The message for businesses
More increments in foreign worker levies across the board and a complementary cut in foreign worker quotas for the services and marine sectors will, no doubt, further raise the level of anxiety for affected businesses.
We suspect it won’t be long before we hear from another restaurant pointing out how no Singaporeans turned up for job interviews for waiters.
Although the tightening of foreign worker supply has stoked a buzz in recent weeks, one should not read these measures as being xenophobic. Rather, as the Finance Minister put it, the key emphasis is on reducing reliance on manpower — as opposed to merely replacing foreign workers with locals — in order to “catch up from a decade of slow productivity growth”.
Probably the thought on the minds of many, is whether the underlying message to businesses is to “shape up or ship out”. Or perhaps move offshore while retaining some core functions in Singapore (indeed, help is pledged to small and medium enterprises expanding their overseas footprints).
While this could well be the case (indeed, another minister’s recent written reply to a parliamentary question states that “businesses that cannot restructure and adapt ... may eventually close down”), one wonders whether some sectors, in fact, deserve a greater helping hand.
Take the services industry, like food and beverage, for example. Any further weakening could have a knock-on effect on travel and tourism statistics, a not-insignificant part of our gross domestic product.
Despite the recent announcements of infrastructural link-ups, it will take a while to persuade people to have their next fancy meal in Iskandar.
There are, of course, many aspects of the Budget aimed at countering the painful effects in this phase of restructuring the economy.
Some, such as the new Wage Credit Scheme, will clearly be of help to many businesses. Other than subsidising the future wage increases of Singaporean employees, it has the benefit of supporting both the SME employer as well as the larger MNC player.
And not surprisingly, given its prominence in the last few Budgets, the Productivity and Innovation Credit (PIC) scheme continues to be given tweaks. The current variant is a PIC bonus, where a dollar-for-dollar matching cash bonus (capped at a certain level) will be given to the extent that PIC qualifying expenditure exceeds S$5,000 per year of assessment.
More changes to the PIC scheme are reflected in the annexes to the Budget statement, and it is heartening that some of these changes reflect business practicalities — such as an indication that equipment that is a “basic tool” can qualify for PIC as long as it increases productivity.
In addition, the tried and tested corporate tax rebate will find its way back (as it has done a few times over the last decade or so) to help businesses again. This time, a corporate income tax rebate of 30 per cent, subject to a cap, has been announced for three years of assessment rather than for just one year.
It may be sending a telling sign to the rest of the world that this rebate, coupled with other tax features, means that a small profitable company with S$300,000 of taxable income will, in fact, have an effective tax rate of no more than 5.9 per cent, despite a headline rate of 17 per cent.
David Sandison is a Partner and Loh Eng Kiat a Senior Manager at PricewaterhouseCoopers Services LLP.