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Singapore Budget 2018: Businesses to get S$1.8b boost over next 3 years
THE Wage Credit Scheme (WCS) will be extended for an additional three years till 2020, but with gradually reduced levels of co-funding by the government, said Finance Minister Heng Swee Keat at his Singapore Budget 2018 speech.
It will provide 20 per cent co-funding for 2018, 15 per cent for 2019, and 10 per cent for 2020.
The scheme, which aims to encourage employers to share productivity gains with staff, will cost the government about S$1.8 billion over the next three years.
Under the current scheme, the government co-funds 20 per cent of qualifying wage increases for Singaporean workers earning a gross monthly wage of up to S$4,000.
In his speech, Mr Heng said: "Though our economy picked up last year, some firms remain concerned about business costs. A key driver of this is wage growth - but wage growth is good for Singaporeans."
The extension of the WCS scheme is to help firms cope with near-term cost pressures, he added.
The scheme was introduced in 2013, where the government co-funded 40 per cent of wage increases for Singaporean employees. This was extended in 2015, following which government co-funding dropped to 20 per cent for 2016-2017.
For 2017, the government is expected to pay out more than S$800 million to more than 90,000 firms, for wage increases given to more than 600,000 employees, said Mr Heng.
Charles Liaw, managing director of local SME Times Software, said that the extension is a "good call" by the government.
"It will definitely mean big savings for many companies, and it will encourage companies to hire Singaporeans," he said, adding that it could lead to a reduction in the unemployment rate of locals.
However, he was unperturbed by the tapering of the government's co-funding as he believes that no government funding can last forever.
"Its objective was to help companies to get over the tough times in the last few years and gradually reduce company dependency of government subsidies," he said.
Apart from wage credit, the government will be enhancing and extending the corporate income tax rebate to help firms manage immediate cost challenges.
The corporate income tax (CIT) rebate for the Year of Assessment 2018 will be raised to 40 per cent of tax payable, capped at S$15,000.
Currently, companies can qualify for CIT rebate of 20 per cent of tax payable, capped at S$10,000 for YA 2018.
Mr Heng also announced that the CIT rebate will also be extended to YA 2019, at a rate of 20 per cent of tax payable, capped at S$10,000.
These changes are projected to cost an additional S$475 million over the next two years.
"The enhancement and extension will benefit all tax-paying companies, especially smaller ones," he said.
Anis Mohamed, creative director of PictureMatters, said that the extension is welcome news to businesses which are struggling to manage costs.
"This also helps small businesses especially, who are still reeling from the economic slump of the years pre-2017, before there was a boost in economic growth," he said.
Times Software's Mr Liaw concurred that the rebate "definitely will be helpful" for SMEs and corporations which turn smaller profits.
But while the enhanced tax rebate is an encouraging step for businesses to manage their costs, some industry watchers say that it is still not enough.
Alan Lau, Tax Partner at KPMG in Singapore, said: "The low rebate cap of S$15,000 is disappointing and implies that practical business savings here would be limited."
In his Budget speech, Mr Heng also addressed near-term measures specific to certain sectors.
For firms in the marine shipyard and process sectors struggling to recover from the oil and gas crisis, some relief is in sight as the government will defer earlier announced increases in foreign worker levy rates for another year.
Employment support for lower to middle income workers is also set to be boosted this year, said Mr Heng.
"This includes upgrading the current Work Trial scheme into a Career Trial programme, with higher funding support for workers to try out new careers," he told Parliament.
He added that this will be elaborated on by the Minister for Manpower at the Committee of Supply debates, slated to take place in March.
- The Wage Credit Scheme (WCS) will be extended for an additional three more years till 2020
- The corporate income tax (CIT) rebate for the Year of Assessment 2018 will be raised to 40 per cent of tax payable, capped at S$15,000
- The CIT rebate will also be extended to YA 2019, at a rate of 20 per cent of tax payable, capped at S$10,000
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