4 groups of people that Budget 2016 forgot about

by Ryan Ong

IN MOST of life’s situations, you win by coming in first. For example, the first one to seize a good investment opportunity makes the most money, and the first one to become a doctor is the only one who gets the Asian parents’ love. But with Singapore’s Budget announcements, those who come in first (in the income category) don’t get to win at all. It’s like our way of saying “Who do you think you are, being better than 99 per cent of us?” So here’s who benefits the least:

Budget 2016 has been called a “targeted” budget, which may not be the best choice of words. I wouldn’t pick a term that implies previous budgets were not targeted, and distributed like a bus full of drunk MBS casino winners chucking money out the windows. But we get the picture: it’s a bad year, money’s tight, and only the ones with the most urgent need get a leg up.

The top winners from this Budget were SME owners, laid-off PMETs, and the elderly. But that leaves some portions of society to fend for themselves. These are:

– Working, high income mothers
– Business owners still reliant on foreign labour
– Certain niche business owners
– Property developers and real estate agents

1. Working, high income mothers

The maximum income tax relief is now $80,000. The demographic most affected by this is working, high income ($152,000 per annum or above) mothers with two or more children. Previously, this demographic had escaped taxes due to the Working Mother’s Child Relief (WMCR) scheme.

The WMCR grants 15 per cent tax relief for the first child, 20 per cent for the second child, and 25 per cent for each subsequent child. This could reach 100 per cent of the working mother’s income, so many paid no taxes. This is no longer the case. With the cap in place, working mothers who earn in the range of $152,000 would pay approximately $2,700 in taxes (and more for higher earnings).

This is such a tragedy for affluent working mothers. What kind of monster chooses to help the destitute and elderly, some of whom have incomes below $1,000 a month and no homes, in place of women who make over $12,600 a month? If we’re going to be pro-ric…pro-family, we should take their concerns seriously.

2. Business owners still reliant on foreign labour

Given the rocky economy, many business owners were looking forward to deferments in rising foreign worker levies. As it turns out, only two sectors saw a one-year freeze on raising levies: the Marine and Process sectors.

It’s not surprising that these two sectors were picked for added aid. The ongoing slump in the shipping industry and a plunge in oil prices combine to make them vulnerable. They’re teetering on the brink right now, and imported labour may be the only thing that keeps them afloat (literally, in the case of oil rigs).

But the manufacturing sector, which is already facing its worst decline in 14 years, will see some unhappy business owners.

However, raising levies in manufacturing is aligned with Finance Minister Heng Swee Keat’s push for automation. If labour costs are rising, some manufacturers may feel a stronger impetus to automate.

The biggest complaints will be from SME owners in the services sector. Looks like it’s back to hiring tertiary students to serve iced tea or whatever to customers, and having a breakdown with those same students at exam time.

(Bonus tip: You are more likely to get inattentive service from restaurants / retail stores at around exam time. All the student part-timers leave, so manpower is too limited to go around.)

3. Certain niche business owners

This year’s budget has big grants for automation, and for businesses that want to go overseas. But the Productivity and Innovation Credit (PIC) grant, which was more general, has seen its cash allowance shrink from 60 per cent to 40 per cent.

This is bad for niche businesses, which don’t aim to scale up or move abroad. Take, for example, a specialist book shop or artisanal cafe, which doesn’t aim to become a giant chain business. Previously, the high cash allowance from the PIC was a major boon to these businesses. But the new grants for automation mean nothing to them, and the lower cash allowance means less support.

Times are lean, and the budget this year – and I speculate the next few years to come – is going to be focused on businesses with the potential to go big, not the little colourful shops that add spice to the city.

4. Property developers and real estate agents

We already knew cooling measures, such as the Additional Buyer’s Stamp Duty (ABSD), would not be lifted – the government said it had no such intentions, even before Budget 2016 was announced. But what will get to property developers and real estate agents is the way it was expressed.

Mr Heng could have just not mentioned property at all, and got on with the rest of the budget. Instead, he made an explicit statement that it would be premature. Property prices slid 3.7 per cent last year, and companies like Knight Frank have predicted a drop of between three to six per cent this year.

The Minister’s statement is a clear message that the government isn’t fazed by these small declines, and that they would be okay with it falling further. That’s consistent with a pro-family stance – affordable homes are one of the main concerns for young couples.

 

Featured Image by Sean Chong.

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The post 4 groups of people that Budget 2016 forgot about appeared first on The Middle Ground.

- Ryan Ong