24 February 2015
Firms welcome break from foreign levy hike
Yvonne Lim

TODAY reports: While most companies welcomed the one-year respite from foreign levy increases, there were mixed feelings in the construction sector due to the continued labour crunch amid a high turnover.

SINGAPORE: Companies welcomed the one-year respite from foreign levy increases, which they said would give them the breathing space to restructure and wean themselves off cheap foreign labour.

Singapore Business Federation chief operating officer Victor Tay said the deferment of the scheduled levy increase, which will benefit all sectors, “slows down the whole process of cost increment” and buys some time for businesses to boost productivity despite limited manpower resources.

Companies in the manufacturing sector had more to cheer about than others. Levy rates for Work Permit holders of all tiers and skill levels for the sector will remain at Jul 1, 2014, rates for the next two years.

Mr Lam Joon Khoi, secretary-general of the Singapore Manufacturing Federation, said the move gives the sector more time to “transform itself” and make relevant changes to address the labour crunch.

“(Some are) changing the workflow from manual to automation, while others are innovating in terms of how they perform certain tasks. For example, some companies outsource (work) to a centralised service provider... So they don’t have to worry about hiring more employees to do the work,” he said.

The construction sector, on other hand, greeted the announcements with less enthusiasm. The lowering of Man-Year-Entitlement (MYE) waiver levies would make it easier for companies to hire Higher Skilled (R1) workers, but the increase in the basic tier levy for Basic Skilled (R2) workers - from S$550 to S$650 in 2016, and subsequently to S$700 the following year - would see fewer R2 workers hired, doing nothing to alleviate the current labour crunch.

Singapore Contractors Association president Ho Nyok Yong said he had “mixed feelings” about the adjustments. Ever since the tightening measures were put in place, the construction industry has had to cut its manpower strength by 45 per cent, despite the sector’s all-time high turnover of S$35.7 billion last year.

“It’s difficult to cope... More developments are coming up, but our manpower remains the same. But the lowering (of the MYE waiver) is good news... And one year (of deferred levy increment) is better than nothing,” he said.

While he had hoped there would be no further foreign worker levy increases for good, Association of Small and Medium Enterprises (ASME) president Kurt Wee said he was pleased the Government was ramping up support for small and medium enterprises (SMEs) in innovation and internationalisation.

“Training of the workforce (to) deepen skill sets, internationalisation - these are quite important and critical to SMEs. (The Government’s support) will be like an external training support pillar for SMEs,” he said.

KPMG head of tax Tay Hong Beng said other measures, such as an enhanced mergers and acquisitions tax incentive, would attract businesses to come together and consolidate.

“This should inject a much-needed interest and enthusiasm in the SME segment, where consolidation would result in a more competitive business venture especially when venturing abroad,” he said.

Deloitte tax partner Lee Tiong Heng said the revised Capability Development Grants (CDG) scheme would provide a more flexible support platform for companies, particularly SMEs, to innovate and internationalise.

“Making smaller projects of less than S$30,000 easier to qualify for CDG from SPRING Singapore will be welcomed by SMEs and should in some way support innovative efforts by SMEs,” he said.

But Mr Melvin Tan, managing director of engineering firm Cyclect Holdings, felt the internationalisation programmes introduced would only help to a certain extent.

“Entrepreneurs still risk their own capital when expanding overseas, (while) tax benefits only benefit those who make money on the whole,” he said.