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Singapore Budget 2018: 3 in 4 SMEs unfazed by proposed GST hike: DBS survey
A SURVEY by DBS Bank has found that three in four small and medium-sized enterprises (SMEs) in Singapore believe that the proposed goods and services tax (GST) hike would have no impact or at most, only moderate impact on their businesses.
In a post-Budget poll of 240 SMEs with annual revenues of up to S$200 million, the majority of respondents said they were confident of weathering the hike, with cushioning from new grants such as the Productivity Solutions Grant and the Enterprise Development Grant.
Finance Minister Heng Swee Keat had announced in his Feb 19 Budget speech that the GST will go up by two percentage points - from 7 per cent to 9 per cent - sometime between 2021 and 2025.
Joyce Tee, DBS Bank group head of SME Banking, said: "The early proposal of the GST hike means that SME owners will have enough lead time to plan ahead and ensure that they have the necessary provisions when the tax is implemented."
Small retailers and economists had earlier expressed concern that a sudden rise in GST would hurt consumer spending and affect Singapore's economic recovery.
The survey found that, despite the calls for the extension of the Productivity and Innovation Credit (PIC) scheme, nearly one in four small-cap SME respondents did not apply for the grant. Mid-cap SMEs tapped it more; only 12 per cent did not do so.
For this survey, small-cap SMEs were defined as those with annual revenue of under S$20 million; those with annual revenues of between S$20 million and S$200 million were classified as mid-cap.
Another measure announced during the Budget was the extension of the Wage Credit Scheme for three more years. (Under this, the government subsidises wage increases for Singaporean employees earning up to $4,000 monthly.) Eighty-two per cent of SMEs responded favourably to this, given that labour costs were cited as a bugbear for six in 10 of the polled SMEs.
The survey also revealed that expanding abroad is not a concern for many SMEs.
Almost half the businesses (48 per cent) said growing outside Singapore was a low priority.
About a third (33 per cent) said the same about innovating their business model to reduce costs; 17 per cent said innovating their business model to grow market share or revenue was a low priority.
But the survey also found SMEs' lack of urgency to internationalise to be tied to their lack of capacity to do so. One in three said they lacked knowledge of new markets; 30 per cent cited the lack of capital as one of the biggest challenges to regionalisation.
However, eight in 10 said they would be more confident about accessing regional market opportunities if given the right resources, such as access to capital and market insights.
Nearly seven in 10 SMEs polled (67 per cent) said the double tax deduction for internationalisation was important when weighing the opportunity costs of expansion.
Kausshal Dugarr, founder and chief executive of Teabox, is an SME owner who has taken the leap. Teabox now operates in Singapore and India and supplies teas to more than 110 countries worldwide.
"Expanding into new markets is a priority for us. However, breaking into overseas markets can be costly and the double tax deduction scheme will help me to save costs which I can then use to reinvest in my business," he said.
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For more Budget 2018 stories visit bt.sg/budget18