Singapore Budget 2017: Highlights for SMEs
SME owners will be happy to see more support that will help them navigate an uncertain economic future. Policies announced during the Singapore Budget 2017 will help Singapore SMEs deal with short-term problems as well as help them look toward the mid- to long-term future.
In the recently released Committee of Future Economy report, the government highlighted the need for businesses to improve their digital capabilities as well as internationalise.
Mr Heng Swee Keat, the Finance Minister, announced several measures during this year’s Singapore budget 2017 that shows how the government will work with SMEs, agencies and other partners to achieve those objectives. It also set out some support measures that help industries especially certain sectors facing cyclical weaknesses.
Here are the highlights from this year's budget that is targeted at SMEs.
Mr Heng announced that foreign worker levy increases will be deferred by one more year for the relatively weak-performing Marine and Process sectors.
Mr Heng also mentioned the Bridging Loan for Marine and Offshore Engineering companies, which was first introduced in December 2016. This loan gives firms in the affected sectors access to working capital so it can help them bridge short-term cash flow gaps.
The construction sector will receive a boost as well. The government will bring forward $700 million worth of public sector infrastructure projects, like community clubs and sports facilities, to start in FY2017 and FY2018. Construction firms will be able to bid for and participate in these projects.
The government will dedicate an additional $26 million to the “Adapt and Grow” initiative, which helps workers looking to take on new jobs. They will increase wage and training support provided under the Career Support Programme, the Professional Conversion Programme, and the Work Trial Programme.
- Career Support Programme is beneficial for employers who offer suitable job opportunities to eligible Singaporean Professionals, Managers, Executives and Technicians (PMETs) as they receive wage support of up to one year for newly hired Singapore PMETs.
- Work Trial Programme allows companies to provide jobseekers a cost-free short-term stint in the company to assess their fit in the company.
- Professional Conversion Programme helps jobseekers reskill and acquire the necessary knowledge and competencies to take on new jobs.
Enhanced Corporate income tax rebate
The government will spend an additional $310 million over Years of Assessment (YA) 2017 and 2018 to enhance and extend the corporate income tax rebate.
What does this mean for businesses?
- The cap for the Corporate Income Tax (CIT) rebate will go up from $20,000 to $25,000 for YA2017.
- The rebate will continue to remain at 50 per cent of tax payable.
- The rebate will be extended to YA2018 – but at a reduced rate of 20 per cent of tax payable, capped at $10,000.
Additional Special Employment Credit
SMEs will be given more support for firms hiring older workers. This will be done by extending the Additional Special Employment Credit till end-2019.
How does this scheme benefit SME owners?
Employers will receive wage offsets of up to 3 per cent for workers who earn under $4,000 per month, and who are not covered by the new re-employment age of 67-years-old.
- Taken together with the Special Employment Credit, employers will receive support of up to 11 per cent of the wages of eligible older workers.
Meanwhile, the Wage Credit Scheme will continue to help businesses deal with rising wages. About $420 million will be paid out to SMEs.
Mr Heng then highlighted three ways in which enterprises here can stay competitive and grow long-term. He identified three ways where businesses need to build upon. They are digital technology, embracing innovation and scaling up.
Continuation of measures to support businesses
The SME Working Capital Loan will continue to be available for the next two years. The scheme allows the government to co-share 50 per cent of the default risk of loans for up to $300,000 per SME. More than $700 million of loans have been used by SMEs.
The government will introduce the SMEs Go Digital Programme to help SMEs build their digital capabilities. The programme will be led by the Info-communciations Media Development Authority (IMDA), SPRING as well as other sector lead agencies. SME Go Digital has three components.
- SMEs, particularly in the retail, food services, wholesale trade, logistics, cleaning and security industries, will get step-by-step advice on technologies that can help them grow further. This will go hand-in-hand with the sectoral Industry Digital Plans.
- SMEs will also get in-person help at SME Centres. There will also be a new SME Technology Hub setup by IMDA. How can this help SMEs? Business leaders can approach advisors at these centres for advice on off-the-shelf technology solutions that are pre-approved for funding support.
- SMEs who are ready to pilot emerging Info-communications and Technology (ICT) solutions will receive advice as well as funding support. The government is also adding more funding toward training cybersecurity professionals, which indicates the importance of cybersecurity and data.
The government will play a big role in helping businesses here tap on innovation and technology. Over the next four years, A*STAR will help up to 400 firms, both big and small, to conduct operation and technology road-mapping. This will help companies innovate and compete.
Under the Tech Access Initiative, SMEs looking to use advanced machine tools for prototyping and testing will also receive support from A*STAR. They will provide access to such equipment, user training and advice.
SMEs will also have improved access to Intellectual Property (IP) with the help of Intellectual Property Intermediary that will match them with IP that meets SMEs' needs. It will also work with the Intellectual Property Office of Singapore (IPOS) to analyse and bundle complementary IP from Singapore and overseas.
Under the Headstart Programme, SMEs can co-develop IP with A*STAR to enjoy royalty-free and exclusive licenses for 36 months. It was previously 18 months.
