Singapore Budget 2010: Focusing on improving productivity

By Carmen Lee
Tue, 23 Feb 2010, 09:12:25 SGT

Summary: In response to the Economic Strategies Committee (ESC) recommendations to increase productivity, the Singapore Budget 2010 has a strong focus on enhancing workers’ and enterprises’ productivity, after last year’s focus to keep jobs. Initiatives were mainly focused on developing the longer term growth of Singapore’s companies, with small-medium sized enterprises likely to be the key beneficiaries. To increase productivity, the government will dish out S$5.5b over the next five years. It is also introducing a new Merger & Acquisition (M&A) allowance to encourage more such activities to drive enterprise growth. REITs and Business Trusts had the concessions extended till Mar 2015. Overall, we feel that the Singapore Budget 2010 is positive for households as well as the SMEs.

Increasing productivity as expected. The Singapore Budget 2010 was largely within expectations and unveiled initiatives to help enterprises and workers to raise productivity. The government is setting aside S$5.5b over the next five years to enhance productivity. There was also the usual emphasis on continuing education as well as higher course fee relief.

Several positives for the market. This included the introduction of a new Merger & Acquisition (M&A) allowance to encourage enterprise growth via M&A, effective from 1 Apr 2010 to 31 Mar 2015. This M&A allowance amounts to a 5% allowance of the value of the acquisition subject to a cap of S$5m. Stamp duty on the transfer of unlisted shares for qualifying M&A deals will also be remitted. For angel investors, a new incentive will allow eligible individuals to enjoy a tax deduction at 50% of his investment at the end of his second year of holding of the investment, capped at $500,000 of investment and with a required minimum investment of S$100,000. There is also the extension of and enhancement to listed REIT concessions. The existing income tax, stamp duty and GST concessions for listed REITs, will be renewed till 31 Mar 2015. Similarly, the GST remission for listed Registered Business Trusts will be renewed till 31 Mar 2015.

Incentives for the SMEs. With the drive to develop and grow Singapore enterprises, there were also incentives for R&D, developing leaders of enterprises as well as the new M&A scheme mentioned above. See the following pages for more details and impact on listed companies.

Households and SMEs are beneficiaries. The Singapore government will be spending a total of S$1.8b in direct transfers to households, benefiting more the lower and middle income families. There are minor changes to the property tax for owner-occupied units. For the enterprises, the above measures are aimed at growing the size of the local enterprises. Overall, the Singapore Budget 2010 is a budget for households and the enterprises, especially the small-medium sized firms.

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