Presenting the Budget in Parliament last Friday, Singapore Deputy Prime Minister Tharman Shanmugaratnam unveiled various measures to boost SME growth through productivity upgrades.
Focusing on innovation, infocomm technology (ICT), and internationalization, a major thrust of this year’s Budget is to deepen incentives for restructuring.
In line with this, the following were highlighted:
Extension of the Productivity and Innovation Credit (PIC) Scheme
The Productivity and Innovation Credit (PIC) Scheme has been extended for three more years to Year of Assessment (YA) 2018. This will cost the Singapore government S$3.6 billion.
New PIC+ Scheme
In addition, a new PIC+ Scheme will be introduced for SMEs with more substantial productivity investments. Under the enhanced scheme, the expenditure cap will be raised from the current cap of S$400,000 to S$600,000 from YA 2015 and onwards. This means that firms can now claim tax deductions for up to S$1.8 million per qualifying category.
Scaling ICT Solutions
Further, Mr Tharman rolled out a masterplan to help local firms adopt more advanced ICT solutions to bolster productivity. For SMEs to utilize such technologies as cloud computing and big data analytic solutions, however, they must first have access to high speed broadband connections. As such, among other incentives, the government will subsidize fibre broadband subscription plans of up to at least 100Mbps.
New Industrial Cluster Spaces
New industrial cluster spaces will be developed for firms in the same industries. This will significantly lower costs through collaboration, pooling of resources, and the aggregated delivery of investments.
Renewal of Land Intensification Allowance
The Land Intensification Allowance(LIA) will be renewed for another five years, up to 30 June 2020. Under the LIA, businesses may claim tax benefits for qualifying expenditures incurred for the construction of a qualifying building or structure.
Lifelong Learning Endowment Fund
The Lifelong Learning Endowment Fund will be topped up by S$500 million, increasing the total fund size to S$4.6 billion.
Catalyzing Financing for Firms
To promote industry transformation and boost the growth of SMEs to make them globally competitive, the government will catalyze financing for companies in various stages of growth. This includes providing initial capital for SMEs under the SME co-investment fund tool and the new SME Mezzanine growth fund, a hybrid debt equity instrument.
In line with this, the maximum loan quantum supported by the Internationalisation Finance Scheme (IFS) will be raised from the current S$15 million to S$30 million. This will boost debt financing for companies to make additional asset investments abroad or fund working capital expenses for secured overseas projects.
Increase in CPF Employer Contribution Rate
As part of the Pioneer Generation package to honour Singapore’s sunset population, CPF employer contribution rate will be increased for all workers by 1%. The top up will go to the employees’ Medisave accounts. Employers will get a Temporary Employment Credit for one year to offset extra costs.
Improvements in the construction, food services, and maritime industries were emphasized as growth areas. The government will provide incentives to lessen the dependency on foreign workers while increasing productivity.
Not Just About Productivity
Mr Thurman, however, underscored that transforming Singapore’s economy is not just about productivity. Rather, it’s about changing social norms.
In particular, to be competitive, firms must provide a workplace culture where employees are engaged and empowered. Secondly, businesses must cultivate a culture of mastery, and aim for excellence rather than just expertise. Lastly, Singapore residents must change their consumer habits and adopt self-service technologies.
In gist, Budget 2014 reinforces the theme from last year’s Budget statement; i.e. to achieve quality growth through innovation in order to gain economic sustainability.
To view the overview of tax changes in Budget 2014, click here.
Rikvin’s content team includes in-house and freelance writers across the globe who contribute informative and trending articles to guide aspiring entrepreneurs in taking their business to the next level in Asia.