Singapore's Deputy Prime Minister and Finance Minister Tharman Shanmugaratnam presented the Budget 2013 yesterday (25 Feb) in Parliament.
The main thrust of the budget is economic restructuring of the company, lowering the dependency on foreign workers, incentives to tick up productivity measures and social inclusiveness.
In his budget speech, the Finance Minister sent a very clear message to the companies in Singapore: restructure, increase productivity and hire more locals (Singaporeans), else pay more levies and salaries to foreign workers.
Transition Support Package
While there are fresh curbs on hiring of foreign workers, the government has announced a $5.3 billion three year 'transition support package'. Foreign worker levies will be raised in 2014 and 2015 and the increases will be higher for those sectors that are more dependent on foreign workers such as construction and process sectors.
Over the next three years, companies will enjoy a 30 percent tax rebate, capped at $30,000 a year. They will also have access to a new Wage Credit Scheme that will co-fund 40 percent of wage increases for Singaporean workers, capped at a gross monthly wage of $4,000.
"The three-year transition support scheme is very well designed," said Gan Kwee Lian, Partner, Tax, KPMG in Singapore. "It helps both employers and Singaporean employees concurrently. The 40 percent co-funding by the government will allow employers to be more willing to increase the basic wages of low and middle income groups."
To push up productivity levels, the Minister announced a productivity bonus and about $500 million of incentives.
Companies can use the PIC bonus (Productivity and Innovation credit) to raise their productivity. The government has said it will support collaborative efforts by companies to achieve scale and share best practices.
The government said it will match a cash dollar-for-dollar bonus for companies that invest a minimum of $5,000 for innovation and productivity improvements.
The government recognises that SME businesses pay a big price for operating in Singapore-rents are high and labour is scarce and expensive. The government will help them relocate to offshore locations if they retain their core functions in Singapore.
Also, the government has announced a $60 million land productivity grant to support companies that intensify the use of land in Singapore.
"Improving productivity is an important initiative given the limited resources in Singapore," said Tay Hong Beng, Head of Tax, KPMG, Singapore. "The enhanced tax incentives for productivity are worth applauding. However, it would have been more complete and holistic an approach if value-creation measures targeted at brand building and innovation activities also featured in this push to grow local businesses."
"This year's Budget announcement has a strong SME focus," said Alan Lau, Partner, Tax, KPMG in Singapore. "The government has pulled out all the stops to help our local enterprises, but has not forgotten the bigger boys. A 30 percent corporate tax rebate will definitely help reduce business costs."
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