A Summary of Singapore’s 2017 Budget
By Wanying Zheng, Advisory Manager, Radius
On February 20, Singapore’s Finance Minister Heng Swee Keat announced the Singapore budget for the 2017 financial year. Since the text is over 50 pages long, we’re summarizing its most important points for foreign entities doing business in Singapore and for those considering expanding there.
Many changes around the globe in 2016 — notably in the US and the UK — have posed potential risks to Singapore, whose economy is heavily dependent on international trade. The budget announced last week echoes Singapore’s 2016 budget in that it emphasizes the need for: flexibility in the face of global economic and political change; a healthy, green Singapore economy; and continued innovation and increased productivity.
In order to better equip the Singapore economy for the ever-changing, digitalized global environment, the 2017 budget aims to continue to support small businesses and enterprises through a further increase in the corporate income tax rebate, additional initiatives such as the Go Digital Program and intellectual property development incentives. Heng points out that “enterprises are the heart of vibrant economies,” and places on record Singapore’s commitment to ensuring that enterprises operating in the country develop and strengthen, particularly by using digital technology and embracing innovation.
The budget also introduces a carbon tax and a vehicular emissions scheme, restructures diesel taxes and increases water prices, all to encourage a sustainable environment and spur economic growth. The introduction of the carbon tax (effective 2019), along with the diesel tax changes, implies a necessary modification of the Singapore tax structure and a gradual shift of Singapore’s tax base from direct tax to indirect tax.
For individuals in Singapore, the budget proposes personal income tax reliefs at 20 percent capped at SGD$500 for income earned in 2016 and a marginal increase in the GST voucher. Heng acknowledges the importance of developing the capabilities of the workforce in Singapore. He proposes the Global Innovation Alliance for Singaporeans so that local citizens can gain experience overseas. He also proposes innovation programs, as well as the SkillsFuture Leadership Development Initiative to grow leaders and help businesses scale up and expand globally.
Overall, the budget is likely to have minimal immediate effects for most Singaporeans and most businesses operating in Singapore. However, the budget’s proposals will likely benefit smaller businesses and the Singaporean workforce in the near future.
Here is a summary of the 2017 budget’s key points.
Key Points for Businesses
- The corporate income tax rebate remains at 50 percent for SMEs, but the cap will be increased from SGD$20,000 to $25,000 for YA2017.
- The corporate income tax rebate is extended for another year at 20 percent, with a cap at $10,000.
- The National Research Fund and the National Productivity Fund will both be increased.
- Funds will be allocated to help Singapore-based companies scale up and internationalize.
- Over $80 million of budget will be devoted to helping SMEs go digital under the SMEs Go Digital Program, including building an SME technology hub to provide specialized advice.
- Intellectual property development incentives will be introduced to encourage research and development.
- Investments will be made to improve productivity and innovation in the construction industry.
- A carbon tax will be introduced in 2019, and there will be changes to diesel taxes.
- A review of the goods and services tax on imported digitized services has been proposed.
- Additional special employment credit will be extended for businesses to retain older members of the workforce.
- Water prices will go up by 30 percent in two phases over the next two years.
- There will be further funding for Singapore’s cyber security program.
Key Points for Individuals
- A personal income tax rebate of 20 percent of tax payable will be made available, with a cap at SGD$500 for income earned in 2016.
- The Global Innovation Alliance and SkillsFuture Leadership Development initiatives will be introduced to development Singapore’s workforce.