The Singapore government is rolling out a major support package for businesses as the economy recovers while strengthening the local enterprise ecosystem. Here's what you need to know.

Singapore’s Finance Minister Lawrence Wong delivered a milestone Budget this year. Much of the focus was around the tax system, especially with the raising of the Goods and Services Tax (GST), which will be delayed and done over two stages on January 1, 2023 and January 1, 2024.

But there was a big section devoted to helping businesses continue to transition into a post-pandemic economy, one that is increasingly digital and globalised.

Here are four key areas that businesses should be paying close attention to.

1. Cash grants, salary support and access to capital

Small and medium enterprises (SMEs) in Food & Beverage (F&B), retail, and tourism have been among the most affected by the pandemic. To help ease them past the pandemic, the government proposes to give a one-off cash grant of S$1,000 per employed local, capped at S$10,000 per company, as part of the Jobs and Business Support Package.

The government will also extend the Jobs Growth Initiative, introduced in 2020, to September this year. This scheme encourages firms to hire locals by paying part of the salary for companies that do so.

The popular Temporary Bridging Loan will also be extended from April to September in 2022. This scheme helps companies continue to maintain cash flow through easy-to-access loans from banks.SMEs can reach out to their friendly bankers for more advice.

Lastly, while the delay in the GST hike offers some short-term relief, smaller businesses and retail players are likely to be the most affected when it does hit. Businesses with an annual revenue below S$1 million, for instance, which are not required to be GST-registered, will not receive GST refunds on their purchases or cost of goods. “Businesses that serve end consumers or are in the retail segment will have to face the decision of charging more or absorbing the GST. Both actions will put pressure on sales and margins,” said Marc Leong, Head of SME Banking at Maybank Singapore.

Quick take: The pandemic has raged for over two years but it has reached a turning point, with the successful rollout of vaccines. But Singapore is not quite out of the woods yet. Economic recovery is fragile and there is always the danger of another variant emerging.

For some industries, such as retail, tourism and F&B, the situation remains uncertain. Cash is king and SMEs in these sectors will appreciate any help they can get.

 

2. Higher bar for foreign talent

Companies will also have to pay higher salaries from September 2022 if they want to hire foreigners on the Employment Pass and S-Pass.

The salary requirement for S-Pass will go up to S$3,000, from S$2,500 currently. The minimum qualifying salary for new S-Pass applicants will be raised in September next year, and again in September 2025. The Government will also raise the S-Pass levy from S$330 now to S$650 by 2025.

The salary requirement for the Employment Pass (EP) will also be hiked to S$5,000, from S$4,500 currently.

For companies in the construction and process sectors, the proportion of work permit holders will be reduced from 87.5 per cent to 83.3 per cent from 2024.

The government will aim to ensure that EP holders are comparable in quality to the top one-third of local professionals, managers, executives and technicians (PMET) workforce, and S-Pass holders are comparable to the top one-third of local Associate Professionals and Technicians.

Quick take: The doubling of levies for the S-Pass is significant and can quickly add up for companies that have a large number of S-Passes on their payroll. The Government continues to welcome foreign talent but the higher bar is a strong sign that companies need to be selective about hiring foreign talent.

Instead of simply hiring foreign talent in Singapore, companies should think about raising productivity, embracing digitalisation, and expanding to new markets to get around rising costs of manpower in Singapore.

 

3. Major green push with carbon tax, green bonds

Companies will also have to be more careful about their carbon footprint after the Government announced major hikes in the carbon tax rate. It will surge to S$25 per tonne by 2024 and 2025 from just S$5 today. By 2026, the carbon tax will double to S$45.

Maybank’s senior economist Dr Chua Hak Bin said: “The government does not expect to derive additional revenue from the increase in the carbon tax, as most of it will be used for investments into new low-carbon and more energy efficient solutions, as well as cushioning the impact on households and businesses.”

At the same time, the government will also look to issue more green bonds to support the greening of public infrastructure. Finance Minister Wong said the government plans to issue up to S$35 billion in green bonds by 2030 to support this push.

Quick take: Green is in. Companies will need to take the greening of their operations seriously from now on with the Government fully behind the sustainability push. The carbon tax will affect industries such as logistics and manufacturing.

But it also provides new opportunities for fresh industries to take root. The green bond drive will also further boost Singapore’s ambitions to be a premiere green finance hub - thereby developing new companies and jobs in the process.



4. Digital economy

With the rise of the digital economy, companies will need to put digital at the front and centre of their operations.

To assist in the transformation, Mr Wong said that the government will set aside a further S$600 million to boost the Productivity Solutions Grant (PSG). Among other things, SMEs could tap the scheme to acquire digital solutions such as accountancy, HR, and customer management automated services.

Quick take: Digitalisation has been a recurring theme for enterprises, especially SMEs. The additional help through the PSG should further extend help for companies who are keen to test new digital solutions such as payroll, accounting and e-commerce services.

For companies looking to further digitalise their operations, the next step is in thinking about big data, cloud and artificial intelligence. These will not only eke out more productivity gains but also potentially expose them to new services, markets and products.


For local businesses, the signal is clarion clear: change is nigh. Companies will need to think digital and go green - these twin forces will reshape the global economy and how businesses are run in the not-so-distant future. Fortunately, with a little help from the Government, businesses can transform themselves to thrive in the new economy.

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