So the budget is out, cheered by many on the street. As a business owner, does it affect you?
To find out more, I hopped on a few taxis to hear what the know-it-all taxi uncles have to say. I'll highlight two:
To find out more, I hopped on a few taxis to hear what the know-it-all taxi uncles have to say. I'll highlight two:
- If the government gives you a chicken wing, it'll take back a drumstick.
- And if the government gives you a drumstick, it'll take back one whole chicken.
Before we begin, you’ll need to digest the key budget figures below:
If the government gives you a chicken wing, it'll take back a drumstick
The first taxi uncle doubted the budget's generosity.
I nodded in disagreement.
Later, I reasoned that maybe he meant “all good things have to be paid for”.
So let's look at the statistics.
The revenue side of the budget repeats a pattern since 2004.
Because something happened in 2003. Do you remember what? Yes, the GST rate first went up from 3% to 4%.
And with that, the trend started in 2004: the top three revenue contributors are corporate income tax, GST, and personal income tax. (Before that, the order was corporate income tax, personal income tax, then GST).
I nodded in disagreement.
Later, I reasoned that maybe he meant “all good things have to be paid for”.
So let's look at the statistics.
The revenue side of the budget repeats a pattern since 2004.
Because something happened in 2003. Do you remember what? Yes, the GST rate first went up from 3% to 4%.
And with that, the trend started in 2004: the top three revenue contributors are corporate income tax, GST, and personal income tax. (Before that, the order was corporate income tax, personal income tax, then GST).
For the budget to balance yearly, tax revenue must increase to fund ongoing government expenditure and social programmes. Remember PM Lee’s caution in his National Day Rally speech in 2013: “all good things have to be paid for”?
The current productivity drive aims to restructure the economy to improve general income level and company performance. Both of which may indirectly contribute to higher income tax collections.
If tax revenue is further needed, then GST must chip in.
The good news is that the Finance Minister assured in 2011 that GST would not be increased for at least five years.
That does not mean it will not (after that).
It depends.
So the sober reminder for you this budget is this: are you GST-proof?
This means that...
The current productivity drive aims to restructure the economy to improve general income level and company performance. Both of which may indirectly contribute to higher income tax collections.
If tax revenue is further needed, then GST must chip in.
The good news is that the Finance Minister assured in 2011 that GST would not be increased for at least five years.
That does not mean it will not (after that).
It depends.
So the sober reminder for you this budget is this: are you GST-proof?
This means that...
- Are you still losing money to GST as an expense because your business is not GST-registered?
- Are you still spending a lot of time on GST filing when GST should be both recorded and compiled at the point of transaction? (A question of productivity, we'll come to that).
And if the government gives you a drumstick, it'll take back one whole chicken
The second taxi uncle expanded the analogy.
I guess he meant, all good things not only must be paid for, but also must end.
Like revenue, the outflow side of the budget also shows a trend.
It's about the PIC scheme.
A little background, the PIC scheme was first introduced in 2011 for five years till 2015. The good news in this budget is that it is extended to 2018. Therefore, the scheme now lasts eight years in total.
A long time for any cash payout scheme.
How much is involved? The budgeted PIC cash payout in FY2014 is $740m.
Let's roll back another two years.
I guess he meant, all good things not only must be paid for, but also must end.
Like revenue, the outflow side of the budget also shows a trend.
It's about the PIC scheme.
A little background, the PIC scheme was first introduced in 2011 for five years till 2015. The good news in this budget is that it is extended to 2018. Therefore, the scheme now lasts eight years in total.
A long time for any cash payout scheme.
How much is involved? The budgeted PIC cash payout in FY2014 is $740m.
Let's roll back another two years.
The PIC cash payout in FY2013 was originally budgeted at $70m. In this budget, it is revised to $650m.
See the difference? Almost ten times more.
One reason could be business owners becoming more aware of the scheme, thus ballooning the take-up rate in 2013.
Have you bought better equipment for your business or sent your employees to training in the last few years?
Are you going to do it?
Learn from what the taxi drivers taught me:
See the difference? Almost ten times more.
One reason could be business owners becoming more aware of the scheme, thus ballooning the take-up rate in 2013.
Have you bought better equipment for your business or sent your employees to training in the last few years?
Are you going to do it?
Learn from what the taxi drivers taught me:
All good things have to be paid for,
All good things have to come to an end.