SINGAPORE BUDGET HIGHTLIGHTS 2014
This year’s budget is different. It is about “quality growth and building an inclusive and equitable society”.
As Singapore nears the halfway mark of its 10-year restructuring plan, Budget 2014 sought to define and reaffirm the society that we aspire to have. It is about accelerating the momentum of economic transformation that Singapore has embarked on five years ago.
This is a budget that will be remembered for years to come. At a time when many countries have continual difficulties in finding adequate fiscal resources and achieving balance budgets, this budget provides Singapore with the wherewithal to attend to our growing social needs. It will indeed set new benchmarks for future budgets going forward.
As a continuance of the emphasis set in previous years, the key economic themes continue to persist: productivity, restructuring, reducing reliance on cheap foreign manpower, long-term infrastructure planning. What has dominated the centre stage in the 2014 budget is the introduction of a path-breaking social initiative to enhance subsidies for Singaporeans and measures to boost retirement savings.
A S$8 billion Pioneer Generation Package (“PGP”) was unveiled for seniors born prior to 1949, and who became citizens before 1987. It features greater outpatient subsidies, Medisave top-up and Medishield Life subsidies. The benefits will be enjoyed by the pioneer generation for the rest of their lives regardless of their income because the objective of the PGP is to honour contributions of the pioneer generation of Singaporeans who have been working and living here when Singapore was newly independent. To cater for the rising healthcare and education cost, a 1% increase in employer CPF contribution and Medisave top-up, together with a one-year temporary employment credit to help employers defray 50% of the CPF increase, were also introduced.
With such a giveaway, we should see a tighter budget position in the coming years. Eventually we should see an increase in GST rate to offset expenditure for social spending. For the time being, the Government is tapping on past years’budget surpluses, net investment income, and raising duties in betting, tobacco and liquor to support these measures.
On the business front, in a show of resolution to stay the course in the long-drawn process of economic restructuring, the Government had extended and improved the Productivity and Innovation Credit Scheme (“PIC”and “PIC+”) as well as certain funding initiatives, tax benefits and measures to assist SMEs in exploring new markets outside Singapore.
It is pertinent to note that the Government has maintained its stance on restricting foreign labour growth and SMEs will be worst hit by these tightening measures. They will affect those in the service sectors such as the F&B and construction industries. Those who have yet to embark in the productivity gains will have to seriously consider the use of technology and innovation going forward. This may perhaps be the last call to do so.
To some, the budget did not address issues concerning the rising costs of doing business in Singapore which have indeed affected SMEs significantly. As business costs such as wages and rentals continue to escalate, not forgetting the impending increase in employer CPF contribution, profit margins are expected to be further eroded. There will be cash-strapped SMEs with limited resources to invest in productivity and take advantage of the schemes. Nevertheless, it is now up to SMEs to rise to the occasion with aplomb and dynamism.
At Acutus, we are pleased to present you with this exclusive highlight to assist you in understanding the changes and initiatives that was unveiled in Budget 2014. As these proposals are yet to be enacted, our comments should not be considered definitive and readers are advised that they should not use or rely on this as a basis for formulating business decisions.
22 February 2014
DISCLAIMER: This publication is issued exclusively for the general information of clients and staff of Acutus Tax Services Pte. Ltd. The material should not be relied upon without appropriate professional advice. Acutus Tax Services Pte. Ltd. will not be liable for any loss or damage arising out of or in connection with the material contained in this publication.
© 2014 This publication is contributed by Acutus Tax Services Pte. Ltd. All rights reserved.
Click here to view full publication.