It will develop a strong Singaporean core.
Singapore's upcoming Budget 2016 will focus on helping businesses cope with slowing growth and persistent restructuring pains, and will help local SMEs conquer overseas markets. With under a week to go before the release of Budget 2016, Singapore Business Review caught up with Ajay Kumar Sanganeria, Tax Partner, KPMG Singapore, to know his insights on the upcoming budget.
He is among the panelists at the upcoming SBR Budget Breakfast Briefing, which will be held on March 28 at The Fullerton Hotel.
1. In your opinion, what will be the key differences between this year’s budget and the Jubilee Budget?
I think that Budget 2016 will be a good platform for the newly elected Government to work on the direction it would take in priming the future economy amidst a challenging global business environment. It is important that Singapore sustains its productivity drive and encourage innovation to continue to sustain the local market as well as enhance international competitiveness.
In a way, the Jubilee Budget had set the course for Singapore’s future. Apart from helping companies cope with rising costs, the Government also delivered on calls to look at companies’ topline growth. It also offered more support for innovation and internationalisation activities. Budget 2016 should continue to help Singapore companies with their restructuring journey.
The new term of Government is expected to exhibit practicality and prudence. In the face of a weaker economy, I expect that Budget 2016 will focus on the shift from a value-adding to a value-creating economy in order to develop a strong core of Singaporean businesses to compete globally at the higher end of the value chain. In a small economy like Singapore, enhancing productivity will inevitably be hampered by the limited indigenous workforce. The only way for businesses to survive and thrive is to continually create new value through new products and services, new markets or new business models.
Therefore, the focus of this year’s Budget is thus likely to be on longer term business sustainability with a more balanced shift of initiatives from value adding to value creation to enhance Singapore enterprises’ domestic and international resilience and competitiveness. Together with the establishment of the ASEAN Economic Community and Trans-Pacific Partnership, this provides a unique opportunity for Singapore to enhance its global competitiveness.
All in all, I think Budget 2016 should provide an indication of Singapore’s economic priorities and mid and long-term strategies to address both domestic and international business concerns.
2. What are the key issues which Budget 2016 should address, and what initiatives will likely be rolled out to help businesses cope with slowing economic growth?
I think Budget 2016 is likely to focus on measures to help firms spur value creation and cope with short-term challenges to sustain growth. As businesses face rising rental and labour costs and SMEs face tougher competition from MNCs, it is important that Budget 2016 help Singapore companies continue with their restructuring journey. For example, more efforts should be made to promote the perception of ‘Made in Singapore’ products and services as being high-tech, high-quality and high-value. This should be done both locally and overseas.
Budget 2016 should therefore nurse local SMEs to prominence and empower them to venture into overseas markets. To help differentiate Singapore from its competitors and present unique propositions to global businesses, I think Budget 2016 should introduce a well-tailored set of tax incentives for local enterprises to encourage productivity adoption, innovation related activities and internationalisation. This includes customising the PIC to cater for different stages of growth of businesses, giving incentives to grow and keep Singapore brands within Singapore, and broadening the scope of the R&D incentives.
Against the backdrop of a weaker economic climate, Singapore continues to attract a good share of foreign investment beyond tax reasons. I think there is a need to balance the need to be a good global citizen in the light of international pressures stemming from the OECD’s Base Erosion and Profit Shifting project and to maintain a conducive and welcoming business environment.
That said, Singapore should strengthen its market connectivity and position itself more competitively as a regional business hub. Having a simple system and greater level of tax certainty does make Singapore even more attractive as a regional centre.
In particular, Singapore should continue to promote itself as an attractive Finance and Treasury Centre, and hub for high value activities such as financial services, biomedical, aerospace and R&D, amongst others. The Finance & Treasury Centre incentive, which offers a reduced tax rate on income from treasury activities, should be enhanced and extended beyond the sunset clause of 31 March 2016, so as to strengthen Singapore’s position as an international treasury hub.
3. What should households expect from this year’s budget?
I hope to see an individual income tax rebate. This may however be capped, and would thus be targeted at lower income taxpayers. This would provide some relief to the rising cost of living. Hong Kong has also recently announced individual tax rebates.
Budget 2016 should also devote more resources in education and skill upgrading. More programmes should be introduced as part of the SkillsFuture initiative to help working individuals upgrade their skills despite slowing economic growth. More career counsellors should be groomed to provide advice to the industry and steps should be taken to provide easier financing for higher education for deserving students in the form of grants or lower interest rates.
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