Budget keeps business and workers on track
The Singapore Budget 2014 saw a host of measures extended towards aiding businesses and workers alike.
Primarily, the Central Provident Fund (CPF) contribution rate for all employees will be raised by one percentage point.
The raise will be directed to workers’ Medisave Account to allow them to save for any future healthcare costs.
Along with the one percentage point increase in employer CPF contribution rate for all employees, the CPF contribution rates for older workers above 50 years old will rise by another 0.5 to 1.5 percentage points.
For older employees aged between 50 and 55 years old, CPF rates will increase by 1.5 percentage points, with one percentage point from the employer’s side and 0.5 percentage point coming from the worker’s side.
For those aged between 55 and 65, rates will rise by 0.5 percentage point from the employer’s side.
Labour chief Lim Swee Say revealed that the labour movement is “very happy” with the measures announced in the Budget, although it hopes to see more tweaks to the CPF system.
It hopes that the CPF contribution rates of older workers will be further increased to be on par with their younger counterparts.
Mark Whatley, Director of Benefits, Southeast Asia, Towers Watson, said the increase in the CPF contribution for older workers was a positive step.
“Moreover, only 48 percent of employees in Singapore are comfortable providing for their health care needs in retirement, so the one percent across the board increase in Medisave contributions should help to address these concerns,” said Whatley.
Sim Cher Whee, HR Director of Micron Semiconductor Asia, said the raising of employer CPF contributions came as no real surprise.
“The raise is probably what we have been hearing and although it adds additional cost pressures to businesses, it has been a very consistent response from the business perspective,” said Sim.
Firms also stand to benefit, following news that the Productivity and Innovation Credit (PIC) scheme will be extended for a further three years to 2018. Harvey Koenig, Tax Partner at KPMG in Singapore, welcomed the $3.6 billion continuation of the scheme.
“The extension of the PIC scheme is an important measure to continue support of the economic restructuring of Singapore,” he said.
Deputy Prime Minister and Finance Minister Tharman Shanmugaratnam also revealed the introduction of a new “PIC+” scheme for small and medium enterprises (SMEs).
The proposal will increase the expenditure cap of the current PIC to S$600,000 from year of assessment 2015. SMEs can now claim tax deductions of up to $1.8 million under the scheme.
Koenig stressed that the qualifying criteria should not be arduous, so that “SMEs can better tap on these schemes”.
The government will also further encourage Singaporean businesses to embrace the use of information and communications technology (ICT). It has unveiled three schemes, costing a total of $500 million over the next three years, to assist local companies in utilising the use of ICT.
Koenig said the attention paid to IT investment was “critical”.
“It will enable businesses to transform as they reap more benefits from maturing technologies which were in their infancy not along ago,” he said.
“The various funding and incentive schemes to encourage adoption of ICT to transform businesses are helpful, especially for SMEs which lack the means to invest for their future.”
Deputy Prime Minister Tharman also revealed that the Lifelong Learning Endowment Fund would be raised by $500 million, equating to a total fund size of $4.6 billion.
The government is also aiming to reduce the dependence on low-skilled foreign construction workers, by increasing their levies from $600 per worker to $700 in July 2016.
However, levies for higher-skilled foreign construction labourers will stay the same to promote their utilisation.