How well does Budget 2008 address the business needs of your industry and the economic needs of Singaporeans generally? Is there more that can be done to fine-tune particular proposals?
Chaly Mah
CEO
Deloitte Asia Pacific
How to stay ahead: The Budget offers a host of industry-specific tax incentives to help keep business competitive
FINANCE Minister Tharman Shanmugaratnam presented a well-balanced Budget, not only in macroeconomic terms (with the Budget in rough balance) but also in balancing the interests of many different constituencies. Personal tax rebates and spending programmes have been designed to benefit the lower and middle income groups to a greater extent while the abolition of estate duty will benefit the more affluent sections of our society, and at the same time will provide yet another boost to the mushrooming wealth management sector in Singapore.
The focus on education, training, and research and development will undoubtedly strengthen the economy over time. The commitment to increase overall research spending to 3 per cent of the GDP by 2010, with one-third of this being publicly funded research, the topping-up of the National Research Fund by $800 million to a total of $1.8 billion, together with the slew of education and training initiatives, will help the economy to continue to move up the value chain. This is imperative if we are to continue to prosper in an increasingly competitive and globalised economic environment.
The decision to leave personal tax rates unchanged for now was somewhat disappointing. The gap between the highest personal tax rate in Singapore (20 per cent) and Hong Kong (standard rate 16 per cent) is significant for the top foreign talents who are high income earners whom Singapore is trying to attract. The gap is in fact higher if the impact of our 7 per cent Goods and Services Tax (which Hong Kong does not levy), is taken into account. Mr Tharman did, however, say that personal and corporate tax rates will be reviewed again and lowered if necessary. Hopefully, this will happen in the not-too-distant future.
Danny Teoh
Managing Partner
KPMG
AS anticipated, Budget 2008 reinforced the message that the government continues to focus on the longer term sustainability of the local economy while caring for the more needy in our society.
What has perhaps been left to future deliberation are some of the new issues that may ultimately drive Singapore's future development and competitiveness.
For example, Finance Minister Tharman Shanmugaratnam signalled that innovation would be a key thrust of Singapore's future economic progress and announced new incentives for promoting entrepreneurship. We would have liked to see more tax incentives encouraging the retention in Singapore of the intellectual property created from innovation.
New tax incentives targeted at encouraging energy efficient and pollution-reducing equipment for businesses in the light of current concerns about environmental protection would also have been welcome.
Lastly, with the view of encouraging workers to continually upgrade themselves as they age, we had hoped to see more tax incentives for encouraging businesses to employ older workers.
Lim Soon Hock
Managing Director
Plan-B ICAG Pte Ltd
THE 2008 Budget excels in form, but more can be done to fine-tune particular proposals.
I applaud the government in making the bold move to invest in education and the development of our human capital to power Singapore into the future. The doubling of the Lifelong Endowment Fund to $800 million, enhanced aid for needy varsity and poly students, subsidy for part-time degree courses and top-up of education accounts for students, are all steps in the right direction.
The removal of estate duty is also a step in the right direction, but I feel that we are somewhat overdue in not adjusting the personal tax reliefs. In addition, the proposed Growth Dividends and increased public assistance payouts for the poor may not be sufficient to help them tide over inflation and the increased costs of living in the next one year.
The top-up of Medisave accounts for those aged above 51 by up to $450 is another welcome move. However, the tax reliefs for topping up of CPF accounts, incentives for CPF Life and the 20 per cent income tax rebate may have inadvertently missed out on those who need this most.
I would like to suggest that the government take a radical step to reduce GST by 2 percentage points for at least the current fiscal year, to rein in inflation, projected at 4.5 to 5.5 per cent for 2008. I believe our government can afford to do this, given that in the last fiscal year, GST of $6 billion accounted for 15.1 per cent of the total revenue of $39.65 billion. It also registered an increase of $1.15 billion over the budgeted figure which translates into 18.1 per cent of the $6.35 billion surplus.
For businesses, perhaps more could be done to address the rising cost of doing business, as a result of increased costs in transportation, utilities and rentals. This is a more pressing need of many companies, which may not be adequately addressed by the proposed increase in tax deductions on R&D and tax reliefs for renovation costs, although easier tax exemptions for SMEs are a boon. The training levy for higher wage workers will further increase the costs for companies with graduate workers and executive staff.
