Coming shortly after the release of the report by Singapore’s Committee on the Future Economy (CFE), Budget 2017 kick-starts the implementation of the seven strategies identified to put Singapore in a position to achieve sustainable economic growth.
Here are seven observations:
Fiscal prudence
Continuing the long-term and prudent stance by his predecessors, Finance Minister Heng Swee Keat’s budget has an expected surplus of $1.9 million compared to the $5.2 billion surplus for fiscal year 2016. This is in anticipation of escalating long-term government expenditure, including that for implementing CFE strategies. Also laudable is the government’s plan for a permanent 2 percent cut to the budget caps of ministries and organs of state.
Partnership with stakeholders
A recurrent theme in the Minister’s speech is the need to develop strong capabilities in our firms and workers. As an educator at the National University of Singapore Business School, I am excited by the announcement of the Global Innovation Alliance scheme which includes setting up the Innovators Academy to connect our tertiary students globally. This will expose more students to successful start-up companies.
Digital capabilities
In an ever-changing technological landscape, the SMEs Go Digital Programme is timely for SMEs to tap on for expert assistance to stay ahead of the curve. This may require SMEs to seriously reexamine their business models.
Industry Transformation Maps
The Industry Transforming Maps which use targeted measures to promote productivity and innovation has started in six sectors. I eagerly await the extension of the programme to the remaining 17 sectors, including education.
Announcement of new taxes
The introduction of the new Carbon Tax from 2019 bodes well for a sustainable green environment but will affect the profitability of major power stations which should respond by reducing gas emissions. Apart from the increase in taxes for water and bigger motorcycles, we did not witness the introduction or increase of other forms of wealth taxes in this year’s budget.
Short-term concerns
The government took a sympathetic stand when it announced that it will accelerate infrastructure projects to help the construction sector and defer the planned increase of foreign worker levy for the marine and process sectors.
However, struggling companies that are not in these sectors will not gain from these targeted measures, nor will they benefit from the 50 percent corporate income tax (CIT) rebate granted to profitable companies for the Year of Assessment 2017. In fact, the more profitable companies now stand to save as much as an additional $5,000 with the increase in the CIT cap from $20,000 to $25,000 for YA 2017; as well as the extension of the CIT rebate for YA 2018, albeit at a lower rate of 25 percent and a lower cap of $10,000.
Future budgets
The Minister in his closing speech reiterated the government’s position to strengthen its revenue base in a pro-growth and progressive manner. Apart from reviewing corporate tax rates to ensure competitiveness, a revamp of the GST system to tax foreign businesses engaging in digital and cross-border transactions in Singapore seems imminent. There is scope to subject SMEs to a lower corporate tax by refining the current partial tax exemption rates and threshold. For GST, the government should consider introducing GST on online purchases and content from overseas suppliers.