Set against a backdrop of geopolitical and economic uncertainties, technological disruptions and anti-globalisation sentiments, the measures announced in Budget 2017 are geared towards transforming Singapore into a nimble and adaptable economy.
The business-centric measures have been very targeted: short-term relief for firms suffering from cyclical downturns, digital transformation efforts and skills-based restructuring for affected industries; and equipping high-growth companies with the right resources to thrive globally.
Given the current business climate, it had been hoped that more would be done to help companies and individuals cope and transition smoothly. For example, many looked forward to an extension of the Productivity and Innovation Credit (PIC) Scheme while others had personal relief enhancements on their wish lists.
Still, there are some noteworthy key measures:
In recent years, we have witnessed the disruption of traditional industries, no thanks to the rapid adoption of new technologies such as artificial intelligence, big data, the Internet of Things and machine learning.
To help traditional industries stay competitive and beef up cybersecurity measures, the introduction of the new SMEs Go Digital Programme could be the silver bullet. In providing an S$80 million leg-up for businesses to innovate and develop their digital capabilities, the scheme will help defray 70% of the cost of technology purchases, capped at S$300,000 per SME.
The SkillsFuture Development Initiative will provide funding support to help employees acquire and use deep skills, even as companies innovate and digitalise. Taking into consideration that understaffing is a common pain point faced by SMEs, training will be made accessible for workers to upskill through offering more short, modular courses and e-learning. Union members are entitled to subsidies for selected courses through the NTUC-Education and Training Fund. S$150 million has been made available to match donations to the fund.
Scaling Up Globally
Businesses often have to manoeuvre through a fragmented path when expanding overseas. Some common “blind spots” when venturing overseas include a lack of knowledge in a country’s tax laws or market.
To support firms in scaling up globally, the government will co-invest S$600 million with Singapore-based firms as part of the International Partnership Fund. Another new measure is the Enhanced International Finance Scheme to help SMEs access regional infrastructural projects. S$100 million has also been set aside for the SkillsFuture Leadership Development and Global Innovation Alliance Initiatives, to groom Singaporean leaders for overseas business expansion.
The Extension of Business Support Measures
SMEs might be able to breathe a little easier during the downturn with the extension/enhancement of the following business support measures:
- Corporate Income Tax Rebate
While the Corporate Income Tax Rebate remains at 50% of tax payable, the cap has been raised from S$20,000 to S$25,000 for the Year of Assessment 2017.
- Wage Credit Scheme
To help firms cope with rising wages, the government will continue to co-fund in 2016 and 2017 wage increases given to Singaporean employees earning a gross monthly wage of S$4,000 and below at a rate of 20% (reduced from 40% applicable in the past three years). To help firms cope with rising wages, the government will continue to co-fund in 2016 and 2017 wage increases given to Singaporean employees earning a gross monthly wage of S$4,000 and below at a rate of 20% (reduced from 40% applicable in the past three years).
- Special Employment Credit
Employers will receive additional wage offsets of up to 3% for workers who earn no more than S$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 can expect to receive support of up to 11% for the wages of their eligible older workers.
- SME Working Capital Loan
The SME Working Capital Loan, which sees the government co-sharing 50% of the default risk for loans up to S$300,000 per SME, will continue to be available for the next two years.
Industry Transformation Maps
High-growth startups and SMEs look set to benefit most from the implementation of the Industry Transformation Maps (ITMs), as opposed to a broader measure of encouraging companies, regardless of sector, to invest in automation and upskilling workers. Furthermore, ITMs are designed to adapt and change – a positive initiative, with the government taking measures to allocate resources where they are needed most.
Personal Income Tax Rebate
During tough times, every cent counts, especially for family breadwinners with several mouths to feed. The Personal Income Tax Rebate of 20% of tax payable, capped at $500 for tax residents for income earned in 2016, looks set to provide some relief for individuals, especially those who have been hit by retrenchments and unemployment.
This article does not cover every single item presented in Budget 2017. For full details, please refer to www.singaporebudget.gov.sg.