Over S$1.4 billion in additional near-term measures, on top of existing measures, will be given to support businesses over the next year, said Finance Minister Heng Swee Keat when delivering Budget 2017 on Monday.
He noted the need for sectors and firms that are doing well to focus on the long term and to build on the momentum to seize new opportunities, while specific measures are put in place to help sectors facing cyclical weaknesses and structural shifts.
Notably, the cap for the corporate income tax (CIT) rebate will be raised from S$20,000 to S$25,000 for year of assessment 2017, with the rebate remaining at 50 per cent of tax payable.
The CIT rebate will also be extended to YA2018, with the rate of tax payable reduced to 20 per cent from the current 50 per cent and capped at S$10,000.
The CIT rebate measures will cost an additional S$310 million over two years.
Existing measures like Wage Credit Scheme, Special Employment Credit (SEC) and SME Working Capital Loan (WCL) will continue.
The government expects to pay out over S$600 million to businesses next month, where about 70 per cent of it will be paid out to small and medium enterprises (SMEs).
The scheme co-funds a portion of the wage increments given to Singaporean employees earning S$4,000 a month or less.
A total of 370,000 workers will benefit from over S$300 million expected to be paid out this financial year under the SEC, which has been extended to 2019.
It provides wage-offset to employers hiring Singaporean workers aged 55 and above, and earning up to S$4,000.
Take-up rate for the SME WCL has been good - it has catalysed more than S$700 million of loans since its launch in June 2016.
Under the scheme, SMEs can apply for unsecured term loans of up to S$300,000 each, where the government co-shares 50 per cent of loan-default risks.
The hard-hit marine and process sectors get some relief as foreign worker levy will remain the same for another year.
But in the construction sector, foreign worker levy will increase, as announced in 2015, in order to sustain the momentum for productivity improvement.
At the same time, the start dates of public sector infrastructure projects worth S$700 million will be brought forward to financial years 2017 and 2018 to support the ailing sector.
Local construction firms will be able to bid for and participate in these projects, which include the upgrading of community clubs and sports facilities, said Mr Heng.
Read Also: Registration tax hikes for big motorcycles
ANZ economist Ng Weiwen said: "The acceleration of public infrastructure projects will be a boon to the construction sector and an additional fillip to headline GDP (gross domestic product) growth.
The construction sector accounted for 5 per cent of real GDP in 2016."
The increase in CIT rebate cap and extension are a welcome move but it does not provide any relief to loss-making businesses, said Harvey Koenig, tax partner at KPMG in Singapore.
NUS Business School Associate Professor of accounting Simon Poh said: "Struggling companies or, for that matter, even mildly profitable companies that earn up to S$387,794 taxable income, will not enjoy additional CIT rebate for YA 2017."
Thus, chief executive officer of Singapore Business Federation (SBF) Ho Meng Kit said: "We are disappointed and a bit underwhelmed. We have expressed our concerns but many are not met."
In a strongly-worded statement, SBF said there are inadequate short-term support to lower business and compliance costs.
It suggested that the deferment of foreign worker levy increments be extended across other sectors, which are also experiencing cost challenges.
It also expected rental rebates but there were none, it said.
Read Also: Big emitters face carbon tax from 2019
Deloitte Singapore tax partner Ong Siok Peng said it would be more helpful to re-introduce SME cash grant to help non-tax-paying businesses cope with rising business costs.
Nevertheless, the increase in CIT rebate cap provides some certainty for businesses on income tax for profit made this and last years, said PwC Singapore's tax leader Chris Woo, as the government continues what it has been doing for the past six years.
- The cap for the corporate income tax (CIT) rebate will be raised from S$20,000 to S$25,000 for year of assessment 2017.
- Existing measures like Wage Credit Scheme, Special Employment Credit and SME Working Capital Loan will continue.
- Foreign worker levy increments for the marine and process sectors are deferred by one more year.
- Public sector infrastructure projects worth S$700 million will be brought forward to financial years 2017 and 2018.
- For more Budget 2017 stories visit bt.sg/budget17
This article was first published on February 21, 2017.
Get The Business Times for more stories.