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SINGAPORE: For many Singaporeans, the Budget announcements made on Thursday were well received. "It is a hong bao budget, especially for the lower income groups and Small to Medium-sized Enterprises (SMEs)," says Cheong Choy Wai, Tax Partner at Ernst & Young, Singapore.
Ms Cheong is referring to the "progressive and innovative" restructuring of the Central Provident Fund (CPF) and the introduction of the Workfare scheme to benefit Low-Wage Workers; and the revised tax regime for SMEs and start-ups to make it easier for them.
"The two per cent corporate tax rate cut is clearly significant for all companies," says Ernst & Young Tax Partner Tan Lee Khoon. "This, coupled with the increase in partial tax exemption from $100,000 to $300,000 will especially benefit SMEs."
In a press release the Singapore Manufacturers’ Federation (SMa) could not agree more: "[It] will certainly enhance Singapore’s competitiveness and attract more foreign Multi-National Companies (MNCs) and SMEs to base their operations here."
Furthermore, Ms Tan says, "The 20 per cent psychological barrier has been broken. The 18 per cent corporate tax rate well positions Singapore for the next lap in a competitive global economy."
She makes a direct comparison to regional competitors, "With the partial tax exemption, Singapore’s effective corporate tax rate will be even lower than Hong Kong’s rate of 17.5 per cent."
The SMa described this year’s Budget as a "business-friendly and socially-balanced 2007 Budget", though it did also express hopes for a reduction in personal income taxes in future to further attract foreign talent in higher income brackets.
Meanwhile companies in Singapore must start preparing for changes to the Goods and Services Tax (GST) which will increase to seven per cent from July.
"It’s the triple 7 – a straight increase to 7 per cent GST, to be implemented in July [7th month] and in 2007," notes Yeo Kai Eng, Tax Partner, GST Services, Ernst & Young Singapore.
"We are only another four-and-a-half months away from the next rate increase, therefore it’s a pretty tight deadline for companies."
However there are reports that some businesses – shopkeepers and small retailers – have already started raising their prices in anticipation of the GST rate increase.
This has raised concerns about profiteering – increasing the prices beyond the two per cent rise as outlined in the Budget.
Raymond Chua, Chairman of the STARetailer Programme at Sim Lim Square, assures consumers that this is being carefully monitored to ensure it doesn’t happen, particularly at his retail outlets.
"We would like to assure consumers that we will absorb the GST increase for most of the lower priced items. However, for big dollar items the prevailing GST amount will be applied. Big dollar items would include larger televisions, sound systems and high-end computers," he says.
To guard themselves against profiteering, consumers are advised to do their own research, make price comparisons and make a decision based on the quality of the product and the after-sales service.
Meanwhile Mr Chua also shares his concerns for retailers, "We are concerned about the GST rate increase because it might cause consumers to be more stringent with their expenditure. This was evident in the [previous GST increases in 2003 and 2004 where] consumers postponed their purchases until they felt comfortable with the increases."
But in the lead up to the GST hike, business is expected to boom, with many Singaporeans intent on stocking up on goods, to beat the price rise in July. - cna/yy
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