Singapore Budget 2018 - UOB Kay Hian 2018-02-20: Prudent; Planning For The Future ~ Highlights of Key Measures

Singapore Budget 2018 - UOB Kay Hian 2018-02-20: Prudent; Planning For The Future Singapore 2018 Budget Budget 2018 Key Measures for Businesses Budget 2018 Key Measures for Individual Straits Times Index Target

Singapore Budget 2018 - Prudent; Planning For The Future

  • The major focus is on prudently preparing for the future, with an eye on structural trends such as an ageing population and disruption from new technology. 
  • We see limited near-term impact from the Budget and would position selectively. We maintain our end-18 FSSTI target of 3,530 but this could stretch to 3,730 if GDP growth or corporate earnings surprise on the upside.


Budget 2018: Prudent; planning for the future. 

  • Finance Minister Heng Swee Keat delivered the 2018 Budget yesterday. Key highlights include: 
    1. A 2ppt increase in GST to 9% between 2021 and 2025, with the exact timing dependent on the economy and how much expenditure grows. The impending rise in GST will enhance revenue by 0.7% of GDP per year.
    2. Anchoring Singapore as a Global-Asia node of technology, innovation and enterprise.
    3. An increase in the top marginal buyer stamp duty (BSD) rate for residential properties priced S$1m and above to 4% (3% previously) from 20 Feb 18.
    4. 2017 Budget surplus of S$9.6b (2.1% of GDP), up from the S$1.9b forecast. The government will share this by giving all Singaporeans (age 21 and above) a “hongbao” of S$100-300, depending on annual income.
    5. Budget 2018 will remain expansionary, with total expenditure projected to rise 8.3% yoy to S$80b and a slight overall budget deficit of 0.1% of GDP.

Budget to position for three major shifts in the coming decade. 

  • The budget notes three major shifts and trends that will shape the future of Singapore:
    1. a shift in global economic weight towards Asia;
    2. emergence of new technology; and
    3. an ageing population. 
  • To position for these major shifts, the 2018 Budget plans to develop a vibrant and innovative economy, build a smart, green and liveable city, foster a caring and cohesive society; and planning ahead for a fiscally sustainable future.

Extension of Wage Credit Scheme. 

  • The government announced the extension of the Wage Credit Scheme for three years to 2020. The scheme will co-fund wage increases for Singaporeans up to a gross monthly wage of S$4,000. The co-funding will be 20% for 2018, 15% for 2019 and 10% for 2020.

Measures to drive innovation. 

  • Several measures were introduced to drive innovation. These include S$600m of new initiatives, alongside an expansion in the National Robotics Programme (NRP) and a productivity solutions grant (PSG) that will support up to 70% of qualifying costs. Tax deduction on licensing payments for commercial use of intellectual property (IP) will be raised to 200%, capped at S$100,000 of licencing payments per year. The tax reduction for qualifying R&D done in Singapore would also be raised to 250% from 150% and the change will be effective from YA2019 to YA2025.
  • A virtual crowd-sourcing platform called the Open Innovation Platform will be piloted this year to list specific challenges that can be addressed by digital solutions. 
  • Lastly, the Nation Research Foundation (NRF) and Temasek will launch a NRF-Temasek IP Commercialisation Vehicle with a funding of at least S$100m.

KEY MEASURES - Businesses 

Help companies overcome near-term challenges: 

  • The Wage Credit Scheme (WCS) would be extended for another three years to co-fund wage increases for Singaporean employees, up to a gross monthly wage of S$4,000.
  • The WCS will provide 20% co-funding for 2018, 15% for 2019 and 10% for 2020, which helps businesses keep increases in operating costs contained.
  • The corporate income tax (CIT) rebate for YA2018 would be raised to 40% of tax payable, capped at S$15,000. The CIT rebate would be extended to YA2019 at 20% of tax payable, capped at S$10,000.
  • Defer the increases in foreign worker levy rates for another year.

Support companies to buy and use new solutions: 

  • Existing grants supporting the adoption of off-the-shelf technologies are streamlined into a single Productivity Solutions Grant (PSG).
  • Tax deduction on licensing payments has increased to 200% for YA2019 and beyond, capped at S$100,000 of licensing payments per year.

Support businesses to build their own innovations: 

  • Tax deduction for IP registration fees rose from 100% to 200%, capped at S$100,000 of IP registration fees per year, to help companies protect their intangible assets.
  • Tax deduction for qualifying expenses incurred on R&D done in Singapore increased from 150% to 250%.
  • The government intends to maintain public sector R&D spending at 1% of GDP annually.
  • The government will provide support of up to S$500m for Aviation Transformation Programme (ATP) and Maritime Transformation Programme. Through the two programmes, Singapore’s airport and seaport will become platforms for companies to develop, test and use new technologies.
  • The government will expand the National Robotics Programme (NRP) to encourage wider use of robotics in the built environment sector, particularly in construction.
  • The amount of expenses that can qualify for the Double Tax Deduction for Internationalisation (DTDi) was raise from S$100,000 to S$150,000 per year of assessment. This will take effect from YA2019.
  • Enterprise Development Grant (EDG) will provide up to 70% co-funding for companies to build a range of capabilities.

KEY MEASURES - Individuals 

SG “hongbao” bonus for Singaporeans. 

  • All Singaporeans aged 21 and above are eligible to receive bonuses ranging S$100-300. Those with YA2017 assessable income of S$28,000 and below will receive S$100, those earning S$28,001-100,000 will receive S$200, while those earning higher will receive S$100.

Service and conservancy rebates. 

  • This will range from 1.5 months for those living in executive and multi-generational homes to 3.5 months for those living in 1- and 2-room HDB units.

Increase in annual Edusave contributions

  • Increase in annual Edusave contributions, broader income eligibility criteria and higher support for lower-income families. From Jan 19, the annual Edusave contributions will rise by S$30 to S$230 for each primary school student and by S$50 to S$290 for every secondary school student. 
  • Bursaries for pre-university students will be raised from S$750 to S$900.

Premiums subsidies for Eldershield. 

  • The government will subsidise the premiums for lower and middle-income families.

Increase in proximity housing grant (PHS). 

  • Families purchasing a flat to live with their parents or children will receive S$30,000 in PHS. Singles who purchase a flat to live with their parents will receive a PHS of S$15,000, while those who live in proximity (within 4 km) to parents will receive S$10,000.
  • Increase in qualifying age for concession for foreign domestic levy from 65 to 67.
  • S$300m top-up to the Community Silver Trust and S$100m top-up to the Seniors mobility fund.

Singapore Research UOB Kay Hian | http://research.uobkayhian.com/ 2018-02-20
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