Finance Minister Heng Swee Keat made his inaugural Budget speech in Parliament today. Access the full speech here. The broad structure and summary of his speech is as follows:
(A) the socio-economic environment then and now
(B) transforming our economy through enterprise and innovation:
(i) Near-term economic support:
– public infrastructure projects in healthcare, education, security and urban development increase by $5 billion
– transition support package: $1.9 billion for qualifying wage increased under the Wage Credit Scheme
– raise the existing Corporate Income Tax (CIT) Rebate, from 30% of tax payable to 50% of tax payable, with a cap of $20,000 rebate each year for YAs 2016 and 2017
– Special Employment Credit to provide employers with a wage offset for workers aged 55 and above earning up to $4,000 a month extended to end 2019 covering 340,000 workers – SEC fund top up by $1.1 billion
– SME Working Capital Loan scheme, for loans of up to $300,000 per SME: the government will co-share 50% of the default risk of such loans with participating financial institutions, to encourage lending to SMEs. Loan availability: 3 years.
– MND will enhance the Revitalisation of Shops package, to better support promotional activities and upgrading projects in the heartlands: $15 million annually
– Defer levy increases for Work Permit holders in Marine and Process sectors for 1 year
– Property measures remain
(ii) Industry Transformation Programme: transforming enterprises, transforming industries and transforming through innovation
> transforming enterprises:
– launch of the Business Grants Portal in the fourth quarter of this year
– new Automation Support Package ($400 million over next 3 years): support the roll-out or scaling up of automation projects; Govt will fund these projects at up to 50% of project cost, with a maximum grant of $1 million; new 100% Investment Allowance for automation equipment; Govt will enhance risk-share with participating financial institutions from 50% to 70% for SMEs’ access to loans for qualifying projects.
– expanding the SME Mezzanine Growth Fund from the current fund size of $100 million to a total fund size of up to $150 million for SMEs to scale up and internationalise
– M&A allowance on up to $40 million of the value of the deal, instead of the current cap of $20 million
– non-taxation of companies’ gains on disposal of their equity investments, based on existing scheme parameters, until 31 May 2022
– extending the Double Tax Deduction for Internationalisation scheme, till 31 March 2020. This covers qualifying expenses incurred for activities such as participation in overseas business development and investment study trips
> transforming industries:
– National Trade Platform to replace current TradeNet and TradeXchange systems: one-stop trade information management system
– over $450 million to support the National Robotics Programme over the next three years
– industry-level transformation through Trade Associations and Chambers (or TACs): SPRING will partner TACs to drive 30 such projects over the next three years, to reach out to more than 3,000 SMEs; $30 million over the next five years;
> transforming through innovation:
– top-up of $1.5 billion to the National Research Fund this year
– allow businesses the flexibility to write down the cost of acquiring IP over different periods of 5, 10 or 15 years, instead of the current 5 years only
– nurture a start-up ecosystem by setting up a new entity called “SG-Innovate”. SG-Innovate will match budding entrepreneurs with mentors, introduce them to venture capital firms, help them to access talent in research institutes, and open up new markets
– Jurong Innovation District
– $1 billion top-up to the Changi Airport Development Fund
– lower the cash payout rate under PIC from the current 60% to 40%; PIC scheme which has been extended for YA 2016 to YA 2018 and will expire thereafter
(iii) Supporting Singaporeans through change:
– SkillsFuture
– MOM will enhance employment support through the “Adapt and Grow” initiative: wage support schemes to encourage firms to hire workers who face difficulty finding jobs; professional conversion programmes will be launched in sectors such as Design, and ICT
– set up the TechSkills Accelerator, a new skills development and job placement hub for the ICT sector
(C) Building a caring and resilient society
(i) Caring for Our Young
– new Child Development Account (CDA) First Step grant for all Singaporean children. Parents will automatically receive $3,000 in their child’s CDA, which they can use for their children’s healthcare and childcare needs. Parents who save more will continue to receive dollar-for-dollar matching from the Government, up to the co-savings cap.
– pilot a new initiative, called KidSTART, for children in their first six years. Based on extensive research which shows that experiences in the early years of a child’s life significantly influence his or her physical, cognitive, and social development. About 1,000 children are expected to benefit. This pilot is expected to cost more than $20 million.
– Fresh Start Housing Scheme: grant of up to $35,000 to help families with young children in rental housing to own a 2-room flat
– new National Outdoor Adventure Education Masterplan and new Outward Bound Singapore (OBS) campus on Coney Island
(ii) Caring for Our Low Wage Workers and Persons with Disabilities
– Workfare Income Supplement (WIS) scheme: raise the qualifying income ceiling from the current average wage of $1,900 a month, to $2,000 a month; increase WIS payouts; simplify the qualifying criteria for WIS-pay WIS for every month worked
– supporting persons with disabilities at work: employers who hire persons with disabilities who earn up to $4,000 a month will continue to receive the SEC. They get a credit of up to 16% of the employee’s wages, twice as large as the SEC for older workers. Now, Govt will enable persons with disabilities who earn low wages and are under 35 years old, to be eligible for the Workfare Training Support scheme
(iii) Caring for our Seniors
– Silver Support Scheme to support the bottom 20% of Singaporeans aged 65 and above, with a smaller degree of support extended to cover up to 30% of seniors. 3 criteria to identify those who are the bottom 20% to 30% of seniors: lifetime wages (have not more than $70,000 in total CPF contributions), housing type (own 4-room or smaller HDB flat), and the level of household support (earns not more than $1,100 per month). Eligible seniors will receive between $300 to $750 every quarter
– pilot Community Networks for Seniors. These networks will comprise local stakeholders, such as Voluntary Welfare Organisations (VWOs), community volunteers, schools and businesses; Pioneer Generation Ambassadors will, through their outreach, encourage seniors to stay active and connect them to relevant support
(iv) Other Measures Affecting Households
– raise the basic monthly cash allowance under the Public Assistance Scheme
– increase the Singapore Allowance and monthly pension ceiling by $20 per month each – to $300 and $1,230 respectively
– one-off GST Voucher – Cash Special Payment of up to $200 for eligible GST Voucher – Cash recipients
– one to three months of Service & Conservancy Charges (S&CC) rebate
– introduce a cap on the total amount of personal income tax relief an individual can claim, at $80,000 per Year of Assessment: will likely only affect 1% of tax-resident individuals
(v) Building a Caring Society
– introduce a pilot Business and IPC Partnership Scheme: businesses that organise their employees to volunteer and provide services to IPCs, including secondments, will receive a 250% tax deduction on associated cost incurred, subject to the receiving IPC’s agreement. This deduction will be subject to a yearly cap of $250,000 per business and $50,000 per IPC
– provide dollar-for-dollar matching for any additional donations through Community Chest’s monthly donation programme SHARE, over and above the FY2015 level-will be over three years, starting from April this year
– set up a new fund of up to $25 million, called Our Singapore Fund (following from SG50 Fund) to support projects that build the spirit of caring and resilience, nurture our can-do spirit, and promote unity and our sense of being Singaporean
(D) Budget position
In FY2016, total spending is expected to be $5.0 billion (7.3%) higher than in FY2015. Rise in expenditure in FY2016 is supported by increases in both Operating Revenue and higher Net Investment Returns (NIR) Contributions. This is partly because of Temasek being added onto the NIR framework and thus being a source of revenue for the long term. Govt expects overall budget surplus of $3.4 billion (0.8% of GDP) in this first year of the term.