scale globally and attract international investors,” says Manik Bhandari, EY Asean data and artificial intelligence leader/
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The creation of a sovereign AI service would ensure “ethical governance, data sovereignty and equitable access to AI capabilities for all Singaporeans”. These measures would help “establish a distinct national AI brand built on trust and reliability”, he adds.
“Lastly, marketing and branding initiatives to promote Singapore as a trusted AI innovation hub would strengthen the national AI brand and promote globally scalable AI ventures,” Bhandari continues.
On talent, Samir Bedi, EY Asean people consulting leader, proposed a national AI workforce strategy, expansion of SkillsFuture programmes with AI-focused modules, and the introduction of “AI vouchers”, similar to CDC vouchers, to help Singaporeans access essential AI tools and training. He also suggested creating a digital AI skills passport to help companies assess workforce readiness and individuals showcase their competencies.
To support the heavy computing demands of AI, Bhandari recommends exploring sustainable pathways for data centre expansion, including green energy allocations and regional cooperation.
Targeted support for the green transition
EY also urged the government to provide targeted incentives to support Singapore’s green transition.
Sanjeev Gupta, EY-Parthenon Asean and Singapore energy leader, said such technologies can include small modular reactors or next-generation nuclear technologies to offer scalable, low-carbon baseload power; early-stage carbon capture, utilisation and storage projects and infrastructure. He also proposed the use of alternative fuels such as bioenergy and green ammonia, which are critical for decarbonising aviation, shipping and heavy industries.
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Gupta also suggested measures to incentivise research and development (R&D) and pilot deployment in next-generation nuclear technologies, tax deduction or grants for early-stage carbon capture, utilisation and storage projects; as well as funding demonstration projects and demand-side incentives for bioenergy and green ammonia.
“These proposed targeted incentives will help to enhance operational efficiency, reduce carbon intensity and strengthen Singapore’s position as a smart energy hub,” he says.
To promote sustainable supply chains and a circular economy, Praveen Tekchandani, EY Asean coleader and Singapore leader for climate change and sustainability services and partner at EY, proposed grants or tax incentives for sustainable procurement, digital platforms for emissions tracking, and minimum sustainability standards for key sectors.
“As well, it would be good to put together the minimum sustainability standards for key sectors, and industry clusters and associations should also look to pool resources and share best practices. These initiatives can help companies build resilient supply chains, reduce costs, while allowing them to enhance brand value and regulatory compliance,” he adds.
Refining the tax framework
On tax, EY recommended enhancing the BEPS-compliant qualified refundable tax credit (QRTC) framework.
“The introduction of the Refundable Investment Credit (RIC) in 2024 aligned Singapore’s tax incentive landscape with the OECD’s (Organisation for Economic Co-operation and Development) BEPS 2.0 Pillar Two framework. A form of QRTC, the RIC offers a globally compliant mechanism to attract high-value economic activities,” EY explains. BEPS refers to base erosion and profit shifting.
Johanes Candra, partner, business incentives advisory at EY, suggests expanding the QRTC framework to support a broader range of business models. “By doing so, Singapore can ensure that high-value economic activities beyond traditional R&D and capital expenditure are recognised and incentivised,” he says.
Noting the QRTC quantum, which relies on traditional metrics such as capital expenditure, local business spending and headcount, EY is also recommending an adoption of a more holistic evaluation methodology.
Tracy Tham, partner, business incentives advisory at EY, suggests additional parameters such as cost of goods sold, product or shipping volume for logistics players, as well as the level of profits and the value of intellectual property brought into Singapore.
“These metrics better reflect the economic spin-offs generated by companies and allow for a more accurate assessment of their contributions. The evaluation criteria should be guided by the nature of each company’s business activities to ensure the awarded credit is commensurate with the scale and substance of its operations in Singapore,” she says.
EY also proposed increasing the expenditure cap under Section 14N of the Income Tax Act for renovation and refurbishment (R&R) expenses from $300,000 to $500,000, citing rising construction and rental costs.
