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A balancing act of near and long-term demands
BUDGET 2017 is widely expected to provide the policy response to the long-term growth blueprint presented last week by the Committee on the Future Economy (CFE), but just as closely watched will be how it addresses the immediate pressures and challenges facing businesses and workers.
Economists and tax experts told The Business Times that they expect it to set out practical steps and targeted moves to relieve near-term concerns, and is likely to be business friendly.
OCBC Bank economist Selena Ling said that in the short term, businesses face structural headwinds from costs, financing, manpower pressures and the need to scale up and internationalise, especially for small and medium-sized enterprises, which policymakers will be more cognisant about.
The Singapore Business Federation said in an earlier statement: "While planning for the long term is important and necessary, addressing near-term issues to help viable businesses transit to the newly restructured economy should not be neglected.
"We urge the government to continue to put sufficient emphasis on assisting businesses to overcome the near-term economic headwinds, as we expect the local business environment to remain tepid at least in the short term."
Head of tax at KPMG in Singapore Chiu Wu Hong said he expects Budget 2017 to be a possible continuation of last year's Budget, with a greater focus on enterprise development.
"The focus is likely to be on longer-term business sustainability, with a more balanced shift of initiatives from value adding to value creation. This will enhance Singapore businesses' domestic and international competitiveness."
ANZ economist Ng Weiwen said that while the CFE report was broad-based, the Budget is likely to be quite targeted in its approach.
"There will be help for both households and businesses, but the focus will be on households due to the soft labour market. There could potentially be short-term reliefs like GST (Goods & Services Tax) vouchers and S&CC (Service & Conservancy Charges) rebates," he said.
Fiscal spending may also be targeted at tackling the job-skills mismatch among professionals, managers, executives and technicians (PMETs).
Mr Ng said: "The share of PMET job openings climbed from 39 per cent in 2013 to 48 per cent in 2016, underscoring the dire job-skills mismatch."
With the Productivity & Innovation Credit (PIC) scheme expiring, the government is expected to introduce targeted measures to encourage innovation and digitisation among businesses, said Daniel Ho, tax partner at Deloitte Singapore.
Russell Aubrey, tax partner at Ernst & Young Solutions, suggested that more funds be set aside to drive "an uptick in innovation and the development of digital capabilities in corporates and individuals". He views these as urgent tasks because they take time to bear fruit and are important to long-term competitiveness.
More industry transformation maps (ITMs) are expected in response to the CFE report, given that only six out of 23 subsectors have roadmaps currently, said ANZ's Mr Ng. A subsector to watch is the financial services sector, because it is a "high-value-added segment in the services sector", he said.
The ITMs will cover 23 industries and about 80 per cent of the economy by the end of FY2017, said the CFE.
Budget 2016's surplus could surprise on the upside at S$5.05 billion - equivalent to 1.2 per cent of the gross domestic product, said Ms Ling.
But the government will probably stay fiscally prudent although Singapore economy avoided a technical recession in 2016, she said.
Mr Ho at Deloitte said major fiscal expansionary policies or significant one-off reliefs are unlikely at this juncture, although economic growth seems weak.
The CFE's recommendation that the Singapore tax system be reviewed has triggered conjecture that taxes could be raised.
Chris Woo, tax leader at PwC Singapore said talk of a progressive, broad-based and fair tax system that is competitive and pro-growth has hinted at another increase in the marginal tax rates for individuals through the tweaking of reliefs and income bands and possibly for asset taxes.
Nevertheless, tax experts are unanimous that the corporate tax rate is unlikely to be raised despite rising social spending.