Minister for Finance, Heng Swee Keat, is delivering the Budget speech for the Financial Year 2018 in Parliament. Stay tuned for live updates on HR and manpower issues arising from the speech.
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For FY2017, there was an overall budget surplus of $9.6 billion or 2.1% of GDP - higher than the $1.9 billion or 0.4% of GDP forecasted a year ago. This increase of $7.7 billion is mainly due to exceptional Statutory Board contributions of $4.6 billion, primarily from MAS, and increased stamp duty collections of $2.0 billion due to the recent property market pick-up.
The government will use some of the year's surplus to save for future spending. This includes setting aside S$5 billion in the Rail Infrastructure Fund, S$2 billion for premium subsidies and other forms of support for Singaporeans when the ElderShield review is complete.
S$700 million of the surplus will be shared with all adult Singaporeans (aged 21 and above), who will enjoy a one-off SG Bonus 'hongbao' of S$300, S$200 or S$100, based on income for FY2017. Those earning S$28,000 and below will get S$300, those taking home between S$28,001 to S$100,ooo will get S$200, and those earning above S$100,000 will get S$100.
Notwithstanding the overall budget surplus, FY2017 budget remains expansionary for the domestic economy.
Similarly, FY2018 Budget will remain expansionary. Ministries' total expenditures are expected to be $80.0 billion, or 8.3% higher than in FY2017. On the whole, a slight overall budget deficit of $0.6 billion, or 0.1% of GDP is expected.
Budget 2018 is about laying the foundation for Singapore's transformation in the next decade - it will support transformation into a vibrant and innovative economy; seek to build a smart, green and liveable city; foster a caring and cohesive society; and ensure a fiscally sustainable and secure future for Singapore.
For this decade – 2011 to 2020 – Singapore is on a sound fiscal footing. The government has sufficient resources to meet our planned spending needs till 2020.
In the next decade from 2021 to 2030, spending needs will continue growing across all sectors, with some rising faster, and more than others. If the government does not plan ahead and take measures early, we will not have enough revenues to meet these growing needs.
Three key areas of expenditure growth are healthcare, infrastructure, and security. To meet these growing expenditure needs and to prepare for any unforeseen ones, Singapore’s fiscal footing needs to be strengthened. For example, healthcare spending up from 2.2% of GDP to 3% of GDP; amd infrastructure spending has increased from $8.5 billion in FY2011 to an estimated $20.0 billion in FY2018.
Fostering prudent spending
- Further moderate the pace of ministries' budget growth - reducing the growth of ministries' block budgets to 0.3 times of GDP growth, starting from FY2019. (currently at 0.4 times of GDP growth).
- The government will save ahead, in preparation for hefty upfront infrastructure investments. A Rail Infrastructure Fund will be set up, to save for major rail lines ahead.
- The government is looking at borrowing by Statutory Boards and government-owned companies which build infrastructure. This helps spread the cost of investment over a number of years.
- The government will consider providing guarantees for some long-term borrowings for critical national infrastructure.
- For healthcare, security and other social spending, the increases in spending will be recurrent, will benefit Singaporeans broadly, and will directly benefit current generations.
- The responsible way to support recurrent spending is through taxation, to ensure each generation contributes their own share.
- To support recurrent spending to benefit Singaporeans, the government plans to raise GST by 2%-points, from 7% to 9%, sometime in the period from 2021 to 2025. Exact timing of GST increase depends on economy, expenditure growth and existing taxes.
- Increasing GST by two percentage points will provide the government with revenue of almost 0.7% of GDP per year.
- GST increase will be implemented in a progressive manner.
- The government will continue to absorb GST on publicly subsidised education and healthcare
- Permanent GST Voucher scheme will be enhanced to provide more help for low income households and senior citizens. Expected to add S$2billion to support these payments this year.
- The government will implement an offset package to help Singaporeans adjust to the GST increase. Lower- and middle-income households will receive more support.
Enhancing progressivity, fairness and resilience of Tax System
Enhanced progressivity through taxing the rich and higher-income more, or introducing wealth taxes like a capital gains tax.
- Raise the top marginal Buyer’s Stamp Duty (BSD) rate for residential properties from 3% to 4%. (1-3% today) This will will apply to the portion of residential property value which is in excess of $1 million. This change will apply to all residential properties acquired from tomorrow.
- The BSD rates for non-residential properties remain unchanged at 1% to 3%.
