Deputy Prime Minister and Finance Minister Tharman Shanmugaratnam delivered his budget speech before parliament for fiscal year 2013/14 on 25 Feb 2013 at 3:30PM. The focus for the economy and businesses in this year’s budget is to drive the increase in productivity, with significant changes in policy to drive companies to adopt innovation for increased productivity and reduce reliance on foreign workers. His aim is to “revitalise and re-energise” the SME sector.
Here are some key highlights from the budget that focuses on the SME sector:
- FY2012 budget surplus higher at $3.9b due to stamp duty and motor vehicle taxes.
- Since 2010, Gov has embarked on major steps to transform our economy, create better jobs and allow for a better pace of life.
- We need to intensify restructuring of our economy and employment market to achieve quality growth and higher wages for S’poreans.
- New Wage Credit Scheme (WCS) to encourage employers to up the pay of their employees.
- We must now go through a new phase of transformation - First, we need to catch up from a decade of slow productivity growth; Second, we also have much room to catch up with the global leaders in each of our sectors; Third, we must also reduce the wide gaps in efficiency between the different sectors of our economy.
- The increase in foreign workers slowed in 2012 to 67,000. The Construction and Process industries accounted for about half of the total increase in foreign workforce. There has been continued rapid growth of S Pass employees in Services sector. Total no. of Employment Pass (EP) holders declined last year, as a result of the tightening of MOM’s eligibility criteria.
- Selective further Dependency Ratio Ceiling (DRC) cuts for sectors where there’s cont’d to be sig. growth in foreign workers. We will increase levies for all sectors to ensure businesses reduce dependence on foreign manpower and improve productivity.
- We will encourage companies to pro-actively develop the talents and skills of our S’porean workforce and reward them fairly. Construction, Marine and Process industries most dependent on foreign workers lag behind international standards of productivity. Services: industries like F&B and Retail that rely most on foreign workers have low pay and low-wage growth for local workers.
- Restructuring of our economy must result eventually in a dynamic and re-energised SME scene.
- Businesses have to respond in new ways to the tight labour market. Businesses can adopt shared services, redesign jobs, and give workers broader roles.
- We will introduce a Quality Growth Programme, aimed at helping businesses upgrade, create better jobs and raise wages: 1: Tightening Foreign Worker Policies through a targeted approach, 2: A 3-Year, Transition Support Package to support companies during this period of restructuring, 3: Strengthening of Productivity Incentives to help companies improve productivity, and make it easier to tap on them, 4: Capabilities for New Growth Industries in manufacturing and services.
- Additional Foreign Worker levies collected will be flowed back to help businesses through schemes such as the PIC scheme.
- Foreign Worker Levies will be raised across the board for all sectors in 2014 & 2015. Further measures to moderate foreign workforce inflow in construction, process and marine sectors, and services sector. In Construction, we will mandate the use of more manpower efficient designs and technologies.
- Levy rates for less skilled Work Permit Holders in Construction Sector will increase by $150 between Jul 2013 and Jul 2015. Construction: Steeper levy increases of $300 for workers hired outside a company’s Man-Year Entitlement or MYE.
- Services: We will reduce overall DRC from 45% to 40%, and lower S Pass Sub-DRC from 20% to 15%. For existing workers, companies will be given until June 2015 to comply with the new DRCs. Companies will not be allowed to bring in new foreign workers beyond the new DRCs from 1 July 2013.
- To help the Services sector cope with labour constraints, we will allow more flexible cross-deployment of foreign workers.
- We’ll tighten Foreign Worker inflow criteria for S Pass holders to moderate future growth and ensure ample opportunities remain for S’poreans.
- From 1 Jul 2013, minimum S Pass qualifying monthly salary will be increased from $2k to $2.2k. Tiered salary system based on age and qualification will be introduced to level the playing field for S-Pass and local workers.
- Employment Pass policy must ensure firms in Singapore remain able to recruit the best teams and maintain level playing field for Singaporeans. Ministry of Manpower will continue to tighten eligibility requirements for EP workforce, especially for Q1 pass holders. MOM will put in place framework to ensure that firms give fair consideration to Singaporeans in their hiring practices.
- The Government will introduce a 3-year Wage Credit Scheme(WCS) to incentivise employers to share productivity gains with employees. Under the WCS, Gov will co-fund 40% of wage increases for Singaporean employees over the next 3 years. Co-funding will apply to wage increases for S’porean employees earning up to gross monthly wage of $4k. WCS payouts will be automatically paid out to employers annually with no application needed. WCS will cost Gov $3.6bn over 3 years.
- The Government will also introduce a special Productivity and Innovation Credit Bonus for YA2013 to YA2015. Businesses which make use of the PIC scheme and invest at least S$5,000 to improve productivity in a year will receive a dollar-for-dollar matching cash bonus.The bonus is capped at S$15,000 over three years until 2015. It’ll be paid over and above the existing PIC benefits.
- CIT rebate will help companies cope with higher manpower costs and other cost pressures (eg. higher rentals).
- Businesses that renew commercial vehicle COEs for 5 years can extend their COEs for another 5 years after that. One year 30% road tax rebate for commercial vehicles.
- Significant enhancement of the productivity incentives over 3 years costing $500m. Initiatives for industry-wide collaboration will be introduced.
- More productivity support for individual firms as well. Easier for businesses to make PIC claims.
- Land Productivity Grant to support coys which intensify land use or relocate some operations to immediate region.
- We will provide further boost to training initiatives for S’poreans at all levels of the workforce.
- Accessibility of government support schemes for SMEs will be improved. We are working with businesses, industry by industry, to help reduce costs, develop economies of scale, and raise productivity and wages.
- EDB will set aside $500m over the next five years to support a Future of Manufacturing plan.
- We will also support the emerging satellite industry in Singapore through a $90m Satellite Industry Development Fund.
- IE will work with Asian Development Bank to expand availability of trade finance insurance for Singapore companies.
- We’ll refine tax incentives for companies in the Maritime and financial sectors to ensure continued growth of high-value activities in Singapore.
- Start-Up Tax Exemption: Investment holding companies and property developers incorporated after today will be excluded.
- Housing and hotel accommodation provided to employees will be taxed based on AV of the property or actual hotel cost.
Source: Singapore Budget 2013 website and Ministry of Finance twitter account.
Click here for the full budget speech by the finance minister.
More details to be added. For more articles on the Singapore Budget 2013, visit myBusiness Insights.