GE2020 Manifestos: Why Political Parties Manifestos Matter To SME Owners

Singapore has earned a reputation for stability, good governance and continuity for decades. While the People’s Action Party (PAP) will likely still hold the mandate after Singapore General Election 2020 (GE2020), Singaporeans' expectations of the next generation of leadership are much higher, given the current Covid-19 climate, they demand a greater role in governance and more transparency in their decision-making. 

Small and Medium Enterprises (SMEs) being the bedrock of Singapore's economy, SME owners' voting decisions will weigh towards whether existing or new political parties can ensure a stable economic environment and growth for Singapore.

With the introduction of different political parties manifestos, we look at two important topics that will influence how SMEs operate their business.

Goods and Services Tax (GST)

People’s Action Party (PAP)

• Increase from 7% to 9% 

• No increase in GST
   

Red Dot United (RDU)/ Reform Party (RP)/ Progress Singapore Party (PSP)

• No to GST increase in the next five years
   

Reform Party (RP)

• Suspension of GST for 2020 & 2021
  
  

Singapore Democratic Party (SDP)

• GST to be cut to 0% until end 2021

(Popular Policy among SME Owners: Singapore Democratic Party - SDP)

A 0% GST will result in a level playing field among SMEs that are GST registered* and non-GST registered companies.

*SMEs are liable for compulsory GST registration if their annual taxable turnover per annum exceeds $1 million.

Without factoring in state revenue from GST, in an ideal world of 0% GST, let us see how a 0% GST affects businesses in Singapore.

1. Increase in Sales Revenue:
   Goods and Services Tax (GST) is ultimately borne by consumers as it is a tax on domestic consumption. Businesses are, in layman terms, the collecting agent for the government, i.e a product that costs $100 will result in a total billing of $107, where the $7 is paid to IRAS by the business.
   
   A 0% GST will reflect a lower price and result in an increase in consumer spending, thus increase in SME sales revenue. 

2. Reduction in Business Related Penalty Fee:

With the current Covid-19 situation, many SMEs are falling behind in their government related payments like CPF, IRAS tax, etc and business contracts. (Not factoring the various government initiative currently to assist SMEs on their tax and business contracts payment)

Struggling SME Towkays can relate to the fact that any delayed Tax or CPF payment will include a penalty fees of 5% imposed by the authorities which are GST taxable, and many business contracts have a late penalty of 2-5% if failure to pay within the given invoice period which is GST taxable too if their supplier is GST registered.  

A 0% GST means less penalty costs incurred during the current covid-19 situation thus improving the company’s cash flow. 

Jobs and Workforce

People’s Action Party (PAP)

• Boost employment of Singaporeans aged 40-60 years old with programmes and incentives
• Encourage the hiring of senior workers with grants and credit support
• Encourage hiring of employees with disabilities through Enabling Employment Credit
• Improve jobs and earnings for lower-paid Singaporeans through enhanced workfare support and extending the Progressive Wage Model
  
  

Workers' Party (WP)/ Singapore People’s Party (SDP)

• Introduce a national minimum wage of $1,300 per month for full time job
• Provide paid re-entry programmes to make it easier for mothers seeking to re-enter the workforce
• Provide employers with incentives for hiring more Singaporeans through tax incentives or reduction in government charges. 

Red Dot United (RDU)

• Ensure a Singaporean-First hiring policy
• Introduce an award scheme for Human Resources managers with good track record for prioritising jobs for Singaporeans
• Reserve jobs for Singaporeans in selected growth sectors

Reform Party (RP)

• Minimum wage of $10 per hour which will ensure more jobs to Singaporeans.
• Better wages for foreign workers
• Employment pass minimum salary to be raised to at least S$5,000 per month with a cap on total numbers

Singapore Democratic Party (SDP)

• Legislate minimum wage

Singapore People’s Party (SPP)

• Legislate minimum wage
• Employers to give employees retrenchment benefits
  
  Progress Singapore Party (PSP)
• Job priority for Singaporeans
• Quota for Employment Pass
• Reduce dependence on foreign labour through curbing easy supply to push employers to invest in process for higher productivity and move towards higher value-add and higher wage model

(Popular Policy among SME Owners: People’s Action Party - PAP)

(Most Unpopular Policy among SME Owners: Reform Party - RP)

Most opposition parties' policies circle around legislating minimum wages and giving priority to Singapore for local jobs thus reducing employment pass quota and giving retrenchment benefits, etc.

Above are popular policies to win Singapore citizens' votes as the ultimate beneficiary of these policies are employees. But for most SME owners, they are looking at their bottom line which is costs and profits. 

1. Legislate Minimum Wages 

By legislating minimum wages, small business owners (SMEs) will likely scale back the number of employees and raise prices to protect their extra cost. This will then result in making many low-skilled workers to be worse off and be unemployed. 

But of course, one can argue that by increasing the minimum wages, employees stay motivated and improve both employee retention and productivity. It is a simple logic of happier workers equates lower employee turnover and recruitment costs to re-train and re-hired.

But the burning question here is given many SMEs usually operate in a highly competitive environment with thin margins, can they afford the wage increase given the current Covid-19 situation?

2. Retrenchment Benefits

According to the Ministry Of Manpower, the prevailing norm is to offer retrenchment packages worth 2 weeks to 1 month’s salary per year of services but there is no compulsory minimum sum. This works as a double edged sword for employees, by fixing a minimum quantum for retrenchment, this usually ends up becoming the maximum quantum for retrenchment benefits.

That is, most business owners might use this law to give the minimum to their retrenched employees.

Imagine if Reform Party's suggestions are in place, with the increase in minimum wages, employment pass and better wages for foreign workers, the burden on SMEs' business balance sheet will likely lead to increase in prices of their goods and services. 

3. Hiring locally

For SMEs owners, hiring locally has its advantages which includes local candidates who understand the culture in this country and are fluent in our native language and generally cost much less than expats for PMET jobs.

The disadvantages are that the pool of talented people with necessary skill sets needed for the job are limited, the costs of training new employees means more money and time will be spent to keep the local workforce on par to the appropriate skill sets.

For international businesses, a policy of hiring locals means hiring employees who might not understand the company’s values or common practice from its country. 

By implementing a Singaporean-First policy, it might stagnate a company's growth and increase training cost and let’s face it, the existence of a company is driven by profit, by implementing local first and limiting the pool of candidates where SME owners might be forced to hire locals at higher costs will not be favourable for them. 

With the exception of the usual complaint of increasing foreign worker levies, the general consensus for SME owners towards Jobs and Workforce is ‘If it ain't broken, dont fix it’.

Read also: Why This Year Singapore General Election (GE2020) Will Be A Different Yet Most Interesting Election

Read also: GE2020 Results: Why PAP Lost Sengkang GRC and 5 Fun Facts About The General Election 2020

Guest Post: Anonymous 
 

This column does not necessarily reflect the opinion of the editorial board or Smart-Towkay.com and its owners.

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