Tuesday, 20 February 2018

Budget 2018: Together, A Better Future

Singapore Budget 2018

• Singaporeans aged 21 and older will receive 'hongbao' SG Bonus of up to $300 after $9.61 billion budget surplus for the 2017 financial year

• GST to be raised from 7% to 9% some time between 2021 and 2025

• GST on imported digital services from 2020

• Higher Buyer’s Stamp Duty for residential properties valued above $1 million

• Carbon tax of $5 per tonne of greenhouse gas emissions to be levied from 2019

• 10% increase in excise duty for all tobacco products

• Corporate income tax rebate raised to 40%, with higher cap; wage credit extended

• Productivity Solutions Grant among measures to 'foster pervasive innovation'



• Proximity Housing Grant enhanced to give more support to family members who want to live with or near each other

• Higher maid levies for those without caregiving needs

• $200 million per year to increase support for education

• $5 billion rail fund, borrowing by statutory boards to tackle infrastructure investment challenges

•  Singapore's net investment returns contribution (NIRC) stands at $15.9 billion in FY2018, NIRC is now the largest contributor to Singapore's revenues, larger than any single tax, including the goods and services tax, and corporate and personal income taxes

• Budget 2018 debate in Parliament









GST set to rise to 9% as Singapore plans for future spending needs
It will go up between 2021 and 2025; carbon tax from 2019; higher stamp duty from today
By Tham Yuen-C, Senior Political Correspondent, The Straits Times, 20 Feb 2018

A hike in the goods and services tax (GST), the first move to do so in 10 years, was confirmed yesterday in a Budget that laid the ground for challenges ahead, even as a surplus of $9.6 billion was declared that made a "hongbao" cash payout possible.

GST will rise from 7 per cent to 9 per cent, but it will take effect only some time from 2021 to 2025, depending "on the state of the economy, how much our expenditures grow and how buoyant our existing taxes are", Finance Minister Heng Swee Keat said yesterday.

To cushion the impact on the elderly and those with lower incomes, the permanent GST Voucher scheme will get a $2 billion boost this year. There will also be an offset package to help people adjust to the increase.

Mr Heng said a gap remained even after exploring ways to manage future expenditure, such as through being prudent, saving and borrowing for infrastructure, and the GST hike is vital in closing it.



Other revenue-raising measures announced in Mr Heng's Budget statement in Parliament were a one percentage point increase from today in the top marginal stamp duty on residential property, a 10 per cent rise in tobacco excise duty with effect from yesterday and a carbon tax first announced last year that will kick off at $5 per tonne of greenhouse gas emissions from 2019.

GST will be also charged on imported services, such as video and music streaming over the Internet and consultancy and marketing services, from 2020.



These tax measures come as Mr Heng said the 2017 Budget is ending the year with a revised surplus of nearly $10 billion - a jump from the forecast $1.9 billion.

But he said this was lifted by one-off items, including unexpectedly high statutory board contributions and increased stamp duty takings as the property market picked up.

Of this, $700 million will be shared with Singaporeans through a one-off SG Bonus for all those aged 21 and above. Each person will get $100 to $300, depending on income.

But some of it will be saved to pay for big-ticket items, including $5 billion for a Rail Infrastructure Fund and $2 billion for premium subsidies and other support when the ElderShield review is complete.

He urged caution in depending on such exceptional factors for long-term fiscal planning.

While the "positive near-term outlook shows that the hard work of employers, workers and the Government is paying off" - economic growth and productivity improved, boosting the real median income of Singaporeans by 5.3 per cent - Mr Heng explained that his Budget is a "strategic and integrated plan" to ensure a fiscally sustainable and secure future for Singapore.

There were three major shifts to prepare for: a shift in geopolitical economic weight towards Asia after Brexit, and tax and trade changes by the United States; the emergence of new technologies; and Singapore's ageing population.



All three would interact to affect Singapore profoundly, he added.

To prepare for these shifts, measures announced continued on the work of previous Budgets to position Singapore for the future.

There were schemes to move businesses and workers up the value chain to anchor Singapore as a Global-Asia node of technology, innovation and enterprise; projects to improve the living environment; and increased support for charity to foster a caring, cohesive society.


Undergirding these efforts is the need to keep finances sustainable for the long term, said Mr Heng.

