Presenting Budget 2017, Singapore Minister for Finance Heng Swee Keat announced that the government will continue existing measures and introduce new ones to help businesses innovate, sustain their growth, and bridge cash flow gaps.
Last year, Singapore achieved GDP growth of 2.0%, similar to the 1.9 % achieved in 2015. “But this aggregate growth figure belies the uneven performance across sectors,” says Minister Heng.
Sectors such as Electronics, Information & Communications, and Education, Health & Social Services, did well. Some sectors have been harder hit by cyclical weaknesses, including Marine & Offshore, and to some extent, Construction. Other sectors like retail are facing structural shifts.
The picture of the labour market is similarly mixed.
Overall, unemployment rate remained low at 2.1%2 in 2016, but redundancies have been increasing and more workers are taking longer to find jobs.
Sectors such as healthcare and education offered more jobs, while others shed them. In 2016, resident employment increased while foreign employment contracted.
Continuation of Measures to Support Businesses
“Over the next two to three years, the different sectors of our economy will be in transition, repositioning themselves for the future economy,” says the Finance Minister. “Some firms may need help to manage cost or cash flow. They will continue to receive support from schemes announced previously.”
Minister Peng says the Wage Credit Scheme will continue to help firms cope with rising wages. “We expect to pay over $600 million to businesses this March. Roughly 70% of this amount will be to SMEs.”
The Special Employment Credit will continue to provide employers with support for the wages of older workers till 2019. Over $300 million, which will benefit 370,000 workers, will be paid out in FY2017.
The SME Working Capital Loan will continue to be available for the next two years. This is where Government co-shares 50% of the default risk for loans of up to $300,000 per SME. “There has been good take-up for this scheme. Since its launch in June 2016, the scheme has catalysed more than $700 million of loans.”
Enhancement of Corporate Income Tax Rebate
Minister Heng introduce two more measures to support firms: Enhancement of Corporate Income Tax Rebate and the extension of Additional Special Employment Credit.
Last year, Minister Heng enhanced the CIT rebate from 30% to 50% of tax payable, capped at $20,000 each year for Year of Assessment (YA) 2016 and YA2017.
This year, the government will further enhance the CIT rebate by raising the cap from $20,000 to $25,000 for YA2017. The rebate will remain at 50% of tax payable.
Minister Heng will also extend the CIT rebate for another year to YA2018, at a reduced rate of 20% of tax payable, capped at $10,000. The enhancement and extension will cost an additional $310 million over YA2017 and YA2018.
“The Government's decision to increase corporate tax rebate to $25,000 will certainly be welcomed by corporates in Singapore,” comments Alan Lau, Tax Partner at KPMG in Singapore. “However, this may not sufficiently help businesses, as many are still grappling with rising business costs on all fronts.
Extension of Additional Special Employment Credit
The Minister says that it will provide more support for firms hiring older workers. The Ministry of Manpower will raise the re-employment age from 65 to 67 years, with effect from 01 July 2017. This will apply to workers younger than 65 on that day.
To encourage employers to continue hiring workers who are not covered, the government will extend the Additional Special Employment Credit until end-2019, according to the Minister.
Under this scheme, employers will receive wage offsets of up to 3% for workers who earn under $4,000 per month, and who are not covered by the new re-employment age of 67 years old. Taken together with the Special Employment Credit, employers will receive support of up to 11% for the wages of their eligible older workers.
Minister Heng says the extension of the Additional Special Employment Credit will benefit about 120,000 workers and 55,000 employers, and will cost about $160 million. This helps to extend the employability of older Singaporeans.
These additional near term support measures, with the existing Wage Credit Scheme and Special Employment Credit, will give businesses support of over $1.4 billion over the next year, according to Minister Heng.
Supporting innovation of firms
To support firms in their efforts to innovate, A*STAR will embark on the following efforts:
Operation and Technology Road-mapping
A*STAR will scale up its Operation and Technology Road-mapping initiative to help local firms develop strategic technology roadmaps that are aligned to their business goals and strategies. It will build up capacity to support 400 companies over the next four years, by partnering Trade Associations and Chambers such as the Singapore Manufacturing Federation and Singapore Precision Engineering and Technology Association.
Under the Headstart programme, SMEs that enter into a Research Collaboration Agreement with A*STAR can enjoy royalty-free and exclusive IP licenses for 18 months in the first instance. With immediate effect, A*STAR will extend this to 36 months.
Tech Access Initiative
To support companies in the use of advanced machine tools for prototyping and testing, A*STAR will provide access to its installed base of specialized equipment.
The available equipment may range from inspection tools to more advanced equipment such as robotized 3D scanners and high pressure cold sprays for additive manufacturing. Firms will be trained to use the equipment.
Further details of the scheme, such as the list of Tech Access equipment, will be made available on A*STAR’s website by September 2017.
To support Singapore-based firms to scale up and internationalize, the Government will set aside up to $600 million for the International Partnership Fund.
The Fund will co-invest alongside Singapore-based firms in opportunities for scale-up and internationalization, with a focus on Asian markets.
Such joint investment would allow Singapore-based firms to partner other promising Asian companies to extend product lines, brands or value chains, or to gain access to markets, channels and technologies.
Qualifying Singapore-based firms should be headquartered in Singapore with annual revenues of no higher than $800 million.
“The International Partnership Fund will help Singapore-based companies to expand globally,” says Chiu Wu Hong, Head of Tax at KPMG in Singapore. “While they venture overseas and raise the ‘made by Singapore’ flag, it is also crucial to keep them anchored in Singapore.”