A look at 2016 Singapore Budget
2015 was a very eventful year for politics in Singapore. Without question, the death of Lee Kuan Yew, also known as Singapore’s founding father, was the most significant event. The ruling party, People’s Action Party (PAP) retained a majority during the General Elections held in September 2015, which were the first since his death. However, all seats were contested – for the first time since Singapore’s independence.
Fast forward one year, and the first annual budget since the death of Lee Kuan Yew and that notable election, has just been deliveredtSo how does this year’s budget stack up?
In terms of the country’s fiscal position, a budget surplus of S$3.4 billion (0.80% of GDP) is forecast in this first year of the term. The Singapore government is adopting a somewhat prudent stance, with flexibility to spend more, should there be unexpected deterioration in the economy later in the year.
The 2016 budget has a strong focus on growing businesses, and SMEs appear set to benefit the most. Newly introduced measures will help SMEs to lower their corporate expenses in order to cope with rising costs. This is in contrast to last year’s budget which reduced the support levels provided by the Transition Support Package. The Transition Support Package is mainly targeted at SMEs to encourage restructuring for future growth. Here are the details of the measures for SME’s:
Improvements to Existing Schemes
The Corporate Income Tax (CIT) Rebate targeted at small companies and start-ups, has now been increased from 30% to 50% of tax payable, capped at a $20,000 rebate each year for the Years of Assessment (YA) 2016 and 2017.
The Special Employment Credit (SEC) has been enhanced and extended for 3 years, until the end of 2019. The SEC provides companies with a wage offset for employing Singaporean workers aged 55 and above.
New Industry Transformation Programme
This new scheme is targeted at value creation and growth via three key focuses – (1) Transforming Enterprises, (2) Transforming Industries, and (3) Transforming through Innovation. A total of $4.5 billion has been set aside by the Government for this programme. This is on top of what was announced in Budget 2015, which saw a strengthening of support for innovation via increased grant support and various other schemes.
- The government is upping the grant game with a new Business Grants Portal which includes grants from IE Singapore, SPRING, STB and Design Singapore, and will include grants from other government agencies in future. Three initiatives have been introduced: an Automation Support Package to encourage companies to automate, incentives for SMEs to scale up, and added support for internationalisation. These come in the form of grants, financing and tax incentives.
- Alongside the automation support, the government is setting aside additional funding under the National Robotics Programme for use across various sectors such as healthcare, construction, manufacturing and logistics. There will also be increased outreach via trade associations and chambers.
- Once again, the government has identified innovation and R&D as being crucial to Singapore’s future development. A new entity, “SG-Innovate”, has been set up to aid Singapore’s growing start-up scene.
Budget 2016 did contain some new initiatives for individuals and households, although these are fairly limited compared to the substantive initiatives introduced in Budget 2015. In contrast to Budget 2015, Budget 2016 did not add any new education initiatives, with the exception of some for the very young. Last year saw every Singaporean aged 25 or over receiving a $500 SkillsFuture Credit to be used for education and training, as well as various other initiatives relating to education. No education initiatives in 2016 have been introduced to help the middle class, usually the hardest hit in a slowing economy.
On the other hand, young families will benefit from both a new housing scheme, and a new Child Development Account (CDA) grant which will be paid out to all eligible Singaporean children. Furthermore, the Medisave withdrawal limit for pre-delivery expenses has been doubled to $900.
The Workfare Income Supplement (WIS) Scheme, which supplements the income of older, low wage workers, has been enhanced. In addition, details of the Silver Support (SS) Scheme which was introduced in Budget 2015, have been released. The SS Scheme is meant to supplement the retirement income of low wage seniors. Once again, the quarterly payout of this scheme is linked to the type of accommodation of the respective applicants, ranging from $750 for 1-room and 2-room Housing Development Board (HDB) flats, to $300 for a 5-room HDB flat.
Most individuals will qualify to receive a one-off GST Voucher (GSTV). This is a special cash payment of $100 or $200 – depending on the annual value of their home – which is being added to their existing annual GSTV payment. A Personal Income Tax (PIT) Relief Cap will also be introduced starting from YA 2018. This will affect those with higher income the most, because the maximum amount of PIT relief is now capped at $80,000 per YA.
So all-in-all, no major surprises, but not too disappointing either.