- To ensure that Singapore’s tax system remains fair and resilient in a digital economy, GST will be introduced on imported services with effect from 1 Jan 2020. This will affect services such as consultancy and marketing purchased from overseas suppliers, as well as the download of apps and music from overseas. The change will ensure that imported and local services are accorded the same treatment.
- For the import of goods, the government will review international discussions on how GST can apply, before deciding on the measure to take.
- To discourage consumption of tobacco products, the government will implement a 10% increase in tobacco excise duty across all tobacco products with immediate effect.
- The government will also be extending and strengthening other tax incentives to enhance Singapore's business competitiveness in this Budget.
Over the past decade, the Government has increased support for our citizens, providing greater assurance through schemes like MediShield Life and the Pioneer Generation Package, while giving extra help to those with less through Workfare and Silver Support. The government will continue strengthening the social safety nets for those in need.
Budget 2018 will build on the SG Cares movement in three ways:
Support for individuals & families to better prepare for the future & care for one another
- Increased annual Edusave contributions from Jan 2019 to S$230 for each primary school student; to S$290 to each secondary school student.
- Update the income eligibility criteria for the Edusave Merit Bursary, and the Independent School Bursary, to benefit more students from lower-to-middle income families.
- Enhancing MOE Financial Assistance Scheme for pre-university students from S$750 to S$900; updating the income eligibility criteria; and covering more meals for secondary school students under School Meals Programme.
- Support to help Singaporeans better prepare for their financial needs at key stages of their lives.
- Pilot a new Financial Education curriculum at our Polytechnics and Institute of Technical Education.
- Enhance existing services to Singaporeans at HDB and CPF Board when they buy a flat and when they retire, to provide more information at these major milestones.
- The government is reviewing ElderShield. To ensure that the enhanced scheme remains affordable, there will be premium subsidies for lower and middle-income Singaporeans. An update will be provided later in the year.
- Enhanced Proximity Housing Grant for families buying a resale flat to live with their parents or children to S$30,000. Those buying a resale flat to live near their parents or children will continue to receive PHG of S$20,000.
- Singles who buy a resale flat to live with their parents will receive an enhanced PHG of S$15,000. Those who buy a resale flat to live near their parents will receive a PHG of S$10,000.
- To give applicants more choices when choosing a resale flat to live near their loved ones, Govt will revise the criteria for the PHG to “within 4km” (currently defined as living in the same town or within 2km).
- Last year, eligible HDB households received 1.5 to 3.5 months of rebate on their Service and Conservancy Charges (S&CC). These rebates will be extended for another year, costing S$126 million and benefitting about 900,000 households.
- To ensure that FDW demand is commensurate with need, and to avoid over-dependency on FDWs, adjustments will be made to the FDW Levy framework, with effect from 1 April 2019.
- Qualifying age for levy concession under aged person scheme will be raised from 65 to 67. Households with people aged 65 and 66, which are enjoying or have enjoyed the levy concession under the aged person scheme before 1 April 2019, will continue to pay the monthly levy rate of S$60.
- For those who do not qualify for the levy concession or employ multiple FDWs, the monthly levy will be raised to S$300 (1st FDW without concession) and S$450 (2nd FDW without concession).
Strengthen partnerships between government and community
- Community Networks for Seniors (CNS) pilot will be expanded nationwide by 2020. For better planning and delivery, social and health-related services for seniors will be consolidated under Ministry of Health.
- Agency for Integrated Care (AIC) will be the central implementation agency to coordinate services for seniors and caregivers. Pioneer Generation Office renamed Silver Generation Office, will be merged with AIC.
- A S$300 million top-up will be provided to the Community Silver Trust, and a S$100 million top-up to the Seniors’ Mobility and Enabling Fund.
- The government will also improve the delivery of social services to other groups in society, by strengthening the role and capabilities of Social Service Offices.
Encourage a spirit of giving in Singaporeans.
- The government will extend the 250% tax deduction for donations made to Institutions of a Public Character (IPCs) for another 3 years, until 31 Dec 2021.
- The one-stop platform, Giving.sg will be enhanced to better match donors and volunteers with charities that need support.
- Community Development Councils (CDCs) will receive increased support - increasing the annual matching grant cap from S$24 million to S$40 million.
- To encourage corporate giving, the Business and IPC Partnership Scheme (BIPS) will be extended for 3 more years until 31 Dec 2021. SHARE as One scheme will be extended until FY 2021. Businesses that support their staff to volunteer and provide services to IPCs will receive a 250% tax deduction on associated costs incurred.
