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Singapore Budget Highlights
The following are highlights of Singapore's budget for the 2013/14 fiscal year starting in April.
Public anger is running high in the affluent city-state about a surge in immigration that is blamed for overcrowding, rising prices and competition for jobs and housing.
Singapore, the Asian base for many Western companies and banks, has large current account surpluses and huge reserves, giving ample room to boost spending on social services and help local firms.
The budget was presented in parliament on Monday by Finance Minister Tharman Shanmugaratnam.
BUDGET SURPLUS
- Singapore expects an overall budget surplus of S$2.4 billion ($1.94 billion) for fiscal 2013/14, equivalent to 0.7 percent of gross domestic product
- For fiscal 2012/13, the overall budget surplus is expected to be S$3.9 billion
- The basic surplus for fiscal 2013/14 is projected at about S$300 million after factoring in various tax rebates and the new three-year Transition Support Package (see below). "At 0.1 percent of GDP, this is close to a balanced budget and reflects a neutral fiscal stance"
ECONOMY
- Growth this year is expected to be 1-3 percent
- Singapore must "shift gears" as a mature economy
- "Quality growth" is necessary through innovation and productivity that benefits all Singaporeans
- Pressure from widening income disparities
- Tax and benefits system to be more progressive to help lower and middle-income households
- Singapore must catch up from a decade of slow productivity growth by upgrading skills and efficiency
TAX CHANGES
- Personal income tax rebate to all taxpayers this year on 2012 income, more for those over 60 years old. Rebates will be capped at S$1,500 and will cost the government S$615 million
- "Property tax cannot be avoided by tax planning", the rich should pay more
- Property tax rates to rise on high-end residential real estate, with largest increases to be on investment properties that are not occupied by the owner. Current tax of 10 percent will be changed to rates of 12 to 20 percent.
- Tax rates to fall for majority of owner-occupied residential properties
- Revised property tax structure to be phased in from January 2014 and take full effect from January 2015
- Registration fees for mid-range and luxury cars to be raised
- Investment holding companies and property development firms incorporated after Feb. 25, 2013 to be excluded from the start-up tax exemption. The exemption "for encouraging entrepreneurship is really not intended for such entities"
- Housing and hotel accommodation provided to employees will be taxed based on the annual value and cost, taking effect from the 2015 tax assessment year. The current way of taxing "undervalues the actual benefits received by the employees"
- Tobacco taxes to be harmonised across cigarette and non-cigarette products
- One-year road tax rebate of 30 percent for goods vehicles, buses and taxis that will take effect from July 2013
FOREIGN WORKERS AND PRODUCTIVITY
- More selective cuts in number of foreign workers in sectors where productivity still lags
- Policy is aimed at reducing reliance on manpower, not merely replacing foreign workers with locals
- Framework to ensure companies give "fair consideration to Singaporeans in their hiring practices"
- Three-year Transition Support Package to help companies adjust, including productivity incentives, tax rebates and new Wage Credit Scheme to encourage sharing of productivity gains with workers via higher wages
- Under the scheme, the government will pay 40 percent of total wage increases for Singaporeans for three years, at a cost of about S$3.6 billion over the period
- The transition package includes a corporate tax rebate of 30 percent of tax payable up to S$30,000 per year
- Levies on businesses that employ lower-skilled foreign workers to rise significantly but no increase for skilled workers in most sectors
- All levies on foreign workers will rise in July 2014 and July 2015, varying by sector
- In the services sector, the foreign worker ratio will be cut to 40 percent from 45 percent
- In the marine sector, the foreign worker ratio will be cut by about one-third
- Government to encourage companies to develop skills of Singaporean workforce
- "We cannot cut off the flow of foreign workers abruptly but we have to slow the growth"
- Proportion of foreign workers (now at 33.6 percent) should not rise indefinitely but must reflect the needs of each sector
- Net inflow of 67,000 foreign workers in 2012 was "too high"
- Number of Employment Pass holders fell last year, partly due to tightening by Ministry of Manpower in lower-level jobs
HELP FOR BUSINESSES
- Economic Development Board to set aside S$500 million over five years to support a Future of Manufacturing plan
- "This has the potential to create a range of new jobs for Singaporeans in future"
- Support of $90 million for Singapore's emerging satellite industry through a Satellite Industry Development Fund
- Land productivity grants, costing a total of S$60 million, will support companies that move some operations offshore while keeping core functions in Singapore, thereby saving land for other uses
- Small and medium businesses will be linked up with public sector research institutions and private sector technology providers to identify productivity solutions, at a total cost of S$51 million
HEALTHCARE AND SOCIAL SPENDING
- "We want to see Singaporeans' out-of-pocket share of medical costs to fall and the government take on a larger share"
- Government wants to broaden insurance coverage by expanding risk-pooling
- More spending on health promotion and preventive care
- Medifund to be topped up by S$1 billion to take total size to S$4 billion. ElderCare Fund to rise S$250 million to S$3 billion
- Monthly cash assistance for lower-income households to be raised
INFRASTRUCTURE SPENDING
- Many improvements needed in public transport
- Some public transport routes will be tendered to private operators
HELP FOR WORKERS
- "We need to redistribute to benefit our lower- and middle-income groups"
- Government to raise employer contributions to CPF retirement fund for older workers
- Expanded coverage of Workfare Income Supplement (WIS) programme to lower-wage workers earning up to S$1,900 a month. WIS payouts to rise significantly, by 25 to 50 percent in maximum payments
- Older Singaporeans must be kept in workforce
- More flexibility needed in work hours, telecommuting
- Government is reviewing healthcare scheme and other programmes for older Singaporeans
Source - Reuters
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