Lastly, as the icing on the cake, our government can afford to give out more from our large surplus, to help deserving charitable organisations as a one-time effort to provide the much needed relief for fund raising, to provide better care for our fellow citizens who are disabled, chronically sick, destitute, aged or less privileged.
Albert Phuay
Chairman and Group CEO
Excelpoint Technology Ltd
THE 2008 Budget recognises that innovation and self-rejuvenation are essential to Singapore's continued growth. What we have in Singapore today is talent. As such, talent-building is crucial for our survival and growth in the changing global environment.
I'm heartened to see that the Singapore government has even taken into consideration the two heavy items on our expense sheets - talent and infrastructure costs - and has put in place new measures such as freeing up space in prime areas, the equity remuneration incentive scheme and tax incentives for R&D and learning to help us maintain costs while capitalising on growth opportunities in our industry.
I believe that the tax incentives for R&D and continual learning will help to create an innovation hub in Singapore in the long run.
Speaking as a Singaporean, I believe that the future is in our hands. We have to build for ourselves and our families a solid future with a good income through hard work and continual learning. We must also play an active role in managing our health and wealth. The 2008 Budget has provided incentives to help us ordinary Singaporeans take the future into our own hands. We must not lag behind.
Oliver Foo
Managing Director
Alcatel-Lucent, Singapore & Brunei
IT?S clear that Budget 2008 emphasises laying strong foundations for our economy. The government has been very transparent and has set clear goals to accomplish its desired objectives. Alcatel-Lucent welcomes these measures where the technology sector will benefit from increased priorities on education, training and R&D.
These initiatives will help businesses and start-ups in the technology sector improve and expand their talent base. This way, they stay prepared, competitive and ready to innovate. We believe these strategies will help Singapore businesses weather uncertain times ahead and be poised for growth once the global economy recovers.
Gerald Chan
Country Head
UBS Singapore
OVERALL, it was a good Budget aimed at creating a stronger economy, enhancing business competitiveness and building a resilient community.
The multi-year step-up in development spending (especially in transportation) and the generous cash-back to low-mid-income families is very positive.
The removal of estate duty should further benefit Singapore as a wealth management hub. The removal might further attract wealthy individuals from Asia as will the tax incentive scheme for family offices. Furthermore, the incentives to foster Islamic banking could help the financial industry further.
The incentives to foster R&D in Singapore are also a good structural initiative to move Singapore's economy up to higher value-added sectors.
EH Lim
CEO
Avi-Tech Electronics Ltd
BUDGET 2008 is generally a balanced one with something for everyone with particular attention given to older Singaporeans and the lower income group. Among the welcome announcements for Singaporeans must be the 20-per-cent personal income tax rebate and the $865 million Growth Dividend to be distributed in cash to all adult Singaporeans.
Nevertheless, the tax rebate was capped at $2,000. It would have been better to have a rebate of 10 per cent with no cap which would have benefited the society as a whole more fairly.
With respect to healthcare and education, the $200 million top-up to the Medifund and Comcare fund will help the less well-off with medical and education needs. However, the rising cost of healthcare in general was not addressed and this must be worrying for all Singaporeans.
With respect to businesses, those in fields such as biomedics will benefit greatly from tax incentives for research and development. Having said that, businesses in general will not benefit much from the 2008 Budget as higher operating costs were not specifically addressed in the Budget. No incentives, allowances or rebates were given to manufacturing companies such as ours. The cost of doing business is expected to further increase this year and this will impact many companies which do not fall within the incentivised group.
Gary Harvey
CEO
ipac Wealth Management Asia
I BELIEVE the Budget unveiled several measures that will encourage the further development of Singapore into a major wealth management centre. The one-off income tax rebate of 20 per cent, incentives for start-up companies, tax credits on foreign-sourced income, and a 5 per cent concessionary tax rate for offshore Islamic insurers will help us turn into a key private banking centre. The abolishment of estate duty will help draw foreign investors and encourage the creation of multi-generation wealth.
These initiatives, in time, will encourage both the growth of the economy and development of the financial market. However, some points we may need to fine-tune are the potential for the range of incentives to become too complex. Hence, they require simplification if people are to benefit from and understand the changes easily so that all individuals take retirement planning seriously. We should also look at creating more incentives to motivate those who are 55 years old to enhance their retirement funds especially as demographic changes will cause people to stay in the workforce longer.
