The Budget 2017 is aligned with the recommendations of The Committee on the Future Economy (CFE). It is encouraging to know that this year’s Budget has a strong focus on preparing SMEs for the future economy, but generally there were no short-term stimulus except an increase in corporate tax rebate cap, from S$20,000 to S$25,000 at 50% tax payable for the year of assessment 2017, reduced to S$10,000 at 20% tax payable for the year of assessment 2018.
The business community was expecting short-term support to lower business and compliance costs. For instance, the deferment of foreign worker levy increase to marine and process sectors should have been extended to other sectors, which are also experiencing high business costs. Businesses are concerned with the impact of costs, especially with increase in diesel tax and steep 30% hike in water prices, as not all businesses are looking to pass higher costs to consumers.
The government is setting up two new schemes:
- Global Innovative Alliance for Singaporeans to gain overseas experience. Under the scheme Innovative foreign companies can link up with Singapore partners to co-innovate, test new products in Singapore and expand in the region.
- Small and Medium Enterprises Go Digital Programme. The programme has three components. The first is a sectoral Industry Digital Plans whereby SMEs will get advice on technologies to use at each stage of their growth. The second is in-person help at SME Centres for basic advice Info-communications and Technology (ICT) advice, and a new SME Technology Hub for specialist advice and finally SMEs that are ready to pilot emerging ICT solutions will receive advice and funding support.
An incentive to encourage innovation – the government has introduced Intellectual Property Development Incentive (IDI) that focuses on IP commercialisation. Under the IDI, qualifying income will be taxed at a rate lower than the normal income tax rate of 17%. The rate will be announced later.
There were no new taxes or increase in tax rates, but they are very likely to happen as Singapore spends more on healthcare and infrastructure. The finance minister said his ministry is studying new taxes or raising the existing tax rates as the government faces rising expenditure from healthcare and infrastructure. The government is looking at levying ‘Netflix tax’ that is a tax on digital buys and services as an avenue to increase its revenue.
There were no measures targeted at retaining and attracting MNCs.