A great deal of press coverage has been given to the impact of the current financial tsunami on major corporations, financial institutions etc but little to the plight and hardship felt by small and medium sized businesses. With the tightening of credit lines many SME’s are struggling each month to meet even their staff salary bills. Hence, I was encouraged to read the measures proposed in the Singapore budget and hope that the Honorable Mr John Tsang will have had a similar sympathetic ear to the representations that have been made to him during the past few months.
Whilst some Singaporeans may question whether the proposals are sufficient, the normal cry of most taxpayers, the following are a few initiatives introduced by the Singapore Government which would be welcomed in Hong Kong.
A) Marginal Corporate Tax Rate
In Singapore, SME’s enjoy a much lower effective corporate tax rate in that 75% of the first S$10,000 of chargeable income and 50% of the next S$290,000 is exempt from tax. Hence a business with profits of S$300,000 (HK$1.54m) has an effective tax rate of 8.9% and a business with profits of S$1,000,000 (HK$5.130m) will have an effective rate of 15.3%. These rates will be reduced further in 2010, 8.4% and 14.4% respectively, when the standard rate of corporate tax is reduced to 17%. This makes Hong Kong’s current rate of Profits Tax of 16.5% comparatively high.
B) Carry back of tax losses
For a long time tax professionals have campaigned for group relief or a carry-back of tax losses but to no avail. In comparison the Singapore Government has extended the aggregate amount of current year trade losses and capital allowances that can be carried back to S$200,000 and to permit the carry back for up to three years of assessment immediately preceding the year in which the loss was incurred.
C) Jobs Credit Scheme
The Singapore Government has introduced a new Jobs Credit Scheme in order to encourage businesses to preserve jobs during the current downturn. The proposal is that all active employers will receive a 12% cash credit on the first S$2,500 of each month’s wages for each eligible employee on the business CPF payroll.
On behalf of all Hong Kong SME’s I hope the Financial Secretary will announce measures to protect the viability of our businesses, assist with our cash flows, and help us weather the storm.
