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A Big, Frustrating Conundrum: Reflections on Singapore’s Deduction Regime for Interest and Other Borrowing Costs following BFC v CIT

Justin Jerzy Tan

(2015) 27 SAcLJ 506

In BFC v Comptroller of Income Tax [2014] 4 SLR 33, the Court of Appeal provided a clear and practical solution to a conundrum: how to prevent s 14(1)(a) of the Income Tax Act (Cap 134, 2014 Rev Ed) from being otiose? However, the solution has no basis, and leads to uncertainty regarding other deduction provisions. Further, one of the principles underlying the conundrum causes confusion regarding the distinction between the deduction and capital allowance regimes and should be discarded. Ultimately, this article argues that comprehensive legislative reform is the best solution to these issues, and makes some suggestions on the shape of the new rules. Lastly, the judgment raises a second, lesser conundrum: whether borrowing costs on working capital loans can ever be deducted.