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Budget 2016: More support for SMEs to address near-term concerns

A calibrated set of measures will be introduced to address the near-term concerns of companies, especially SMEs, while enabling restructuring, says Finance Minister Heng Swee Keat.

SINGAPORE: To tide over cyclical weaknesses in Singapore’s economy, Budget 2016 includes a range of measures to support businesses, particularly small- and medium-size enterprises (SMEs), Finance Minister Heng Swee Keat announced on Thursday (Mar 24).

First, the Corporate Income Tax rebate will be raised from 30 per cent of tax payable to 50 per cent, with a cap of S$20,000 rebate each year for Year of Assessment 2016 and 2017.

The higher rebate, targeted at SMEs, is expected to cost the Government an additional S$180 million over two years. This brings the total support given to companies under the Corporate Income Tax rebate to close to S$1 billion over two years, Mr Heng said.

The Special Employment Credit (SEC) scheme, which subsidises the wages of older locals earning up to S$4,000 a month and was due to expire on Dec 31, will be extended to 2019. The scheme, however, will now only apply to workers who are 55 and above, instead of 50 and above.

The subsidy has also been reduced for workers below 65. Employers who hire workers aged 55 to 59 will now get 3 per cent of these employees’ monthly wages, while those who hire workers between 60 and 64 will get 5 per cent. Those who hire workers 65 and above will get 8 per cent – unchanged from the current subsidy – which will be bumped up to 11 per cent until the re-employment age is raised.

Current Special Employment Credit wage offset

Age of Worker

Until Dec 31, 2016

50 and above

Up to 8% of monthly wage

65 and above

Up to 8% of monthly wage
(+ additional 3% until re-employment age is raised)

New Special Employment Credit wage offset

Age of Worker

2017 to 2019

55 to 59

Up to 3% of monthly wage

60 to 64

Up to 5% of monthly wage

65 and above

Up to 8% of monthly wage
(+ additional 3% until re-employment age is raised)

For SMEs with cash flow concerns, an SME Working Capital Loan scheme will be introduced for loans of up to S$300,000 per company. Under this scheme, the Government will co-share 50 per cent of the default risk of such loans with participating financial situations.

The scheme will be available for three years, and is expected to catalyse more than S$2 billion of loans over this period, Mr Heng said.

TARGETED HELP FOR SECTORS

For the marine and process sectors, which is facing challenging business conditions and has seen a reduction in the number of work permit holders, the levy increase for work permit holders will be deferred for one year.


Levy increases will apply for work permit holders in the services and construction sector, as well as S Pass holders in every sector, as announced in last year’s Budget. The foreign workforce in these sectors has continued to grow over the past year, Mr Heng noted.

Meanwhile, heartland shops will get more support under the Revitalisation of Shops package, which will be enhanced to better support promotional activities and upgrading projects in HDB town centres and neighbourhood centres.

SPRING will also work with the Federation of Merchants Associations and local merchant associations to strengthen their capabilities to support heartland businesses.

The initiative is expected to cost about S$15 million annually, Mr Heng said.

“Taken together, this calibrated set of measures is appropriate to address the near-term concerns of our firms, especially SMEs, while enabling restructuring,” Mr Heng said.

Some have asked for a repeat of support measures introduced during the global financial crisis in 2009, he said.

“But that was when the economy was already in deep recession, and facing huge uncertainty. For now, while the outlook is soft, MTI (Ministry of Trade and Industry) expects positive growth in 2016.

“We must not let pessimism take hold, lest it creates self-fulfilling expectations,” he said.