It’s “budget season”, and it seems that everyone wants a piece of the proverbial “surplus pie”. Businesses, particularly SMEs, want more support as they face a downturn in the economy, while families want more assistance as society becomes more complex and social matters become more demanding. Budget 2016 has a whole slew of new grants, credits, schemes and other initiatives to address both sides. I’ll go over some of these in this article, and also list a few very crucial things that I think the budget was missing. Finally I’ll conclude with one BIG takeaway message that summarises what this budget should mean for you, your business and your family.
When Minister Heng Swee Keat delivered the budget, I envisioned Santa Claus with children around him, each with their hands stretched out. This year, Singapore is expecting a $3.4 billion surplus (though this is mostly due to one-off measures which will not be sustained, and to the new Net Investment Returns framework which allows the Singapore government to recognise Temasek Holdings’ unrealised capital gains as spendable investment returns). In the previous 2 years, the government ran deficits of $4.9 billion and $6.7 billion, respectively. With this unprecedented surplus, the temptation to spend is certainly there, as there is no shortage of ways to spend. Here are some key expenditures for Budget 2016. I’ve divided them into 2 sections – “For Businesses” and “For People” (I’ve left out the Industries and the Charities sections), with the latter further divided into 4 parts.
|1||Corporate Income Tax (CIT) Rebate - Increased from 30% to 50% of tax payable, and capped at $20,000 per year.|
|2||SME Working Capital Loan - Capped at $300,000 per SME.|
|3||Special Employment Credit (SEC) - Extended for 3 years (was originally set to expire this year).|
|4||Revitalisation of Shops Package - Enhanced, and expected to cost about $15 million annually.|
|5||Foreign Worker Levy (FWL) - Levy for Manufacturing sector unchanged (as per 2015 Budget) while levy for Services and Construction sectors to increase. Levy for all S passes to also increase (as per 2015 Budget). Levy increases for Marine and Process sectors to be deferred for 1 year.|
|6||Automation Support Package - Initial period of 3 years. Includes grants (up to 50% project cost, capped at $1 million), a new 100% Investment Allowance for automation equipment, and improved SME access to loans for qualifying projects.|
|7||SME Mezzanine Growth Fund - Expanded from $100 million to $150 million.|
|8||Mergers & Acquisitions (M&A) allowance - Increased from $20 million to $40 million of consideration paid for qualifying deals.|
|9||Non-taxation of Companies' Gains on Disposal of Their Equity Investments - Extended until 31 May 2022.|
|10||Business Grants Portal - A one-stop portal to make applying for government schemes more accessible.|
|11||Double Tax Deduction for Internationalisation Scheme - Extended until 31 March 2020.|
|12||PIC Grant - Extended for 2016 until 2018 (as per 2014 Budget), but cash payout rate has been lowered from 60% (currently) to 40% of expenditures incurred on or after 1 August 2016, while the 400% tax deduction remains unchanged.|
|1||Skills Future Initiatives - Expand and deepen support, expected to cost around $1 billion per year till 2020 (as per 2015 Budget).|
|2||Adapt and Grow Initiative - Expand wage support schemes, set up Professional Conversion Programmes.|
|3||Lifelong Learning Endowment Fund and Skills Development Fund - Commit an additional $35 million per year.|
|4||TechSkills Accelerator - A new skills development and job placement hub for the ICT sector.|
|5||Workfare Income Supplement (WIS) - Income ceiling raised from $1900 to $2000 a month, increased WIS payments, and switching from quarterly to monthly payments.|
|6||Persons with Disabilities (PWD) Initiatives - Continued SEC of up to 16% of employee wages (which is double the amount of SEC for older workers). Workfare Training Support (WTS) Scheme extended to PWDs with no age limits.|
|7||Child Development Account (CDA) First Step Grant - $3000 for eligible babies born from 24 March 2016 onward.|
|8||KidSTART Pilot Initiative - To give more learning, developmental, and health support in the first 6 years of life. Expected to cost more than $20 million.|
|9||OBS Coney Island Campus - To give more youths outdoor adventure education. Expected to cost about $250 million.|
|10||Silver Support Scheme - Automatic payouts between $300 and $750 every quarter for eligible seniors age 65 and above.|
|11||Fresh Start Housing Scheme - Grant of up to $35,000 for families with young children to purchase a 2-room flat, who had previously owned a flat.|
|12||Public Assistance scheme - Raised monthly cash allowance.|
|13||Singapore Allowance - Increased allowance to $300 and monthly pension ceiling to $1230.|
|14||GST Voucher & Special Cash Payment - A one-off special cash payment of up to $200 will be given, in addition to the regular GST Voucher of up to $300.|
|15||Service & Conservancy Charges (S&CC) Rebate - Eligible households to receive 1 - 3 months of S&CC rebates for the year.|
