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.



WHAT’S NEW


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
UOB Kay Hian SGX Stock Analyst Report BUY Maintain BUY 0.63 Same 0.63
HOLD Maintain HOLD 0.870 Same 0.870
HOLD Maintain HOLD 0.59 Same 0.59
HOLD Maintain HOLD 1.060 Same 1.060



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