Budget 2017 saw the Singapore government shift even more focus to digitalisation, as well as overseas expansion. Described by Deloitte Singapore as a “clear shift towards targeted measures”i, we break down Budget 2017 and reflect on how the changes could impact your business:
Finance Minister Heng Swee Keat introduced the SMEs Go Digital Programme, to help SMEs cope with the growing need for digital solutions in cybersecurity, data analysis and more. With this programme, businesses can look forward to in-person advice at SME Centres and a new SME Technology Hub. Although more details are set to be released this month, experts are already viewing it as a necessity. PwC’s Sunil Agarwal believes that:
As Mr Heng notes, “digital technology can significantly improve productivity”, especially in the retail, F&B, trade, logistics, cleaning and security sectors. SMEs can get a headstart at digitalisation with their own e-commerce shop. This raises brand visibility and boosts SEO rankings. Get a headstart on the digital movement with StarHub’s user-friendly eShop Builder.
Labour Cost Offsets
The Foreign Worker Levy (FWL) increase in the Marine and Process sectors have been deferred for one more year, indicating that there is no change in foreign worker levy till 30 June 2018.
Eligible firms can also expect the payout from the Wage Credit Scheme (WCS) this month. The WCS is where the government co-funds 40% of wage hikes to help SMBs cope with rising wages.
Additionally, the Additional Special Employment Credit (which offset wages of up to 3% for workers who earn under $4,000 per month and who are not covered by the new re-employment age of 67 years) will be extended till end-2019.
Given that SMEs overseas’ export generate the highest average annual exporting per-company, it’s no surprise that the government has rolled out measures to aid further overseas expansion.
To encourage more growth, the Government will be introducing a smart financing ecosystem termed the International Partnership Fund. Through this fund the government will co-invest in Singapore-based firms to help companies scale-up and internationalise.
Working Capital and Cashflow
The SME Working Capital Loan, where the government provides 50% of loan default risks, will continue to be available for next two years.
SMEs will be glad to know the Corporate Income Tax (CIT) Rebate has been increased from $20,000 to $25,000 for YA2017. The CIT will also be applicable for YA2018, albeit at a reduced rate of 20% of tax payable.
You can also free up your cashflow by making the switch from Capex to Opex.
Where Budget 2016 sought to stimulate innovation with measures like the Jurong Innovation District, this year’s budget goes one step further, zoning in on innovation through technology. Although this focus on SME digitalisation and internationalisation is a step in the right direction, the new measures are better suited for larger SMEs, who can afford to expand overseas and adopt new technology.
SCCCI President Thomas Chua notes that SMEs “who are facing challenges are disappointed that there are not enough near-term measures to help them. Businesses are concerned with the impact on their business costs, especially with the immediate increase of diesel tax, and soon water price."iv For these smaller SMEs and startups, the priority remains choosing the right technology partners to overcome challenges in a cost-effective yet efficient way.