To help meet the inevitable rise in public spending, especially in healthcare, infrastructure, security and education, there was a need to act now rather than later, he said.

Indeed, on the increase in GST, he noted: "I expect that we will need to do so earlier rather than later."

This is expected to add 0.7 per cent of GDP a year to government coffers, which works out to more than $3 billion in today's dollars.

For the upcoming financial year, a slight deficit of $0.6 billion, or 0.1 per cent of GDP, is expected amid a Budget that Mr Heng described as expansionary. Ministries' total spending is forecast to rise 8.3 per cent from the 2017 financial year to $80 billion, for example.



To put future Budgets on a sound footing, the Government is studying plans for statutory boards and government-owned companies to borrow for critical national infrastructure projects, and will consider providing guarantees for some of these borrowings.

This will mean committing part of the reserves to back the loans, and will require the assent of President Halimah Yacob and the Council of Presidential Advisers.

Mr Heng said: "This is another way to use the strength of our reserves to back our infrastructure projects without directly drawing on the reserves."

The move will spread the cost of such investments over more years, and ensure the financial burden is distributed equitably between current and future generations.




























From GST hike to budget surplus hongbao: 12 highlights from Heng Swee Keat's speech
By Charmaine Ng, The Straits Times, 19 Feb 2018

Finance Minister Heng Swee Keat presented the Budget before Parliament on Monday (Feb 19), laying out the Government's revenue and expenditure for the 2018 financial year.

Kicking off his speech, he said the economy picked up last year, with Singapore's gross domestic product (GDP) increasing by 3.6 per cent - up from 2.4 per cent in 2016.

Productivity and real median income also increased last year, he added.

For the next fiscal year, he announced a crop of key measures focused on developing an innovative economy, a smart and green city, a caring and cohesive society, and a fiscally sustainable future.

Here are 12 key highlights from his speech.


1. GST WILL BE RAISED BY 2 PERCENTAGE POINTS

The goods and services tax will be increased for the first time in more than a decade, from 7 per cent to 9 per cent.

The increased GST will be implemented some time from 2021 to 2025. Mr Heng said he expected that the Government would "need to do so earlier rather than later".



The timing of the raised GST will depend on the state of the economy, how much expenditures grow, and how buoyant existing taxes are, said Mr Heng.

To help lower-income households cope, the permanent GST Voucher scheme will be topped up by $2 billion. Currently, $800 million is given out a year.

GST on publicly subsidised education and healthcare will continue to be absorbed.


2. HELP FOR HOUSEHOLDS

In the light of the impending GST increase from 2021 to 2025, the permanent GST Voucher scheme will be enhanced with a $2 billion top-up to the fund.

Other announcements for households also include increased Proximity Housing Grants for families and singles, and the extension of the service and conservancy charges rebate for another year.




3. E-SERVICES GST TO BE INTRODUCED

From Jan 1, 2020, digital services from overseas suppliers will be taxed, even if they do not have a physical presence in Singapore.

Some examples of imported services include music and video streaming, apps, listing fees on electronic marketplaces, software, and online subscription fees.

The GST will also cover imported services for businesses here, such as marketing, accounting, IT and management services.

However, the move will not affect e-commerce for goods.




4. BUYER'S STAMP DUTY RATES FOR RESIDENTIAL PROPERTIES TO INCREASE

In a surprise announcement, Mr Heng said the top marginal Buyer's Stamp Duty (BSD) will increase from 3 per cent to 4 per cent.

The new top marginal rate will apply to the portion of residential property value which is in excess of $1 million.

The change will apply to all residential properties acquired from Tuesday (Feb 20), Mr Heng added.

Rates for non-residential properties remain unchanged at 1 per cent to 3 per cent.




5. TOBACCO EXCISE DUTY TO INCREASE BY 10%

Tobacco excise duty will increase by 10 per cent, in efforts to discourage consumption of tobacco products.

The increased duty will take effect from Monday (Feb 19), said Mr Heng.


6. EXTENDED MEASURES TO HELP BUSINESSES WITH COSTS

The Wage Credit Scheme, which helps co-fund wage increases for Singaporean employees up to a gross monthly wage of $4,000, will be extended for another three years.

For FY2017, more than $800 million will be paid out to more than 90,000 firms, for wage increases for more than 600,000 employees.

Rebates under the Corporate Income Tax scheme will also be raised, from 20 per cent to 40 per cent this year. The cap will be raised from $10,000 to $15,000.

