Companies may now claim up to $1.8m tax deduction over 3 years

This is a whopping 50% boost.

According to DBS, productivity growth continues to be a key focus. While not deviating from the notion of alleviating the pain of restructuring through productivity enhancement, Budget 2014 is more carrot than stick!

There has been no further broad-based tightening in foreign labour policies, which has been a pain-point for companies in past years. Instead, more assistance has been announced to help companies upgrade their technology, harness innovation and ultimately enhance productivity.

Here's more from DBS:

This is much in line with our long-held view that appropriate and targeted assistance to companies will yield much better outcome in the longer term than broad-based tightening in labour policies, which undermines Singapore’s competitiveness.

The PIC scheme has been extended and enhanced, and this will definitely be welcomed by businesses. Companies can now claim up to SGD 1.8mn tax deduction over 3 years, up from SGD 1.2mn over the same period previously. However, what has been lacking is perhaps further easing in qualifying criteria to allow smaller companies to benefit from the PIC scheme. Survey has shown that the take-up rate for smaller companies has been lower than the bigger ones. With less resources at their disposal, the smaller companies will need just as much, if not more help from the government to enhance their productivity.

Beyond that, additional tax incentives to encourage SMEs to adopt innovative IT solutions was rolled out. The government is also taking more forceful steps to alleviate the funding needs (i.e. crowd-funding) and internationalisation attempts by SMEs. This will surely go a long way in fostering entrepreneurship in Singapore and in helping local SMEs grow through bigger overseas markets.

In addition, productivity enhancement measures in the construction sector has become more calibrated. Requirements for construction companies to leverage on new techniques and technologies, as well as new measures to encourage companies to upgrade skills of their workers and retain staff, will likely result in more positive impact in the longer term.

The hikes in employers’ CPF contribution rate (into Medisave accounts) will hurt companies’ bottomline in the form of higher employment costs. However, the overall net impact of this measure on the economy is more positive compared with the hikes in foreign workers’ levies (FWL), particularly if it is viewed as an attempt to force companies to raise productivity. Both have the same outcome of raising business costs. Yet, the hikes in employers’ CPF rate will benefit Singaporeans directly, whereas, previously the hikes in FWL benefited only the official coffer.