Tax rebate and cut in worker levies, fuel taxes among measures sought
THE Government’s Budget this year may look like it is hongbaos all around, but companies are disappointed that they are getting little aid with their most pressing challenge – escalating costs.
Even as families look forward to generous Budget goodies to help them cope with rising inflation, the corporate sector says it has been left to fend off the same economic demon on its own.
Finance Minister Tharman Shanmugaratnam yesterday said, however, that corporate taxes were already cut since last year, adding that the Government should not overreact to the present situation.
‘Particularly for small and medium-sized companies, the tax regime in Singapore is already more competitive than in Hong Kong or any other country,’ he told reporters at a community event.
Still, companies, business groups and economists said with a near-record surplus of $6.45 billion, the Government could afford to dish out rebates and other measures to help with spiralling rental and wage bills.
And while they welcomed new schemes to promote innovation in the long term, they said they would have liked some immediate aid, too.
‘Our costs have gone up on all fronts, be it raw materials, labour or rentals,’ said Mr Lee Tong Soon, managing director of the Thai Village restaurant chain. ‘Our profit margins will be hurt, and we had hoped that the Government would do something to help us in the Budget.’
The latest Budget was presented to Parliament by Mr Tharman last Friday. Strong economic growth and a redhot property market led to the exceptional surplus, paving the way for special transfers totalling $5.4 billion.
Most benefits went to ease the burden of rising living costs for households, especially those of the poor and needy.
‘For businesses, there was really little in terms of direct help to tackle rising costs,’ said CIMB-GK economist Song Seng Wun.
While a cut in the corporate tax rate would have been welcome, few expected it since the rate was reduced from 20 per cent to 18 per cent last year.
‘The tax rate is already fair. Our China branches are taxed at more than 30 per cent,’ said Mr Lee.
Still, companies and analysts were hoping for a one-off income tax rebate, like that offered to individuals.
Foreign worker levies and fuel taxes could also have been lowered, while foreign worker quotas could have been raised and rebates given to relieve rising transportation costs, they said.
Mr Phillip Overmyer, Singapore International Chamber of Commerce chief executive, applauded the move to allow renovation costs to be expensed. This will mean big savings for retailers and restaurants, which have to remodel their outlets every two to three years.
But he was disappointed that the Government did not address Singapore’s acute shortage of skilled labour.
‘In the hospitality sector, foreign worker sources are mostly exhausted already, so there’s scope to broaden the countries that hotels and restaurants can source from.’
DBS Bank economist Irvin Seah said it was unfair to look at this Budget only. The Government has been working to relieve rental and wage burdens through non-Budget initiatives, he said.
Citigroup economist Kit Wei Zheng also said the Government may be counting on cost pressures to dissipate as the global economy slows.
Others suggested that the Government may be keeping its powder dry for off-Budget measures that may be needed should the United States and world economy slow more severely than expected.
Reactions to Budget 2008
‘Budget 2008 focuses on innovation and manpower – twin strategies that require an early investment in order for Singapore companies and the Singapore economy to stay ahead of global competition.’
SINGAPORE BUSINESS FEDERATION
‘For the financial sector, the most significant financial incentive is the removal of the estate duty… This would certainly make Singapore more attractive to overseas investors and assist in promoting the asset and wealth management business in Singapore.’
ASSOCIATION OF BANKS IN SINGAPORE
‘The tax measures introduced were well-balanced and consistent with the overall aim of the Budget to create a top-quality economy… Reduction of personal tax rates would have been a real icing on the cake in helping to achieve this aim, and we look forward to this materialising in the coming Budgets.’
MR AJIT PRABHU, Deloitte Singapore & South-east Asia tax partner
‘The Budget is good news for SMEs with most of the goodies appearing to go to them. However, it falls short of the expectations of multinational corporations and big business.’
MR DANNY TEO, KPMG managing partner
‘We had hoped to see additional tax depreciation on energy efficient and pollution-reducing equipment for businesses. The absence of such incentives… is a big let-down given the increasing worldwide concern on sustainability.’
MR LEONARD ONG, KPMG executive director
‘Significantly higher business costs from soaring rentals, GST hike, increased transportation costs from ERP, taxi fares and fuel prices have all exacerbated the situation. The Budget could have been better if it had brought some relief to address the rising cost of doing business.’
SINGAPORE CHINESE CHAMBER OF COMMERCE AND INDUSTRY
Source: The Straits Times 18 Feb 08