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Singapore Budget 2018: Calibrated approach to future-proof Singapore's plan for sustainable future
BUDGET 2018 espouses the values of thrift, self-reliance, caring for the young, old and needy and planning for the future.
It reflects the Singapore government's consistent message to its people and businesses to embrace technology and continuously upskill to remain relevant.
While reaping the rewards, we will not forget to nurture the young and care for the elderly and less fortunate. All this is to be achieved while not spending beyond our means.
With Asia forecast to be the growth engine of the world for the foreseeable future, Singapore, as one of the favoured entry points, is in a good position to capitalise on this. That said, faced with increasingly stiff competition from other countries, the Digital Age disrupting the traditional economy and an ageing population, Singapore must stay nimble and adapt in order to thrive.
As Finance Minister Heng Swee Keat stressed, first-mover advantage is key.
With the sunset of the Productivity and Innovation Credit (PIC) scheme introduced back in Budget 2010, concerns were raised about the impending drop in competitiveness of Singapore's tax regime against others in the region as nations jostle for foreign direct investments. The PIC scheme, with its broad-based tax incentives laid a good foundation for businesses to adopt technology. It is now time to take a targeted approach given limited resources.
With the merger of SPRING Singapore and International Enterprise Singapore into Enterprise Singapore, the government is aligning resources to strategically help businesses. It is also enhancing existing schemes (for example, Double Tax Deduction for Internationalisation, Enterprise Development Grant, Productivity Solutions Grant) and introducing new ones (such as the Partnerships for Capability Transformation) to encourage businesses to continue to innovate and venture abroad.
Having developed the master roadmap for developing Singapore into a smart nation and laying a strong foundation, the government is now encouraging businesses to forge strong partnerships and take charge of their own growth journey. Instead of playing the role of a helicopter parent or tiger mum, the government is putting in place measures to encourage self-reliance and wean businesses from expecting handouts.
Help when needed
While pushing businesses to be self-reliant, help is still there when needed. For example, the pilot Open Innovation Platform will help businesses find partners to co-develop business ideas and solutions. Trade associations and chambers are also tasked to take a more direct role in helping businesses as they are closer to the ground and understand the business more intimately.
The government continues to invest heavily in education and the young, to equip Singaporeans with the necessary knowledge and skills for the future.
On the other side of the coin, with the looming silver tsunami, the government is also budgeting for exponential spending on healthcare and social services. Health and social support services for seniors will be housed under one (agency) roof to streamline the delivery of services. The capabilities of Social Services Offices will also be strengthened to provide holistic support to the needy.
There will also be an extension and increase in matching donations by the government for donations made to Institutions of a Public Character and Community Development Councils respectively, as well as other measures to encourage giving and fostering a caring society.
All the above spending needs to be met with higher revenues. However, contrary to speculation, there was no immediate increase in the Goods and Services Tax (GST) rate (it will go to 9 per cent after 2020), no introduction of a wealth tax, no sugar tax, nor any increase in personal income tax rates.
Instead, there was a reduction in the amount of partial tax exemption threshold from S$300,000 to S$200,000 and in addition, for corporate start-ups, a 75 per cent exemption instead of a full exemption on the first S$100,000 of chargeable income.
This, coupled with an increase in Buyer Stamp Duty for residential properties' in excess of S$1 million to 4 per cent, an increase in excise duty for tobacco and past budgets' prudent savings, is sufficient to ensure that Singapore has enough surplus to fund the increased expenditure.
This demonstrates the value of foresight and long-term planning. In the same vein, the government is now laying the foundation stones for the next decade.
The calibrated measures of staggered introduction of GST, carbon taxes, and borrowing to fund big ticket spending among others, instead of drawing on reserves, continues the calibrated "Singapore way" of spending prudently for our sustainable future.
Budget 2018 emerges as one of good strategic long-term thinking.
- The writers are both partners, tax services, at Ernst & Young Solutions LLP. The views in this article are those of the authors and do not necessarily reflect the views of the global EY organisation or its member firms.
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