Deborah Ho
CEO
DBS Asset Management
FOR the wealth management industry, Budget 2008 will be remembered for the elimination of estate duty, which brings Singapore in line with other countries such as Hong Kong and Malaysia. This will boost our reputation as a global wealth management hub, in attracting both Singaporeans and foreigners to base their assets here. It is also a timely move that complements the launch of Formula One and the integrated resorts, in drawing more well-to-do individuals who can contribute to our economy.
I am also pleased to note that this Budget is an inclusive one, as all Singaporeans will get a share of our nation?s surpluses through the Growth Dividends. This will go some way in boosting incomes and helping to counter the impact of inflation. This is especially so for the middle class in managing spiralling living costs.
Gery Messer
President
Red Hat Asia Pacific/Japan
BUSINESSES and citizens should be encouraged by the generous Budget 2008. Most importantly, the focus on innovation would be key in augmenting Singapore's competitiveness globally. As companies leverage on the R&D and innovation incentives, it would be advantageous for them to also be cognisant of the added abilities of various developer communities at large, such as the open source developer community in driving accelerated innovation.
The prowess of communities coupled with the government's focus on innovation can result in a formidable synergy towards propelling Singapore ahead in the global innovation race. This will forge a truly competitive position for Singapore as the economy of choice on a global front.
VR Srivatsan
Vice-President, South Asia
Business Objects
I AM heartened to know that Finance Minister Tharman Shanmugaratnam had highlighted in his 2008 Budget speech that Singapore will invest in a total upgrade of business and IT infrastructure to enable new growth in the decades to come, as this commitment reflects a positive outlook for the IT industry. The focus on providing affordable top-tier tertiary education reflects Singapore's investment in human capital which companies in various industries can benefit from in the near future.
The much welcomed measures, such as Growth Dividends and income tax rebates - to help Singaporeans of various income groups cope with inflation and the rising cost of living - does reduce some pressure on businesses to help their employees cope with the burden, especially in the first half of the year.
Mary Yeo
Managing Director
UPS Singapore
UPS applauds the government for a comprehensive Budget with an overall beneficial scope for the nation. Although there are no major breaks for multinational companies, we believe MNCs will still benefit, as the 2008 Budget lays the framework for Singapore?s continued stability and attractiveness as an investment destination.
According to UPS Asia Business Monitor, a survey on SMEs' competitiveness, innovation is consistently highlighted as one of the key obstacles SMEs face in Singapore. The move by the government to provide tax incentives for SMEs to encourage R&D and innovation is definitely a booster shot for them. With SMEs forming the backbone of the economy, their growth will provide strong growth impetus for Singapore's economy, which will drive the nation's competitiveness and benefit logistics and supply chain companies like UPS.
We agree that the best way to stay competitive, in an uncertain global climate, is to invest in the future. Hence, we are heartened to note that our commitment to the long-term economic benefits of education is one that the government shares.
On the whole, we are satisfied that the Budget will have a positive impact on MNCs, SMEs and ordinary Singaporeans alike. UPS looks forward to a resilient and growing economy in 2008.
Tan Chong Huat
Managing Partner
KhattarWong
BUDGET 2008 addresses the needs of the legal industry through various initiatives. The unilateral tax credit claim for foreign income taxes incurred to all types of foreign-sourced income earned in countries that have yet to conclude an Avoidance of Double Taxation Agreement will mean better profit margins for legal firms with regional aspirations and may provide the impetus for them to further their practice.
Likewise, the double tax deduction for recruitment and relocation costs for global talent will provide a much needed shot in the arm for the increasing demands of good legal professionals here in Singapore. These, together with the measures taken to liberalise the legal services market, will enable Singaporean firms to both look outwards and grow locally in this increasingly competitive marketplace.
The average Singaporean who can now claim tax relief for course fees leading to a vocational qualification will stand to benefit as it will encourage the spirit of life-long learning. I laud the move to make CPF top-ups more easily available to Singaporeans below the age of 55, with tax reliefs of up to $7,000 for those who wish to top up their CPF to the Minimum Sum before age 55. Employers are now permitted to contribute to an employee's pension fund via the Supplementary Retirement Scheme (SRS). This gives Singaporeans more incentive to start planning earlier for retirement.
The annual values of properties were recently revised upwards. In this exercise, we felt that the restraining effect of an existing lease (if any) on the rent attributable to a property cannot objectively be overlooked, as is the current practice. This was something we had hoped the Budget would have addressed because of the very significant impact it has on business costs in Singapore.
