Singapore Budget Speech 2013 roundup

Deputy Prime Minister and Finance Minister Tharman Shanmugaratnam bared Monday a government budget for the fiscal year starting April that he said aimed to ensure Singapore could achieve quality yet inclusive growth.

In a nearly two-hour speech, he detailed plans to make the tax system more progressive and further increase subsidies for lower-income and elderly workers in order to help improve social mobility.

He also disclosed measures to mitigate the country's reliance on foreign labour and to improve productivity.

Also, for fiscal year 2013, he projected that government would post a surplus of $2.4 billion equivalent to 0.7 per cent of GDP. for the current fiscal year, he estimated a surplus of $3.9 billion.

The speech comes amid public discontent over rising living costs and strains on infrastructure which many Singaporeans have blamed on the influx of immigrants over the past several years.

Here are the main highlights:

Tax changes

Individual taxpayers below the age of 60 will get a 30 per cent tax rebate capped at $1,500 for income earned in 2012. Those aged 60 and above will get a rebate of 50 per cent but also capped at $1,500.

To help household with cost of living, government will also provide an extra one-off GST voucher this year on top of the permanent GST voucher.

Investment holding companies and property development firms incorporated after Monday, the day of the budget speech, will be excluded from exemption from start-up tax as they are not intended target for government's programmes to encourage entrepreneurship.

Tobacco excise duties will be raised. From $239 per kilogram, the duties for beedies, ang hoon and smokeless tobacco will be increased by 25 per cent to $299 per kilogram, while the duty for unmanufactured tobacco will go up by 1.5 per cent from $347 per kilogram to $352 per kilogram.

Property tax system would be changed to place a bigger burden on owners of high-end residential properties, especially those for investment purposes.

Taxes for luxury cars were also raised. Vehicles with an open market value of above $50,000 will have an additional registration fee of 180 per cent.

A one-year road tax rebate of 30 percent for goods vehicles, buses and taxis will take effect from July 2013.

Foreign worker curbs
Ministry of Manpower will continue to tighten eligibility for employment pass holders, said Tharman.

Minimum S Pass qualifying monthly salary will be increased from $2,000 to $2.200 from 1 July this year.

Dependency ratio ceilings will be cut. DRC in services will be cut from 45 per cent to 40 per cent.

In construction, levy rates for less skilled Work Permit Holders in Construction Sector will increase by $150 between Jul 2013 and Jul 2015

Health subsidies to be boosted.

Medifund will be increased by $1 billion to $4 billion and Eldercare to go up by a quarter million to $3 billion.

Government will expand senior mobility fund to cover a much wider range of devices such as hearing aids.

Band for zero property tax will be widened. Property tax for high-end investment residential properties will be raised.

Changes to CPF. Employer contribution rate will be restored fully.

He bares enhancements to Workfare scheme.

WIS payments will be raised. Workers will receive 40 per cent of WIS in cash as compared to 29 per cent.

Workfare will now cover workers earning up to $1,900 from $1,700 ceiling. This will benefit 480,000 workers or 30 per cent of the workforce.

An additional $72 million will be put into Opportunity Fund for students from less advantaged backgrounds and will be extended to polytechnics. $300 million top-up to Edusave fund.

Government will more than double spending in pre-school sector to S$3 billion over next five years. It will expand capacity so pre-schools are closer to homes and bring more operators to the anchor operator scheme. Government will provide 16,000 additional places by 2017.

He talks about the need to address income inequality. He notes that older singaporeans make up 40 per cent of singapore workers in the lower income ladder.

EDB will set aside $500 million for next five years to develop new frontiers in manufacturing.

Government will introduce a land productivity grant, which will be provided to companies that intensify land use or relocate some operations to immediate region.

It will also link up SMEs with research institutions to look into solutions that will give the SMEs a competitive advantage.

Productivity incentives will be provided to further boost training. Government will also launch an SME talent programme.

On road tax, commercial vehicles will get a 30 per cent rebate.

He bares a three-year co-funding package under the Wage Credit Scheme.
The government will co-fund 40 per cent of wage increases to Singaporeans with gross monthly wage up to S$4,000.

WCS payouts will be paid out to employers automatically and annually over three years. No application needed. The scheme will cost government $3.6bn over 3 years.

He bares a new quality growth programme that will include:

Tightening of foreign worker policies through a targeted approach. All foreign worker levies will be increased 2014 and 2015.
Will introduce a special 3-year package to support companies.
Will help companies strengthen productivity through incentives.
Will develop capabilities to chart new frontiers in manufacturing and help companies seize opportunities in new growth industries in Asia.

The government can and will actively support all SMEs that are willing to upgrade. The restructuring of our economy must result in a dynamic and re-engergised SME sector, he said.

He says dependency ratio ceiling cuts will be made in sectors which are behind global productivity leaders. Levies will also be increased on industries most dependent on foreign workers.

"We will not increase levies for skilled workers. Most companies will not need to pay higher levies if they rely on skilled workers," he said.

Currently, foreign workforce makes up 33.6 per cent of Singapore's total work force.

Net inflow of 67,000 foreign workers in 2012, but most of the growth was in construction and the services sectors. In manufacturing there was in fact a slight decline, he said.

But in construction and retail, productivity is one-fifth below HK's.

He also cites greater strides in productivity. Three decades ago, he said Singapore's productivity level was 30 per cent of that of global leaders but now it is 70 per cent. It is now even greater than HK's.
He also bares greater investments for sports and culture.

Government will invest 30 per cent more in sports programmes over the next five years. The government will also create a fund to match investments for cultural programmes.

He announces enhancements to workfare.

Low wage worker will get a top up of his pay of 30%. This is in addition to what his employer will receive through new wage scheme that will encourage his employer to up the worker's pay.

Flexible working practices must be more important. We should also make it possible to give employees to be working from home or smart working centres near their homes. The government will help businesses in these efforts.

"If we do not do better in raising productivity... businesses and workers will be worse off.
We must help SMEs revitalise themselves," he says.

He notes that society is facing widening income disparity. "We must take further steps to temper inequality," he says. More must also be done to help seniors enter their retirement, he adds.
Our strategy for achieving higher quality of growth and an inclusive society are bound together, he says.

While fixing these problems, Singapore has to shift gears for an economy and society in transition.

He notes that there are pressing challenges on housing and transport.

The budget will introduce further measures to support our workers, especially lower-income workers.

Our budget for 2012 is expected to have a surplus. We expected S$1.3 billion but we now expect the higher surplus of S$3.9 billion due to higher revenues from stamp duties.

He maintains that Singapore's economic growth will likely range between 1 per cent to 3 per cent this year.

- wong chee tat :)