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Deloitte’s post Budget sentiment survey

SINGAPORE, 13 March 2014 — Singapore’s Minister for Finance presented the 2014 Budget Statement on 21 February 2014.  Two weeks after the announcement, Deloitte’s post Budget sentiment survey reveals the following insights:

  • The top two business concerns of small and medium enterprises (SMEs) are rising business cost (55%) and talent shortage issues (45%)*.
    • It is clear that the SMEs are a big beneficiary of this year’s Budget through a variety of support measures and additional tax incentives and the survey results reflect this – almost half (46%) of the SMEs said that the budget sufficiently addressed their concerns.
    • However, 18% of the respondents said it did not address their concerns sufficiently.
    • The other three business concerns raised by the SMEs include: Global economic environment (36%), boosting productivity (27%) and incentives for investment in innovation (18%).
  • For the multinational companies (MNCs), 83% of those that responded said that managing rising business cost is a key concern, followed by the need to boost productivity (42%)*.
    • When asked if the Budget sufficiently addressed their concerns, none of the MNCs that responded said it did.
    • 42% of the MNCs said that the Budget was neutral to them while more than half (58%) of the MNCs indicated that the initiatives introduced did not address their concerns sufficiently.
    • In comparison to the SMEs, only 8% of the MNCs indicated that talent shortage is an issue for them.
    • The other top business concerns raised by the MNCs include: Global economic environment (25%) and incentives for investment in innovation (25%).

*Note: For this question, respondents were asked to select their top two concerns in the lead up to this year’s Budget announcement. There were eight options from which to choose, including 'others' and multiple responses were permitted.

These results were first unveiled at Deloitte Singapore’s recent Budget seminar held on 3 March 2014 during a panel discussion led by Low Hwee Chua, Head of Tax Services, Deloitte Singapore & Southeast Asia, and the panelists shared their views on the results:

Song Seng Wun, Regional Economist, CIMB GK Research - SMEs are more nimble and hence in a better position than MNCs to manage business cost. For instance, they can relocate their operations to other parts of Singapore to reduce rental cost if required as they tend to be smaller in size. However, the talent shortage issue is a real concern for SMEs. Many Singaporeans are still gravitating towards the MNCs and MNCs are still the more attractive employers when you consider the whole employment package.

Lee Tiong Heng, Tax Partner, Deloitte Singapore - The calls by SMEs for more help have broadly been answered with this year’s budget. More support has been given in the areas of investment in productivity, innovation, adoption of Infocom Technologies, overseas expansions and financing support. There are still areas for improvements such as the communication between IRAS and businesses on the process of agreeing the PIC-R&D claims so that the gap between what businesses and IRAS view as R&D can be closed. Also, cash flow remains a key concern for SMEs. We will like to see more help given to SMEs which are struggling. For example, a higher level of cash payout for PIC can be considered and the time period of cash payout can be shortened.

Robert Tsang, Indirect Tax Leader, Deloitte Singapore, Southeast Asia & Asia Pacific - There was only one notable change for the Goods and Services Tax (GST), which demonstrates that the Government values stability and consistency for businesses in Singapore, particularly in the fund management industry that was affected by the change. More of the same steady course; the business-friendly approach continues -  IRAS continues to watch what other countries in the region are doing in relation to Indirect Tax, to ensure that Singapore keeps pace.

Low Hwee Chua, Head of Tax Services, Deloitte Singapore & Southeast Asia - While it may seem like there is little offering in this year’s Budget for MNCs, MNCs should consider the measures introduced this year in totality with the existing tax regime. The extension of the PIC, R&D and IPR writing-down allowance schemes relate to broad-based schemes that are available to MNCs as well. It is also important for the MNCs to note that last year the Government introduced the 3-year transition support package, which is now estimated to be a SGD7.3 billion package, much higher than the originally estimated. This package includes corporate tax rebate, PIC bonus as well as the wage credit scheme which is a scheme whereby the Government will co-fund 40% of wage increases for Singaporean employees earning a gross monthly wage of $4,000 and below.

The survey also asked companies to indicate the areas that have not been addressed by the Budget announcement and the following points in the area of business tax were raised:

  • Simplification of tax compliance regulations
  • Increase PIC cash payout limit
  • More generous R&D and innovative incentives
  • More funding for overseas expansion
  • More measures to manage rising property related costs
  • Allowances for increasing cost of labour due to shortages
  • Tax rate reduction

Another suggestion that was also captured by the survey is the call for a reduction in personal tax rates.

Overall, the SMEs are more optimistic about the progress of the Singapore’s economy in the next 12 months in light of this year’s Budget, with 45% of the respondents believing that the economy will improve and 55% said it will stay the same. For the MNCs, only 17% of the respondents indicated that it will improve, 75% said it will stay the same and 8% commented that it will get worse.

That said, Singapore still remains relevant and the measures that the Government has been introducing since 2010, as part of the 10-year economic restructuring exercise, will continue to position Singapore as an attractive destination for foreign investment.

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Jeanette Juay
Deloitte Singapore
Job Title:
Marketing & Communications
+65 6531 5050
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