- Dollar-for-dollar matching will be provided on donations received by the Empowering for Life Fund (ELF) under the President’s Challenge, for the next 5 years.
A strong economy is not an end in itself, it is a means to improve the lives of our people. In Budget 2018, the government will continue to make Singapore a smart, green and liveable city.
Technology has the potential to make our city more liveable. The government is embarking on several strategic national projects, to lay foundational infrastructure & drive adoption of smart technologies.
- Our Smart Nation movement aims to make the best use of these new technologies to improve our city, uplift our quality of life, enhance our economic competitiveness, and promote social inclusion.
- The government is building a Smart Nation Sensor Platform to deploy sensors and “Internet of Things” devices to enhance municipal service delivery.
- A National Digital Identity system is under development to enable citizens to authenticate their identities securely and easily when making online transactions.
- The government is also increasing the adoption of e-payments island-wide, to allow everyone to make simple, swift and seamless payments.
- The government is opening up digital platforms for the private sector to build innovative services, and will share more data with the public to facilitate cocreation.
- The government is collaborating with academics and corporates in research and innovation, to take Singapore’s sustainable development story to the next level.
- This year, Singapore will embark on Energy Grid 2.0, to develop next-generation grid architectures that can respond quickly and reliably to changes in energy demand and supply.
- To encourage companies to further reduce emissions, a carbon tax will be implemented from 2019.
- From 2019, Carbon tax of S$5 per tonne of greenhouse gas emissions will be levied on major emitters (facilities producing 25,000 tonnes or more of greenhouse gas emissions in a year). The government intends to increase this to S$10-S$15 per tonne by 2030.
- The carbon tax will apply uniformly to all sectors, without exemption to maintain a transparent, fair and consistent carbon price across the economy to incentivise emissions reduction.
- Government revenue from carbon tax revenue is expected to be nearly S$1 billion in the first five years.
- To give companies and households a strong push in the first five years when the carbon tax is introduced, more grants and support will be provided to help enhance energy efficiency and reduce emissions.
- The government will set aside funds starting from 2019 to enhance support for companies, including SMEs and power generation companies, to improve energy efficiency. The support for companies will be done through schemes like the Productivity Grant (Energy Efficiency) and the Energy Efficiency Fund.
- Impact of the carbon tax on households will be small. To help households adjust to the carbon tax, the annual U-Save rebates will be increased by $20 per household for 3 years from 2019 to 2021.
Long term strategies
New tech means the way in which companies do business will change. Companies must keep up and workers must adapt. Asia's growth means new markets and new needs to be met. This will bring new opportunities and new challenges. Singapore needs to venture abroad as well as enable older workers to contribute. Strengthen the 3 key enablers that lay foundation for ITM.
Foster pervasive innovation throughout the economy
- This Budget, the government will support more firms to innovate across the entire value chain - whether they buy new solutions, build their own, or partner others to co-innovate.
- The government will support businesses to buy and build new solutions.
- Streamline existing grants for adoption of pre-scoped, off-the-shelf technologies into one Productivity Solutions Grant (PSG)
- To support firms to build their own innovations, the government will raise tax deductions for: 1) IP registration fees from 100% to 200%, capped at $100,000 of licensing payments per year; and 2) Qualifying expenses incurred on R&D in Singapore, from 150% to 250%
- To help firms find partners to co-create solutions, the government will pilot the Open Innovation Platform - a virtual crowd-sourcing platform, where companies can be matched with ICT firms and research institutes, to co-develop digital solutions.
- National Research Foundation (NRF) and Temasek Holdings will launch a new investment venture, to groom start-ups based on IP created from publicly-funded R&D in Singapore.
- To drive greater adoption of digital technology, automation and robotics in our economy, the government will: 1) launch an Aviation Transformation Programme; 2) launch a Maritime Transformation Programme; and 3) expand the National Robotics Programme.
Build deep capabilities in firms and workers
- Broad based measures such as the PIC scheme have been useful to build capability and to innovate. Budget 2018 will build on this base and take a more targeted approach, to help firms deepen the capabilities they need to continue growing.
- In April the government will merge SPRING and IE Singapore into Enterprise Singapore. Enterprise Singapore will provide integrated support to companies, for internationalisation as well as the development of other capabilities, so as to help them compete better both locally and abroad.
- To help firms deepen capabilities, the government will integrate IE’s Global Company Partnership grant with SPRING’s Capability Development Grant, to form an integrated Enterprise Development Grant (EDG). The EDG will provide up to 70% co-funding for companies to build a range of capabilities.