|16||Personal Income Tax Relief Cap - Total amount of personal income tax relief an individual can claim is capped at $80,000 per year.|
What Was MISSING:
As I mentioned before, there’s simply no shortage of things the government can spend money on, and here are a few that I feel were important issues (ones that potentially could alter our society in a significant and irreversible way) that I felt were neglected in Budget 2016:
- The Rise of the Freelancing Economy. According to a Forbes article, by 2020, almost half (40-50%) of the US population is expected to be freelancers. With the rise of the sharing economy and P2P service platforms (e.g., Uber, Page Advisor, etc.), and with more and more firms downsizing or moving abroad, Singapore will also definitely see a rise in the self-employed population. This is a huge shift in the way we work and the way we exchange goods and services. I felt that the budget focused a lot on businesses, employers, and employees. However, freelances are not in any of these categories, and if indeed the economy becomes a mostly freelancing population, many of the initiatives meant for businesses will not be applicable and hence, will not have been money well spent. Furthermore, there are very few protections for freelancers, since they are not unionised and not legally entitled to statutory protections and benefits accorded to employees. I would have liked to see more focus on this population, as it is also in the government’s best interest to support this population. Freelancing potentially increases productivity, reduces overhead, and can be an untapped source of revenue for the government (as some freelancers may not report all their earnings)
- Social & Health Support for Adults. The 2016 Budget had a section for “Children” and one for “Seniors”; anyone in between those age groups (i.e., all adults) were primarily treated as workers. We are so much more than what we do for money; we are mothers, fathers, husbands, wives, caretakers, friends, neighbours, hobbyists, athletes, volunteers, enthusiasts, etc. These additional or alternative roles can have a more profound impact on our family and on the community than our role as a worker. In fact, focusing too much on earning money and neglecting our other roles can lead to many problems and dissatisfaction in life. In an adult’s life, employment and career problems do come up from time to time, yet it is often the social and health problems that can lead adults down a very dark and tumultuous path. I would have liked to see more initiatives supporting personal social planning, personal financial planning, and health and wellness counseling with the intent of preventing, minimising, or delaying the development of social, financial, and health catastrophes. I believe these services are just as important as career counseling, job training, and retrenchment programmes. Many of these social or health problems start off small, but when they are unrecognised or ignored, they can become insurmountable once they rear their ugly head again later in life.
- Climate Change. While Budget 2016 tried to address the vulnerable groups among us, it forget one very, very vulnerable group – all those who live on an island nation that is just barely above sea level (i.e., every one of us). Of all the developed nations, none of them have included climate change on their budget, but I was hoping Singapore would be the leader in this and take a stand to set a global precedent by including it in this year’s budget. February 2016 broke worldwide climate records. Understandably, other issues this year were more of a priority such as the slowing Singapore economy and the rapidly aging population. Unfortunately with the relentless warming of the planet and its associated disastrous consequences, failing to address climate change in every year’s budget risks downplaying the seriousness of climate change. I would have liked to see an amount set aside in the budget for future initiatives to mitigate the effects of climate change.
The Most Important Takeaway Message:
In my opinion, I think the biggest takeaway message from this budget is that all these schemes and initiatives are supplemental, meaning that they are just meant to provide some support. You should not rely on these schemes and initiatives to be financially solvent in your business or in your household – PERIOD! Remember that this year’s surplus is not a “real” surplus, and with the downturn of the economy, times will be rough. And government schemes, which had been introduced in the past, have and will sunset (even though most have been extended this year). Too many people depend on these just to make ends meet. This is not sustainable. Many people say we are in a new era in our economy; there will be sectors that will rise, others that will fall, and some that will disappear forever. We’ve seen a 7-year period of cheap and easy credit that flooded our economy. As one economist I spoke to recently put it, the 7-year period of “partying” will be followed by a huge hangover and it won’t be pretty. This is the time to prepare yourself and not be too dependent on government support. This is the time to be frugal.