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Singapore Budget 2018: Taxes take centre stage; concerns over manpower policies
- Ho Meng Kit, CEO of the Singapore Business Federation (SBF)
- Selena Ling, head of Treasury Research & Strategy, OCBC Bank
- Kurt Wee, president of the Association of Small and Medium Enterprises (ASME)
- Chris Woo, tax leader, PwC Singapore
Moderator: Michelle Quah, senior correspondent at The Business Times
THIS year's Budget delivered by Finance Minister Heng Swee Keat on Monday outlined the steps Singapore must take to prepare for three major shifts in the coming decade. These are: the shift in global economic weight towards Asia, the emergence of new technologies, and an ageing population. Is the government doing enough to build a better future for our people?
Below is a roundtable discussion moderated by The Business Times' Michelle Quah, and held in collaboration with Singapore Press Holdings Radio's Money FM 89.3.
BT: What are your thoughts on this year's Budget?
Kurt Wee: I really liked the strengthen-ing of the digitalisation and internationalisation messaging. There are various consolidation points if you look at it, whether it's Enterprise Singapore, consolidation of tax solutions under the open innovation platform or (the) Enterprise Development Grant which essentially is going to replace your IE and Spring Singapore type of grant. It sharpens a message in terms of where the macro trends are and what you should do. There was one message that was quite important: If you're stronger, we help you more. If you're struggling, there might not be much for you.
Selena Ling: I think it's a Budget for the long term. They're really planning for the next decade so it's all about refreshing and investing in economic infrastructure to make sure that Singapore remains competitive and also preparing the workforce for some of the challenges ahead. I think the key thrust hasn't really changed. Innovation, re-scaling, upscaling are still there, but the tax angle really comes into play, more so in terms of what you need to spend in the next decade.
Ho Meng Kit: I agree. Right now, businesses are going through transformations and what they need is government support in areas of technology, innovation, building capabilities within companies as well as people. I think (the Budget) meets the future challenges ahead. The point that was surprising to me was when (the Finance Minister) . . . introduced the concept of borrowing among the statutory boards. I think that is new and a very good take on the future generation funding lumpy infrastructure rather than the present generation.
Chris Woo: I think it's a Budget to really take into account reality. We've got lots of changes coming about. You could see them as dark clouds or see the silver lining behind it. Disruptions (and) technology are going to threaten the way jobs are being done. Tax competition is becoming a reality. You have (the US), the largest economy in the world dropping the tax rate from 35 to 21 per cent, and 21 per cent isn't that far from 17 per cent, which is our rate.
BT: Singaporeans might not be so sanguine about this proposed hike in the GST rate. Why do you think the government announced the rate hike now but said that the implementation is sometime between 2021 and 2025?
Selena: Looking back at the healthy fiscal surplus, it would be very hard to pull off a GST hike immediately. I think the Finance Minister did take great pains to explain what were all the possible revenue sources including the net investment income contribution. GST looks like it's a relatively plausible candidate. It's all about forward guidance. People like to know what's coming so they can plan for the future.
BT: For the man on the street, do you think the offset packages and the other measures announced are going to be enough?
Meng Kit: I was surprised that (the GST hike) is not implemented now. I thought it's good that he announced it now. When GST is implemented, there will be a drop in demand and some businesses will be affected, so it's a signal to companies that in the next three, four years, something like this will be implemented. If you really want to grow, grow your revenue rather than be affected by the drop in demand when GST (goes) up.
Kurt: In the short term, there might be some constraint on consumer spending. There are 120 micro enterprises. I'm not sure how many of them are GST-registered. There'll be some extent of business cost that will go up but that's not just a Singapore problem. That's (also) a global problem where business costs are rising. It's good that businesses have the heads-up.
BT: Do you think there's a likelihood, given this lead-up time, that the government could possibly change its mind down the road?
Chris: There's a possibility. Asian average GST is about 10.2 per cent. Singapore's is the third lowest, sharing that ranking with Thailand which has also deferred its increase in the rates to 10 per cent. I put down money that (Singapore's rate) would go to 10 per cent.
Meng Kit: The minister talked about the shift of the economic centre coming to this part of the world. If Singapore can catch that wave and grow quite strongly, I think our personal income tax takings (and) corporate income tax takings will go up. They might not need to raise it to 9 per cent so quickly. He mentioned that it could be buoyant so I hope for buoyant conditions going forward.
BT: On the GST on imported services, what sort of structure do we have in place now that helps us to implement this from 2020?
Kurt: This year, as part of ASME's Budget wishlist, we did call for the implementation of GST across online imports so as to level the playing field between Singapore SMEs in the retail space versus purchases made from an overseas vendor. The retail segment in Singapore has not had the greatest time for a long time. Some parity is really welcome.
Selena: The surprise was that the GST was not implemented on imported goods. I think that was what the market was really watching out for, but I guess the GST on imported services could be a nod to the fact that increasingly, we consume more services rather than goods over time.
BT: Is it a pre-cursor to a more broad-based e-commerce tax?
Selena: I think so. The challenge is trying to find the right platform for implementation in overcoming some of the hurdles.
BT: While we did get a corporate income tax rebate, something I expected but didn't hear was a corporate income tax hike. What are your thoughts about that?
Chris: We see many countries almost racing to the bottom in terms of lowering the (corporate income tax) rates. (In) the US, we're seeing a reduction in rates. Our neighbours - Malaysia and Indonesia - talked about it as well. I don't think that's going to be the right move especially when we want to grow the economic pie. We should be seeing corporate tax as trying to get a bigger base. Of course, we still have our incentive rate regime which brings down some of our effective tax rates as well. Combined with that, an increase in corporate tax rate will be counter-intuitive.
BT: What are your thoughts on buyers' stamp duty going up?
Selena: Given that there has been some verbal jawboning about the en bloc fever that's been ongoing, I did anticipate that there'll be some property measures although I was a little surprised it came on the stamp duty side rather than on the developer's side.
BT: What are your thoughts on the "cluster-based approach"? Do you find that these incentives are truly helpful to the business community?
Kurt: I think that is necessary. Some-times our competition is not ourselves (but) the region. Helping clusters build deep capabilities and then positioning (them) to orientate towards regional and international competition is a very important strategic piece. I think (the minister) has a very good macro, broad strategy in place, but we actually like to see a bit more meaty micro moves.
BT: Any particular one you were hoping for?
Kurt: I'm a bit more grant-orientated towards (intellectual property) and internationalisation, maybe a bit more help for domestically-oriented enterprises.
BT: What would you have liked to see in this year's Budget that wasn't announced?
Meng Kit: More policy changes on the foreign manpower capability. While we want to be tax competitive, we cannot (let) Singapore be unfriendly to talent. That is how we can tap on the growth that is shifting to this part of the region.
Chris: If you look at what businesses are faced with now, they are sometimes not able to hire talent. In terms of headcount increases, many of my clients are faced with trying to keep the current headcount or even pressured to reduce (it).
Kurt: A tweak in the foreign man-power structure. There are certain industries struggling to find local talent. It's probably (in) a more micro industry or industry cluster approach that the solution needs to be found.
Selena: I'm going to add (a) voice to that. I would like to see more forward guidance on manpower policy. I think greater clarity would be very beneficial to businesses on how to plan their manpower needs. I think this is something that's going to be an ongoing challenge.
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