- To further support firms to internationalise, Govt will enhance the Double Tax Deduction for Internationalisation (DTDi). The amount of expenses that can qualify for the DTDi without prior approval will be raised from $100,000 to $150,000 per year of assessment. This will take effect from YA2019.
- Adjustments will be made to two broad-based tax schemes – the Start-up Tax Exemption and the Partial Tax Exemption.
- Tax exemptions under both schemes will be restricted to the first $200,000 of chargeable income.
- For start-ups, exemption from corporate tax will be reduced from 100% currently to 75% of their first $100,000 of chargeable income.
- Even with these adjustments, corporate tax will remain low for start-ups and smaller firms. For example, a taxable income of $100,000, the effective corporate tax rate is 4.3% for start-ups and 8.1% for older firms, as compared to the headline rate of 17%.
- To help firms develop digital capabilities, the government is studying, with the Singapore Business Federation and other industry partners, the development of a nationwide e-invoicing framework.
- To train Singaporeans in digital skills, the government is looking at expanding Tech Skills Accelerator (TeSA) into additional sectors like manufacturing and professional services. TeSA will also support more people to learn emerging digital skills, such as in data analytics, artificial intelligence, the Internet of Things and cybersecurity. An additional $145 million will be set aside for TeSA over the next three years.
- New Southeast Asia Leaders Programme will help Singapore business leaders better understand Southeast Asian markets, and encourage them to chart growth plans and build networks in the region.
- SBF and the Singapore Management University will pilot the SBF-SMU LEAD-CHARGE Initiative this year, to help SME leaders transform their organisations
- Capability Transfer Programme supports skills transfers from overseas trainers to Singaporeans, to plug gaps in skillsets that are lacking in certain important fields in Singapore.
Forge strong partnerships in the locally and abroad
- Coorporation is also key, where synergies exist, we can achieve more when we work together, and draw on one another’s strengths to address common challenges and capture bigger and better opportunities.
- To encourage our companies to form stronger partnerships, the government will integrate various partnership support measures into a single PACT scheme. Under PACT, companies can receive up to 70% co-funding, for projects undertaken in partnership with others.
- The government will anchor Singapore as a Global-Asia node of technology, innovation and enterprise. Firms and people can remain plugged into the latest developments, and create new ideas by interacting with people from diverse backgrounds.
- As ASEAN chairman, the Singapore government is working on an ASEAN Innovation Network to strengthen linkages between innovation ecosystems in the region, to spark new collaborations and solutions.
- Infrastructure Office to be set up to bring together local and international firms from across the value chain – including infrastructure developers, institutional investors, multilaterals, and legal, accounting and financial services providers – to develop, finance and execute infrastructure projects. It will enable players to tap on opportunities in the region while supporting Asia's growth.
- Our Trade Associations and Chambers play an important leadership role. The Government will continue to support such efforts, through the Local Enterprise and Association Development (LEAD) programme.
All our firms and industries face the same major shifts in the global environment. Innovation, building deeper capabilities in our firms and our people, and forging stronger partnerships will put us in good stead for the future.
Overcoming near term challenges
- Economy picked up last year, but firms are worried about business costs especially wage costs.
- Wage Credit Scheme extended for 3 more years, to fund 20% of wage increases in 2018, 15% in 2019, and 10% in 2020. This will cost about S$1.8 billion over the next three years.
- Enhance the Corporate Income Tax (CIT) rebate in YA2018. CIT rebate raised to 40% of tax payable, capped at a maximum rebate of S$15,000. Extend the CIT rebate to YA2019, at 20% and capped at S$10,000.
- For Marine Shipyard and Process sectors, the earlier-announced increases in Foreign Worker Levy rates will be deferred for another year.
- Budget 2018 will continue to support workers facing career transitions. It will help mid-career workers retrain and enter sectors that have potential for job growth.
- This year, the government will strengthen employment support for lower- to middle-income workers in various ways.
- Work Trial scheme to be upgraded into a Career Trial programme, with higher funding support for workers to try out new careers.
Minister Heng Swee Keat opened the floor by talking about the major shifts that society is facing (shift in global economic weight towards Asia, emergence of new technologies, and ageing), and how these are likely to impact Singapore. For example, the rapid pace of technological change may lead to older workers feeling marginalised.
Budget 2018 aims to develop a vibrant and innovative economy, build a smart, green and liveable city, foster a caring and cohesive society, and plan ahead for a fiscally sustainable and secure future.
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