SINGAPORE BUDGET HIGHLIGHTS 2016
The Finance Minister, Mr. Heng Swee Kiat, presented his maiden Budget on 24 March 2016. Marked as his first Budget under the current term of government, the Minister draws on challenges that Singapore is facing currently as the driving force behind the urgency to transform its economy through enterprise and innovation.
It is clear from the lead-up to Budget 2016 that one of the Government’s priorities is to encourage Singapore businesses to create value through innovation and to grow by expanding overseas. The turn of the year, however, brought with it uncertainties in the global economic outlook and heightened market volatility. Recognising the impact of these external developments on Singapore’s open economy, the Minister put forward various measures as the blueprint for Singapore’s transformation to ensure that we overcome the headwinds arising from the slowing demands in the global market as well as to steer the country into the future. It is a Budget that focuses in bringing Singapore together through partnerships within the community and industry to build a caring and resilient society and a robust and productive economy.
On the other hand, while acknowledging the intense difficulties that businesses are currently facing, the Minister also draws his perspective to growth opportunities and that Singapore is well-positioned to weather the challenges. He further emphasises that these opportunities can only be harnessed if businesses innovate, restructure and increase productivity. Whilst Budget 2016 has some reliefs targeted at SMEs to help them through their immediate challenges, the main thrust is on improving medium term growth through innovation, increase in productivity and internationalisation.
Budget 2016 therefore aims to achieve the following:
(a) Transformation to strengthen enterprise, driving growth through innovation, and
(b) Supporting our people through change.
SMEs, being the backbone of economy, remain in the spotlight and the initiatives that are rolled out includes:
(a) Corporate income tax rebate increases from 30% to 50%, capped at $20,000 for the Years of Assessment 2016 and 2017.
(b) The Special Employment Credit for companies has been modified and extended to the end of 2019 to provide employers with a wage offset for workers aged 55 and above earning up to $4,000 per month.
(c) Levy increase for work permit holders will be deferred for one year for the Marine and Process sector.
(d) New SME Working Capital Loan scheme introduced to encourage lending to SMEs.
Under this scheme, the Government will co-share 50% of the default risks for loans up to $300,000 per SME. On the social front, concerted effort have also been taken to build a caring and resilient society. Various initiatives to nurture the young, such as the Child Development Account and KidStart initiatives are introduced. Older Singaporeans are also not forgotten with the implementation of the Silver Support Scheme and Community Networks for Seniors. Generous deductions will also be accorded to both businesses and charitable organisations to support volunteerism of employees.
While many would have commented that this budget have been well-thought to set the Singapore story into the future, some are of the view that the Budget may lack the depth to deal with the immediate concerns currently encountered by the business as well as the possible tougher times ahead. Perhaps the Government think that the economy is not in such a bad shape that it has to step in immediately. This may be a gross underestimation of the real situation of what is experienced on the ground, which could be worse than expected or imagined. Certainly, not only the SMEs are having difficulties, MNCs are also having difficulties in coping with the high cost of doing business and the shortage of workers and skilled labour. Ignoring these issues would eventually have a detrimental effect in the long run on our ability to spring forward when the economy recovers.
It may be noteworthy to state that the granting tax rebates and schemes initiatives to support businesses in the event of an economic slowdown may not be the most effective way to turn around businesses, especially for companies that are sustaining losses. Also the “Schemecentric” concept of assisting businesses in time of an economic slowdown may often lack an emphasis on its outcome. Notwithstanding this, the Minister have assured that the situation shall be monitored closely and adjustments will be made if necessary.
Finally, from the nation’s perspectives, this year’s Budget has been carefully calibrated to provide the basic support to help businesses overcome the economic challenges. The Budget may not shield them from negative market forces. It is now up to businesses to adopt, innovate and strive to improve their capabilities in order to remain relevant and put the pieces together.
Acutus is pleased to present you with this exclusive highlight to assist you in understanding the changes and initiatives that was unveiled in Budget 2016. As these proposals are yet to be enacted, our comments should not be considered definitive and readers are advised that they should not rely or use this as a basis for formulating business decisions.
We hope you will find this commentary useful and we look forward to supporting you in your business endeavours.
25 March 2016
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