The wants of businesses in the upcoming Budget 2020 provision differed to that of the previous two years as shown by them calling for corporate tax rebates and corporate tax cuts, according to the survey done by the Singapore Business Federation (SBF).
Despite such clamours, it is not likely that such provisions will be included in the upcoming budget, as remarked by the SBF chief executive officer, Ho Meng Kit. The budget is set for unveiling on 18 Feb by the Deputy Prime Minister and Finance Minister, Heng Swee Keat.
At the launch of the latest annual survey monitoring business sentiments on Tuesday (14 Jan), Mr Ho told the media, “Those companies that are profitable, that are paying taxes, should not expect the Government to be willing to (provide) relief by way of reduction of corporate taxes, nor a tax rebate.”
Mr Ho also remarked “I personally feel that this year’s Budget for businesses will still continue to focus very much on the longer-term structural issues of pushing companies to continue on the journey of transformation, to improve their productivity.”
Singapore’s corporate tax rate is one of the lowest globally at 17 per cent. Other economies have also been looking to slash corporate taxes to lure more investment.
More than 1,000 large and small-and-medium-sized companies in the survey, amounting to more than half (55 per cent) of the respondents would like for corporate tax rebates and corporate tax cut to be incorporated in the new budget.
Less than half of the survey respondents also hope for incentives for industry-related training and corporate venturing as well as the government to provide easier access to information and resources.
The fact that tax cuts and rebates are sought after by businesses shows that there is a significant change in sentiment in the newest survey.
Past concerns included the easing in the foreign workers’ quota and levy and support for digital transformation, but these did not make the top concerns this year. This is the case even though there are concerns such as the shortage of local talents, high labour costs and tight foreign worker quotas which are also top concerns among businesses this year.
Mr Ho answered to the query as to why this shift in priorities took place with“Maybe they (are) looking at (this year’s Budget) as an election (Budget).”
Industry observers also propagated the idea that the upcoming budget may be more generous due to the fact that a General Election (GE) is expected to be held later this year.
The government has to end its term with a balanced budget and the GE has to be held by April 2021. As of now, since the start of its term, there is an accumulated surplus of S$15 billion that could be spent before the GE.
Mr Ho hoped that the government will be “judicial in using it[the surplus] rather than dishing it out generally”.
The survey also captured return to the short-term needs of businesses as they gingerly navigate the uncertain economic climate contributed by the US-China trade frictions, Mr Ho added.
“This year is back to the basics, the nuts and bolts, near-term issues. I guess it is because they are challenged, because of the uncertainty.” He further remarked.
The fact that the government is adamant in maintaining the quota for foreign workers in the services sector is also a reason why businesses’ priorities have changed, according to David Black, who is the managing director of BlackBox, the market research firm commissioned by SBF to conduct the survey.
Last year, some SMEs were in a tight spot due to manpower shortage when Mr Heng announced in the budget that foreign worker quota, also known as the dependency ratio ceiling (DRC), for the services sector would be slashed.
Mr Ho remarked that “We don’t think we should even ask for the DRC quota not to be implemented” and he hoped that the current levies are not increased further. The government has not budged even with the voices wanting the restriction to be loosened echoing throughout 2019.
Silver lining amidst trade war
The SBF survey also showed that there was increased expansion of Singapore firms overseas from 2018 to 2019. The overseas presence increased from 71 per cent to 80 per cent.
Of the firms that expanded abroad, 80 per cent engage in the member economies of the Association of Southeast Asian Nations (ASEAN) whereas 76 per cent have plans to expand there.
Mr Ho reasoned that this could be due to companies wanting to diversify as a long-term strategy against the rising uncertainties in global trade in anticipation of the initial “phase one” trade deal between the US and China slated to be signed this week.
According to the survey, the opportunities created by the trade friction motivated 30 per cent of businesses to expand.
For example, with Vietnam’s industries and town expanding with the entering of more Taiwanese and Chinese factories, Singapore real estate companies swooped into the picture to provide services to them, Mr Ho noted. Despite this, there are also sectors that did not do as well, such as logistics and manufacturing.
The SBF survey covered not only tight foreign worker quota and high labour costs, but also other manpower challenges.
Based on the findings, 37 per cent of firms felt that job seekers do not have the right work attitude while 41 per cent found attracting or retraining young talents to be difficult.
Work attitude issues seem to be more prevalent among SMEs compared to big corporations, Mr Black noted. This could be due to the warped expectation of young workers when working with SMEs. Mr Black argued reasoned that “You have to have a Google-type workplace and all those sorts of things that maybe don’t occur so much as SMEs so I think SMEs are feeling more of the cultural dislocation with younger workers as they kind of adjust.”