Source: CNASINGAPORE: Members of Parliament raised their concerns about the impact of foreign worker levy increases on businesses on the first day of the Budget Debate, with some calling for a tiered approach.
The MPs also suggested how the government could help the small and medium enterprises and how workers could tap on the various training schemes.
23 MPs spoke on Monday.
Many MPs described the budget as pro-growth and pro-Singaporean.
Dr Teo Ho Pin, Mayor of Northwest CDC, said: "Many were grateful that the government has responded and addressed their key concerns of rising cost of living, affordable housing and children's education expenses."
MP for Sembawang GRC, Dr Lim Wee Kiak, added: "The man on the street may be more excited and interested in the amount each and every family is receiving from the Grow and Share package. The more important aspect of the budget is the long term impact and transformation that will affect all of us and our children."
However, they said that businesses had mixed reactions to the rise in foreign workers levy and the restoration of the employers' CPF contribution rate by 0.5 percentage points bringing it to 36 per cent.
They felt the levy increase would be felt most by smaller businesses as they faced greater competition in the tight labour market.
Some MPs were concerned that the levy hike could be passed on to consumers.
Dr Teo said: "It is difficult to check and prevent profiteering. Some businesses may use the increase in levy as an excuse to increase prices, thus further increasing the cost of living.
"Theoretically, the increase in levy may force firms to innovate and increase productivity. But, some business operations may have limited scope for productivity improvements. For example, how much productivity can you improve for hairdressing saloons?"
MP for East Coast GRC and Chairperson of the Government Parliamentary Committee (GPC) on Finance, Trade and Industry Jessica Tan said businesses have suggested the government roll out a tiered approach to the levy increases.
"There was a suggestion to amend the levy such that it only impacts new recruitments and not the existing pool of foreign workers already hired and assigned to projects. This will help the companies to maintain stability and manage their current projected cost of operation...what companies require is clarity and certainty to allow them to plan their operations."
Unionists in the house had a different view.
MP for Jurong GRC and GPC Chairperson for Manpower Halimah Yacob said: "The increase is painful, but necessary, if we want productivity and incomes to go up, and I am glad that the government has given a clear signal that the levy will no longer be used as a tool to adjust business costs in bad times."
Dr Amy Khor, Minister of State for the Environment and Water Resources, said: "It is a painful but necessary step in a combination of incentive and disincentives to nudge our enterprises away from over-reliance on low skilled foreign labour, and in the long run, raise overall wage levels. Hence, the minister has already in place short term measures such as the corporate income tax rebate, and the SME cash grant to offset these increases."
So, Madam Halimah suggested that companies make better use of the various incentives given in the Budget to invest in automation, improve processes and upskill their workers.
Madam Halimah also informed the House that the labour movement has been working with about 200 companies under the Inclusive Growth Programme (IGP), to help them tap into the National Productivity Fund and boost their productivity.
One of the criteria for drawing down on this fund is the requirement that any productivity gains must be shared with workers. As a result, workers have had their basic wage increased or received additional bonuses through productivity gain sharing.
However, Dr Khor, who is also Chairman of feedback portal REACH, explained that there have been murmurings, particularly from SMEs, over the complexity and difficulty in navigating and accessing funds for productivity improvement programmes. She said this was one of the feedback inputs which REACH received during their pre-Budget 2011 feedback exercise. SMEs, she said, wanted more communication and guidance as to how firms can make use of the Productivity and Innovation Credit (PIC).
To resolve some of the issues, Dr Khor suggested that the National Productivity and Continuing Education Council render more sector-specific help to SMEs to educate them on how they can tap on the PIC for productivity improvements.
MPs also spoke about the importance of encouraging self-reliance amongst workers.
Dr Khor said some of the most powerful rewards in Budget 2011, like the Special Workfare bonus, personal income tax rebate and the more progressive personal income tax schedule, should go to the employed.
However, she felt more could be done for the Workfare Income Supplement.
"I, for one, believe that WIS should be a regular feature of our Budget which should have a more redistributive slant henceforth because of the lingering presence of low wage and older workers. But I urge the Finance and Manpower Ministries to review this and implement changes for the longer term and not on an ad-hoc basis to make WIS really effective...WIS payouts could be increased when the economy does well such," said Dr Khor.
The government's decision to put back into the reserves, the S$4 billion it had drawn out at the height of the global economic downturn, to fund various economic recovery programmes was welcomed by all MPs including the opposition. More MPs are expected to speak in the House, with the Finance Minister wrapping up the Budget Debate on Wednesday.
