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28 Mar 2020  (465 Views) 
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Investment


Not a good idea for businesses to contribute to a contingency fund
I disagree with Mr Chow Kok Fai, who suggested that businesses contribute to contingency funds (Get businesses to contribute to contingency fund for future crises, Feb 28).

Making a mandatory contribution to a contingency fund is equivalent to having taxes raised. This is not in line with Singapore's laissez-faire economy, which promises relatively lower tax rates in the region to incentivise foreign investment.

His point that using net income to fund savings will not burden business cost does not capture the limiting of investment opportunities for businesses. Money, a finite resource, taken away from other opportunities will reduce further innovation and productivity.

Businesses must learn how to weigh their costs and benefits accordingly when there is no safety net such as aid from the Government to tide them over tough times. When businesses that are inefficient fail and leave the market, other productive businesses can take their place in the market. This will ensure that the efficiency and competitiveness in the market are maintained.

Businesses have their own responsibility for having contingency funds.

If the allocation of tax spending is well managed by the Government, businesses and individuals will see some relief. But realistically, losses in such economic downturns are inevitable.

Adele Kek Kai Ting

Source: https://www.straitstimes.com/forum/not-a-good-idea-for-businesses-to-contribute-to-a-contingency-fund


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