Liu Chunlin
CEO
K&C Protective Technologies Pte Ltd
I MUST commend the Minister for a fine balance and addressing a wide spectrum of needs.
In my Views from the Top piece previously, I had alluded to the potential double whammy of inflation and an economic slowdown.
However, quick fixes against inflation only address symptoms. I am glad that besides the goodies to individuals, there are provisions in the Budget for R&D incentives which address longer-term economic sustainability. Perhaps the threat of a slowdown is ironically also helping to impose a reality check, and hopefully a check on inflation, as people are brought back to the need for true value creation.
Our business, which is protective technologies, straddles both construction and manufacturing. The R&D and start-up incentives are particularly relevant. However, because our business is a niche and new market, it does not quite fall into the incentives for categories like maritime or finance. It is our hope that we can grow our particular business into an industry by itself worthy of even greater government attention and incentives in the future beyond start-up incentives.
Shaun Meadows
Chief Executive Officer
Aviva
IN A volatile business environment with changing employment patterns, we understand that lifetime employment is no longer a common trend. Employees will need continuous in-patient medical provision when they change jobs.
With the introduction of the 2 per cent tax deduction limit extending to in-patient benefits through Portable Medical Benefits Scheme (PMBS) either by paying insurance premiums directly or by reimbursing premiums into employees? Medisave, the employer can ensure that their employees get a portable medical plan instead of doing nothing to their Medisave top-up.
We anticipate greater demand from employers for group insurance coverage now that the tax incentive has been introduced. This should further encourage insurance companies to provide better and more innovative products and is a good step forward for us.
Douglas Foo
CEO
Apex-Pal International
WE welcome the changes announced in the 2008 Budget. As an F&B company that is expanding aggressively overseas, every little bit will help us achieve our vision of building global brands. For one, we will certainly benefit from changes to the Skills Development Fund levy as we employ many mature employees and foreign service crew earning less than $2,000. The savings from the levy can be channelled into non-functional company-wide training programmes such as cardiopulmonary resuscitation skills.
With the relaxation to the Equity Remuneration Incentive Scheme, we can also consider using share options or shares to reward our employees. We hope this will help us to attract and retain staff especially when manpower shortage is a constant challenge for the F&B industry.
The Fixtures and Fittings Incentive will give a much needed boost to companies in the service industries who may be reconsidering plans to renovate in view of climbing costs and a slowdown in economic growth and business. This is also critical at a time when Singapore is attracting mega sports and arts events to be hosted here.
Timely renovation is one of the key aspects that can provide an unforgettable experience and thus enable us to meet the sophisticated demands and high expectations of tourists and increasingly well-heeled and well-travelled locals. While the quantum is not a lot, especially for bigger F&B companies managing multiple F&B outlets, it's a good start.
More can be done for those who aspire to be global companies with a presence in every corner of the world. With merger and acquisition as a key strategy that can help companies expand quickly, changes to the treatment of fees of professional services such as legal fees and financial advisory fees, that is, as tax deductible expenses, will also help SMEs.
Overall, we are happy that the government is giving us the help we need in the challenging year ahead.
Valerie Wong
General Manager
Rolls Royce Motor Cars Singapore
I WELCOME a Budget that has invested in the community and tried to help curb inflation. This is a cautious Budget which anticipates the threat of global economic recession.
Against this, we see a backdrop of oil prices breaking the US$100 mark, shrinking COE quota and other pressures on the consumer which will definitely affect the outlook for the motor industry this year.
In terms of fine-tuning, perhaps one idea could be to examine niche demands and look at how we can catalyse the automotive industry in other areas - for example, high value chain activities such as motorsport R&D, which was successfully implemented in the UK, attracting a wealth of Formula One intellectual capital.
Kenny Chan
Managing Director
The Hour Glass Ltd
THE government is driving business growth and attracting investments here by removing estate duty, as well as grants and rebates for companies engaging in R&D activities. The former makes Singapore an attractive place for wealth to be invested and built up, for both Singaporeans and foreigners; while the latter helps to lure companies with a strong technological edge to expand their presence here.
The Hour Glass applauds this approach to grow Singapore's economy and hopes that the government will continue to attract and retain foreign investors. This way, the economy will be kept buoyant, building the momentum in the high-end retail sector.
