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Businesses unhappy with lack of urgent fixes
SMALL and medium enterprises (SMEs) and businesses, already feeling the pain from a tough business climate, are unhappy with the lack of short-term measures that they were hoping to see in Budget 2017.
Although there are targeted measures such as the hike in the cap for corporate income tax (CIT) rebate, many are lamenting that the measures do not help to solve their immediate problems.
Sentiment on the ground is especially strong. On one hand, businesses feel there is no quick fix to relieve their current woes; on the other hand, they see higher costs on the horizon from the increases in water tariff and changes in diesel tax.
Kurt Wee, president of Association of Small and Medium Enterprises (ASME) said: "Given the cost pressures businesses are facing, we feel there shouldn't be any cost-increase measures at all.
"Cost issues have been a nagging concern across all sectors. There are no measures to decrease costs in an impactful way."
He said the deferment of the foreign worker levy (FWL) hikes by another year in the marine and process sectors should be granted to all sectors, including the construction sector.
During his Budget speech, Finance Minister Heng Swee Keat said public-sector infrastructure projects worth S$700 million will be brought forward to support the construction sector.
But Mr Wee said that, instead of just bringing forward future spending, total spending should be increased as well.
He also emphasised the importance of ensuring the health of companies in order for employment to be stabilised.
"If you do not stabilise businesses, where are the jobs going to come from?" he said, and added that businesses continue to feel squeezed while grappling with marginal profitability, making sustainability elusive.
Kenneth Loo, president of the Singapore Contractors Association, said that while bringing forward of public-infrastructure projects will boost the quantum of work for the sector, the raised water tariff is a concern. But he added: "But we haven't ascertained how it is going to affect us; in our industry, we use a lot of water."
Water prices will go up by 30 per cent over two years; three-quarters of Singapore businesses will pay less than S$25 a month more after the second of the two-step increase in July 2018.
The Water Conservation Tax will be imposed on NEWater to encourage conservation among industrial users.
Said Mr Loo: "With the market being slow and business cost is our biggest worry, any increases in costs will have an impact on our members, so that is a bit of a setback for us."
Still, he lauded the acceleration of public-infrastructure projects, saying "any help is appreciated".
Businesses and industry experts noted that the hike in the cap for corporate income tax (CIT) rebate does not benefit loss-making companies.
Chief executive officer of Singapore Business Federation (SBF) Ho Meng Kit said: "It benefits only companies that do not pay tax."
Tommy Yee, SIM University's accountancy senior lecturer, said that in order to benefit most from the S$5,000 increase in tax rebate for Year of Assessment 2017, companies need to have a chargeable income before partial tax exemption exceeding S$446,618. These are likely to be SMEs, he said.
Mr Yee said loss-making companies could be allowed to convert their losses into cash, instead of carrying the losses into future years for setoff against future income.
He said: "However, such a measure should be introduced with caution against companies which do not incur genuine losses."
Dr Tan Khay Boon, senior lecturer at SIM Global Education, said the cap hike in CIT rebate helps to "reduce the corporate tax burden and theoretically, companies can save the tax revenue for operational needs".
"Loss-making companies will benefit more from the Wage Credit Scheme, Special Employment Credit and the SME Working Capital Loan."
Besides wage credit, direct subsidies on rental, machinery and other operational costs will be most useful in helping businesses reduce operation and compliance costs in the short term, he added.
Chan Chong Beng, chairman of Workforce Advancement Federation, said that the deferment of FWL hikes for distressed sectors is timely.
He said: "It is fair to help them to see if they can make a comeback."
But the slowdown in sectors such as construction and retail is not due to the business environment; it is a change in the nature of the business, he said.
"If they don't change, no amount of government help is going to help them.
"You have to continually challenge yourself to be better than your competitor. Even if I give you no costs to run your business, if your business cannot compete, you still have to close shop," he said.
- For more Budget 2017 stories visit bt.sg/budget17