Analysts laud Singapore govt’s ‘Robin Hood’ budget

A view of the Keppel container port terminal in Singapore, pictured on February 22, 2013. Singapore's trade-reliant economy slowed down sharply last year, expanding 1.3% as exports tumbled due to a global economic slump, according to the latest official data

The Singapore government's proposed budget for the next fiscal year offers a significantly more progressive and balanced strategy than before, say analysts in the corporate and finance sectors.

Sharing their views in the wake of Monday afternoon’s budget announcement by Deputy Prime Minister and Finance Minister Tharman Shanmugaratnam, experts said the government’s strategy of taxing the wealthy and assisting the poor further will benefit lower and middle-income Singaporeans the most.

Speaking of the increased tax rates for high-end property — in particular investment property — as well as increased additional registration fees (ARF) for mid-range and luxury cars, PricewaterhouseCoopers partner Chris Woo said, “The minister is riding through Singapore’s Sherwood Forest to tax the rich who own high-end property and drive luxury cars.”

He noted further that Tharman’s announcements “tax consumption and those who enjoy property benefits in Singapore”, with PwC partner Lennon Lee acknowledging DPM Tharman’s moves to enhance Workfare payments, reduce property tax and subsidise education for disadvantaged students were ones that “redistribute to the poor, disabled and needy”.

“It’s overall a very progressive and balanced budget,” said OCBC bank head of treasury research and strategy Selena Ling. “For the lower-income Singaporean worker, they can look forward to a bigger WIS (Workfare Income Supplement) with a greater proportion going into the cash component. This will help mitigate the rising cost of living.”

She, too, noted that the government’s latest changes to the property tax and tiered ARF systems would “help to improve the progressivity of the tax system”, saying also that the business-related incentives were targeted mostly at local firms, in particular small and medium-sized enterprises (SMEs).

“There was hardly anything for MNCs apart from the Corporate Income tax relief,” she observed. “This reflects the policy intent to push on with the economic restructuring strategy.”

‘A Darwinian budget for businesses’

Commenting on the budget’s moves to further tighten and refine foreign worker dependency ratios by sector, as well as tightening criteria for S and employment passes, head of tax services at Ernst & Young Solutions Adrian Ball said the government is indicating loud and clear where its attention is directed at.

“The government is sending a clear message that it is focusing on those industries where Singapore is, and can be, competitive,” he said. “It is not offering sweeteners to defray costs.”

Going as far as to call it a “Darwinian budget for businesses in Singapore”, Ball noted the government’s clear intention to compel companies to, in other words, “shape up, or ship out”.

“Budget 2013 is centred on transforming our SMEs to make a quantum leap,” he said. “The fiscal schemes to boost SMEs’ competitiveness are there for the taking.”

Partner at PwC Services Elaine Ng voiced her surprise at the government’s bold moves to further reduce the Man-Year Entitlement as well as the dependency ratio ceiling, alongside increasing foreign worker levies “in the sectors that have felt the most pain and made the most noise”.

“This shows the government’s steely resolve to push ahead in the productivity game for the good of all of Singapore,” she said.

Partner at PwC International Assignment Services James Clemence had reservations about these measures, however, citing “a faint line between driving productivity with local workers and driving businesses overseas to reduce costs”.

Transition support scheme ‘a generous move’

Nonetheless, others felt heartened by the government’s transition support package for SMEs that includes a $3.6 billion Wage Credit Scheme, enhancements to the Productivity and Innovation Credit scheme as well as a 30 per cent Corporate Income Tax rebate that will set the government back by a further $1.3 billion.

Partner at Ernst & Young Solutions’ Business Incentives Advisory department Tan Bin Eng called the wage credit scheme in particular “a generous move... to help SMEs cope with wage increases during what is anticipated to be a ‘painful’ transition period”.

He also took notice of the proposal for a $60 million land productivity grant for companies which make better use of their land space here, as well as for companies that choose to move operations offshore while retaining their core functions here to save land.

“(The grant) has the potential to be a game-changer,” he said. “It is a strong signal of the government’s acknowledgement that SMEs will need to examine all options, including relocation of some activities offshore, to ensure survival in this highly competitive global environment.”

However, partner at PwC Services Abhijit Ghosh warned of the dangers of employer exploitation of the wage credit scheme.

“I hope this does not encourage entrepreneurs to lay off the costlier, older Singaporean workers in order to hire Singaporeans whose gross monthly wage is $4,000 or less,” he said.

Other analysts also called on the government to ensure that hurdles and hoops that SMES need to leap over and through will be lowered and lessened to allow more local businesses access to its benefit schemes.

Yet, with regard to businesses, analysts say one thing is certain from this year’s budget: productivity is a must for local businesses to survive.

Said partner at PwC Services Koh Soo How, “Overall, the message is clear. Businesses need to see beyond a quick fix — whatever the pain, improving productivity remains the long-term goal for Singapore.”