Singapore Budget 2015

Synopsis

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Read our signature Singapore Budget 2015 Synopsis for an analysis of the Budget 2015 measures.

Future-proofing Singapore

“The future depends on what you do today,” said Mahatma Gandhi.

In this year’s Budget announcement, the Government pressed on with a consistent purpose: the economic transformation that Singapore has embarked on several years ago must continue relentlessly so as to future-proof the country for a better tomorrow.

To secure a distinctive place in the global economy means we must deepen our skills and capabilities, make innovation pervasive, and strengthen the economic and social infrastructure of the country.

It has not been, and will not be, easy. Singapore’s quest for productivity growth, underpinned by many broad-based measures in recent years, has not yielded significant productivity growth overall. This signals that measures with good intent and purpose must be changed if they do not deliver the intended results. This Budget seeks to do just that – the schemes, both existing and new ones, are more targeted, and there is a conscious effort to make them accessible.

The SME sector, which contributes more than 50% of economic output and 70% of employment, is the backbone of Singapore’s economy. Growing the nation will necessarily mean giving homegrown enterprises a lift. It is not surprising that SMEs are one of the main beneficiaries of this Budget.

For one, the Capability Development Grant scheme will be extended, and more importantly, the scheme will be made more accessible with a simplified application process. Other funding schemes such as the venture debt risk-sharing programme, have been introduced to further reduce the funding gaps for innovative start-ups. With the strong funding support now available to SMEs, it is time for our local players to think and act bigger and bolder.

This also means that SMEs should have the courage and appetite for scaling up and move beyond the comfort of our shores. Additional support from IE Singapore through its grant schemes and Double Tax Deduction for Internationalisation scheme will help to this end.

The usual lament by homegrown enterprises is that our tax incentive programmes often lean towards benefiting the MNCs. The introduction of a new International Growth Scheme is a welcomed move to address this perceived gap. Homegrown enterprises can now expand overseas and enjoy a 10% concessionary tax rate on their incremental income from qualifying activities, while retaining key business activities and headquarter functions in Singapore.

Our people

Strengthening homegrown enterprises must go hand-in-glove with the upskilling of our population. The SkillsFuture initiatives are innovative. SkillsFuture empowers every Singaporean to take charge of his career and lifelong learning.

It is hoped that trade organisations and industry bodies will make use of the SkillsFuture Credit to offer targeted training to meet the needs of the business sector.

A fair and just society

This year, the Silver Support Scheme, which complements the existing Workfare, has been introduced to provide income supplement for the bottom 20% to 30% of senior Singaporeans during their retirement.

Has Singapore leaned towards being a welfare state? Clearly it’s about striking a fair balance and in my mind, this social security support is crucial to ensuring social cohesiveness. Fortunately, the foundation for our social security network remains that of family and community support. Hopefully, with higher incomes coming from continuing education and training and greater retirement savings through our enhanced CPF scheme, every Singaporean can be self-reliant in the future.

With increased social spending, the Minister expects that Singapore will see a tighter budget position in the coming years. For now, the Government is tapping on past budget surpluses and the “redefined” net investment income, and raising petrol duties.

What has perhaps come as a surprise is the increase in the top marginal personal income tax rate from 20% to 22%, plus the tweaking of the tax rate structure that affects the top 5% of our income earners, to strengthen Singapore’s revenue position. While it cannot be said that this action is unexpected, this early announcement certainly demonstrates our Government’s confidence that this measure will not significantly dent Singapore’s competitiveness.

The Minister for Finance has indicated that the revenue measures that have been put in place will be sufficient for the increased planning needs until the end of the decade. Perhaps we might not see a GST rate increase until the end of 2020?

Conclusion

This is one of the most holistic and comprehensive budgets seen. It has touched on every aspect of life that matters, from support for lifelong learning to sharper initiatives to help companies to continue to raise productivity, innovation and internationalise. It is laudable that there is a shift in policy-making towards a more pointed and targeted approach, and simplifying our tax regime and making schemes more SME-friendly.

This Budget steers Singapore in the right direction. In celebrating Singapore’s Jubilee this year, let’s continue to act, believe in and plan for the “Singapore Dream”.

Happy 50th birthday, Singapore!

Chung-Sim Siew Moon
Partner and Head of Tax
23 February 2015