“While this scheme has been enhanced in recent years to offer greater flexibility, the expenditure cap has remained unchanged at $300,000 since Year of Assessment (YA) 2013. Since then, the business landscape has evolved significantly, and the cap has not kept pace with rising costs and transformation needs,” notes Chai Wai Fook, partner, tax services at EY.
“We recommend increasing the expenditure cap to $500,000 per three-year period, as construction and renovation costs have increased substantially since the last revision and the current cap no longer reflects the realistic cost of R&R projects,” he adds.
In addition, Chai also notes that businesses may need to relocate more frequently given the increasing commercial rental rates, in order to manage costs.
EY also called for greater flexibility in the merger and acquisition (M&A) scheme to better reflect how Singapore-headquartered groups structure overseas investments.
Sandie Wun, partner, international tax and transaction services at EY, noted that groups expanding their footprints overseas usually acquire foreign targets via a newly-incorporated Singapore entity that is directly owned by the ultimate parent entity for risk management and other commercial reasons.
“Such [an] entity currently does not satisfy the conditions for M&A allowance due to the requirement that, among others, the acquiring company (i.e. ultimate parent entity) must carry on a trade or business in Singapore on the date of share acquisition,” she says.
“In addition, the group may not want the main operating subsidiary as the acquiring vehicle for overseas investments for risk segregation purposes. As a result, many of the acquisitions cannot meet the required conditions under the M&A scheme,” she adds.
“We hence suggest relaxing the above condition such that so long as the acquiring company has at least one wholly owned subsidiary which conducts trade or business in Singapore, the ‘trade or business’ requirement would be considered met,” she continues.
EY is also proposing the government to introduce an international expansion tax credit (IETC), a refundable tax credit of 20% to 30% on qualifying overseas market entry costs such as market research and feasibility studies.
While the double tax deduction for internationalisation scheme (DTDi) supports established firms through enhanced tax deductions, it offers limited benefits for startups and small- and medium-sized enterprises (SMEs) that have little or no taxable income, says Chai.
“The IETC addresses this gap by providing direct cash support, improving cash flow and enabling earlier and more confident international expansion. By reducing upfront costs and supporting firms at earlier stages of growth, the IETC empowers more Singapore-based companies to scale abroad, enhancing national economic resilience and global influence,” he adds.
Sector-specific measures
For the maritime sector, EY urged closer alignment of the Maritime Sector Incentive (MSI) scheme with OECD Pillar Two GloBE rules, including clearer treatment of ancillary income such as interest income.
“By explicitly aligning the MSI regime with Pillar Two exclusions, especially for qualified ancillary international shipping income, companies can be assured that interest income derived from international shipping activities is exempted under the MSI where appropriate,” says Cedric Tan, partner, tax services at EY.
“This helps prevent unintended top-up tax liabilities and eases regulatory burdens for shipping groups. As well, introducing a de minimis rule for interest income under the MSI would allow incidental interest income to be covered under the incentive, reflecting practical business realities, reduces administrative overhead, and reinforces the competitiveness of the MSI regime,” he adds.
In financial services, EY’s Stephen Bruce, partner, financial services, recommends removing the Dec 31, 2026 sunset date on withholding tax exemptions under Section 12(6) to provide long-term certainty for banking and capital markets.
For manufacturing, EY’s Andre Toh, EY-Parthenon Asean valuation, modelling & economics leader, proposed linking higher incentive benefits to commitments for technology diffusion across local supply chains, to strengthen the broader ecosystem.
Empowering workers and families
Finally, EY’s Goh Jia Yong, partner, people consulting at Ernst & Young Advisory, called for enhanced support to help employers hire, reskill and retain senior workers, including extensions of existing schemes and the introduction of a senior workforce reskilling grant and a job fractionalisation incentive scheme.
EY’s Kerrie Chang, partner, people advisory services tax, also proposed updating personal tax reliefs to reflect changing caregiving needs, such as extending Parent Relief to cover extended elderly family members and excluding National Service allowances and internship stipends from the $8,000 income threshold used to assess relief eligibility.
