Balancing business and social priorities

NEW VISION: In his National Day Rally speech last year, Prime Minister Lee crystallised a new vision for Singapore. The Government is giving greater emphasis to non-economic and more social priorities.


    Jan 16, 2014

    Balancing business and social priorities

    BUSINESS groups are busy proffering their wish lists as the upcoming Budget comes into focus.

    A pertinent question to ask is whether a gap is developing between business expectations and the Government's changing priorities.

    Budget wish lists haven't changed very much in tone over the years. While their specifics may differ, the main themes have remained consistent.

    There are the usual calls to keep Singapore tax competitive, to support investment and innovation, to help local firms go overseas, for special assistance to be given to smaller firms, and, amid economic restructuring, help to cope with rising business costs and manpower shortages.

    This is very much in line with the Republic's economic imperatives - a small, open economy dependent on global investment and trade flows must continually strive to stay pro-business and investment-friendly.

    What has changed is the emphasis given to non-economic - and more social - priorities.

    This is not to say that previous Budgets have been all about business. Sharing the fruits of growth with Singaporeans has always been a policy objective, and, for many years now, transfers and targeted schemes to help those who need help have been given much prominence in Budget speeches.

    Feedback from the ground - delivered through the ballot box, among other channels - as well as changing demographics and an ageing population have pushed social policies to the forefront of the national agenda.

    Prime Minister Lee Hsien Loong in his National Day Rally speech last year crystallised a new vision for Singapore. The ruling People's Action Party (PAP) appears to be moving left of centre; to some, it is re-acquainting itself with its social-democratic roots.

    At its party convention last month, the PAP adopted a new resolution that called for greater social mobility through an open and compassionate meritocracy, even as it vowed to moderate the excesses of the free market.

    To reduce social inequalities, the Government has pledged special help for the pioneer generation of Singaporeans, now in their twilight years. It has also undertaken a major review of the national health-insurance scheme, MediShield, to extend coverage for life to all.

    Budget 2014 is expected to flesh out these initiatives, which have implications for businesses and the wealthy - two constituencies whose interests are most often highlighted in Budget wish lists.

    For one thing, the emphasis on social cohesion means that curbs on foreign labour - in tandem with a concerted productivity push - will continue, notwithstanding the short-term cost and manpower challenges they pose to companies.

    A second, more fundamental, issue is taxes. Higher social spending will have to be paid for in the longer term. Singapore's two main sources of revenue are taxes and investment income; the Government is increasingly expected to introduce changes to both taxes and the way it recognises investment income.

    The competition to cut headline taxes, both corporate and personal, vis-a-vis regional rivals (incidentally, Hong Kong is also placing more emphasis on social policies) is probably all but over.

    Instead, the tax burden on selected groups may rise. Specifically, the introduction of "wealth" taxes in the form of heavier taxes on higher-value cars in last year's Budget might gain traction.

    And while tax incentives will still be handed out selectively to the areas deemed vital for growth and to encourage restructuring, across-the-board tax reduction for companies is unlikely in the foreseeable future.

    This is especially so since the political room to raise the Goods and Services Tax (GST), which would have provided additional revenue, has narrowed considerably since the last General Election, and the Government has said it would not do so before 2016.

    Even if Budget 2014 does not bring these forces into play fully, the wheels of change have been set in motion, and it is important that business expectations come to grips with the new realities.

    There will still be a slate of pro-business initiatives - Singapore needs to grow so as to spend more - but businesses may not be in prime focus.

    An informal poll of chief executive officers and business leaders by The Business Times on the Budget found that while a number were indeed thinking about non-business concerns, such as the income gap, maturing population and rising health-care costs, they were in the distinct minority.

    The danger here is policy disappointment. Singapore will seem less friendly to businesses and the wealthy, but this has to be set against the equally important social objectives that the country has to pursue.

    For the Government, balancing the budget has indeed taken on deeper meaning.