Singapore's approach is in stark contrast to that adopted by most major developed economies that are raising their taxes to fund their stimulus plans.
Singapore (PRWEB) February 22, 2010
The Singapore Government released its budget for the year 2010 this afternoon. An analysis of the budget by GuideMeSingapore.com shows that the country has weathered the financial crisis very resiliently and it now seeks to build upon this success by ushering an era of higher productivity.
In his budget speech, Minister of Finance, Mr. Tharman Shanmugaratnam assessed the effectiveness of last year's budget. In 2009, to counter the steep fall in economic activity caused by the global financial crisis, Singapore launched one of the world's most aggressive stimulus plans on a per-capita basis that represented nearly 6% of its GDP or S$20.5b.
The 2009 budget had assumed that the Singapore economy would contract by as much as 5% in 2009 and that the recession could extent to 2010. Instead, the Minister informed that the country ended the recession in the 2009 and shrank only by 2%. Another key objective of the 2009 budget was to protect jobs and keep the country's unemployment rate low. The country succeeded quite well on that measure as well. According to Mr. Shanmugaratnam, the unemployment in the country stood at 3% by the end of 2009. Finally, the basic deficit in 2009 turned out to be only S$8.5B as opposed to a projection of S$14.9B. For 2010, the budget projects a annual growth of around 4.5% to 6.5%.The government can rightfully claim to have met the financial crisis resolutely.
To build upon this success, the 2010 budget takes a comprehensive approach to improving the productivity of the country's economy and sets an ambitious target of improving it by 2% to 3% each year over the next decade. To meet this objective, the budget introduces several initiatives including the following:
- A S$2.5B investment to improve worker skills through Continuing Education and Training over the next 5 years.
- Productivity and Innovation Credit lasting 5 years that will allow 250% deduction for expenditures on innovation focused activities such as R&D, intellectual property registrations or acquisition, employee training, automation and design.
- A S$2B National Productivity Fund that will promote industry-wide productivity improvements with construction sector being the initial focus.
- Tax allowance equal to 5% of the acquisition value to help promote M&A activities.
- An additional S$1.5B to the National Research Fund to promote public sector R&D.
- A 50% tax deduction (after 2-year holding period) for angel investors in order to promote entrepreneurial start-up formation.
- A S$1.5B commitment over 10 years to seed a range of venture capitals funds in partnership with the private sector.
- Industry specific incentives to promote Singapore's global competitiveness in legal services, financial services, transportation, marine financing, and clean technologies.
- Property and tax reliefs for lower and middle income households.
These measures reinforce Singapore's attractiveness to foreign investors. Jacqueline Low, the Director of Singapore Incorporation Services at Janus Corporate Solutions, the parent company of GuideMeSingapore.com said, "By identifying productivity improvement as its primary objective for the next decade, the Singapore government has set the stage for the next evolution of its economy. The measures announced today will help the country improve the skills of its workers, the quality of its jobs and the incomes of its citizens. Furthermore, the venture capital seed funding will accelerate the pace of new company formation by entrepreneurs and foreign investors. The government is making these substantial investments without resorting to higher taxes. Singapore's approach is in stark contrast to that adopted by most major developed economies who are raising their taxes to fund their stimulus plans. The 2010 budget makes Singapore an even more competitive business jurisdiction for international investors."
The full text of the Minister Shanmugaratnam's budget speech is available at http://www.singaporebudget.gov.sg/budget_speech.html. A summary of the key initiatives introduced in the budget is available at http://www.guidemesingapore.com/tax/c894-singapore-budget-2010-summary.htm. A quick overview of Singapore's tax system is available at http://www.guidemesingapore.com/reports/singapore-tax-report-2010.pdf.
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