Scaling up globally
The government has been emphasising the need for companies to scale up globally and establish a strong presence in overseas markets. To support that, a new International Partnership Fund has been announced. This fund will co-invest with Singapore-based firms to help them scale-up and internationalise.
Additionally, an enhanced Internationalisation Finance Scheme will help local companies take on more overseas projects.
To help businesses have capable leaders to succeed in overseas markets, the government has introduced new measures to improve their leadership capabilities. Under the Global Innovation Alliance, there will be innovation launchpads that connect entrepreneurs and business owners with mentors, investors and service providers.
Apart from innovation launchpads, an Innovators Academy will be launched to help tertiary students build connections and capabilities overseas. Besides students from the existing NUS Overseas College programme, the academy will make these opportunities available to students from other Singapore universities. The annual intake will grow from 300 to 500 over the next five years.
Welcome Centres will also be launched in San Francisco, Beijing and various ASEAN cities. These centres aim to link up innovative foreign companies with Singapore partners to co-innovate, test new products in Singapore, and expand in the region.
Additionally, The SkillsFuture Leadership Development Initiative will support companies to groom Singaporean leaders by sending them on specialised courses and overseas postings.
SMEs benefit from a stronger, more skilled workforce and the government is increasing its training support for jobseekers. Furthermore, to ensure that skills learned during trainings are well-utilised, co-operation between employers, Trade Associations and Chambers (TACs), and the government is vital. Mr Heng mentioned these initiatives that will aid in the objectives.
- More courses and supporting funds
To make training more accessible, shorter, modular courses will be offered. Courses will e-learning will also be more available. Singaporeans will be able to enrol in approved courses available through SkillsFuture. Additionally, union members will get subsidies for selected courses through the NTUC Education and Training Fund. The government will support this by putting aside $150 million to match donations to the fund.
- Enhanced National Jobs Bank
The National Jobs Bank will be made more useful for jobseekers and employers. The government will work with private placement firms to ensure that professionals are matched to the right jobs.
Industry Transformation Map
The government will put in place to roadmaps to transform at least 17 industries over the next year. The government will soon release 17 industry-specific blueprints and these blueprints will outline the jobs and growth strategies for these industries. The industries include marine and offshore, construction, transport, healthcare, education, financial services, and professional services sectors among others.
The maps require various stakeholders to work together. They include TACs, unions, and the government. The maps are not fixed and will adapt to seize new opportunities.
SMEs will be affected by the carbon tax on the emission of greenhouse gases. The carbon tax rate, which will be implemented from 2019, will be between $10 and $20 per tonne of greenhouse gas emissions. Businesses should therefore be incentivised to reduce their emissions. Additionally, revenue from this tax will help fund measures by industries to reduce emissions.
The continued commitment toward tackling climate change could also create new opportunities in green growth industries such as clean energy, said Mr Heng. He also added that the cost of this carbon tax for businesses should be “modest”.
Increase in water prices
To keep up with the cost of water supply, the government will be increasing the price of water by 30 per cent. This will take effect from July 1 2017 and will be implemented in phases.
The Sanitary Appliance Fee and the Waterborne Fee will be combined and restructured into a single, volume-based fee. This will reflect the volume of used water discharged. For 75 per cent of businesses here, the increase will be less than $25 per month.
To promote water conservation among industrial users, the government will impose a Water Conservation Tax on NEWater, which will be 10 per cent of the NEWater tariff. This takes effect on July 1 as well.
The government will also introduce a restructured diesel tax. It will now impose a volume-based duty at S$0.10 per litre on automotive diesel, industry diesel and diesel components in biodiesel.
Mr Heng also said that he will permanently reduce the annual special tax on diesel cars and taxis by $$100 and $850 respectively.
The government will also introduce 100 per cent road tax rebates for a year and partial tax rebates for another two years for commercial diesel vehicles.
- The cap for the Corporate Income Tax (CIT) rebate will go up from $20,000 to $25,000 for YA2017. Rebate will continue to remain at 50 per cent of tax payable.
- Rebate will be extended to YA2018 – capped at $10,000 at a reduced rate of 20 per cent of tax payable.
- SMEs will receive an extension of the Additional Special Employment Credit till end 2019.
- SMEs Go Digital Programme announced by government will help SMEs build their digital capabilities.
- A*STAR will also provide more support to SMEs looking to adopt new technologies.
- More Schemes introduced to help local firms internationalise. This includes the new International Partnership Fund, which will co-invest with local firms to help them scale up.
- Measures like Wage Credit Scheme and SME Working Capital Loan will continue to be available for businesses.
- Government will lend more support to a skilled workforce through increased funding for training as well as an enhanced National Jobs Bank.
- A carbon tax will be imposed on businesses starting from 2019.
- Water prices will also increase by 30 per cent starting from July 1.
- Diesel tax will be restructure into a voulme-based duty at $0.10 per litre on automotive diesel, industry diesel and diesel components in biodiesel.