The scheme will also be extended to next year, where firms will receive 20 per cent rebate capped at $10,000.




7. FOREIGN WORKER LEVY INCREASES TO BE DEFERRED

The earlier-announced increases in foreign worker levy rates will be deferred for the marine shipyard and process sectors, which still face weakness.

There will be no change in the increases in rates for all other sectors.


8. MEASURES TO PROMOTE INNOVATION

Among the new measures include a productivity solutions grant to be introduced to make it easier for companies to access support to adopt off-the-shelf technology and productivity solutions.

The tax deduction on licensing payments for the commercial use of intellectual property will also be raised.


9. CARBON TAX TO BE INTRODUCED

All facilities that produce 25,000 tonnes or more in greenhouse gas emissions a year will be taxed on their total emissions.

The carbon tax will be $5 per tonne of greenhouse gas emissions from 2019 to 2023, by which the tax rate will be reviewed.



The Government plans to increase the rate to between $10 and $15 per tonne of emissions by 2030.

Households will receive additional $20 under the Utilities-Save GST Voucher for three years, to help offset the impact of the carbon tax on electricity and gas consumption.


10. SAVE AND BORROW FOR INFRASTRUCTURE EXPENDITURE

Where possible, the Government will save ahead to prepare for costly infrastructure investments, such as the Changi Airport Development Fund set up in 2015 for the upcoming Terminal 5.

It is also considering borrowing by statutory boards and government-owned companies that build infrastructure, to help spread the cost of larger investments over more years.

To help lower the financing cost, Mr Heng said, the Government is "considering providing guarantees for some of these long-term borrowings for critical national infrastructure".


11. HONGBAO FROM FY2017'S BUDGET SURPLUS

Thanks to a budget surplus in FY2017, all Singaporeans aged 21 and above will receive a "hongbao" of up to $300 this year, depending on their annual income.

Those who earn $28,000 and below a year will receive $300, while those earning $28,001 to $100,000 will receive $200.

Singaporeans who earn more than $100,000 a year or who own more than one property will receive $100.

The bonus, which will cost the Government $700 million, comes from this year's budget surplus of $9.6 billion.




12. EXPECTED 'SLIGHT' BUDGET DEFICIT IN FY2018

Total expenditures of the ministries are expected to increase by 8.3 per cent in FY2018, at $80 billion, said Mr Heng.

On the whole, it is expected that there will be a "slight overall budget deficit" of $0.6 billion, which makes up 0.1 per cent of Singapore's GDP.




















A fiscally sound but politically risky Budget
By Chua Mui Hoong, Opinion Editor, The Straits Times, 20 Feb 2018

This could have been a pure sugar Budget with its huge surplus and SG Bonus for all adult Singaporeans. Instead, Finance Minister Heng Swee Keat coated the sugar with a strong lacing of lemon.

The goods and services tax (GST) will be raised from 7 per cent to 9 per cent "sometime in the future from 2021 to 2025". Some analysts had forecast a hike to 10 per cent over two years, so the impending hike is gentler and slower than expected. But it still carries quite a sting.

The delay in introducing the GST hike might be due to the unexpected injection of $4.9 billion from the Monetary Authority of Singapore's (MAS) net profit, propelling the Budget into a healthy surplus of $9.6 billion when $1.91 billion was forecast.

The headline figures will cause many Singaporeans to ask: Why raise GST when Singapore's Budget nearly always ends with a surplus?

The short answer is that long-term spending will go up, and more tax revenue sources need to be found.

The extra funds from MAS or the higher-than-expected revenue from stamp duties this year cannot be relied on always. A more permanent way to raise taxes has to be found - and the GST, currently at a relatively low 7 per cent, is a natural target.



Meanwhile, Singapore's people and infrastructure are both ageing, and spending needs are rising. Healthcare spending will overtake education in the next decade. It has already more than doubled since FY2011, to $10.2 billion in FY2018.

Singapore aims to spend an extra $3.6 billion a year to raise healthcare spending from 2.2 per cent to 3 per cent of gross domestic product over the next decade. Where will that extra $3.6 billion or 0.8 percentage points of GDP come from? In part from the GST hike, expected to raise revenue by 0.7 per cent of GDP.

In fact, budgeting 3 per cent of GDP on healthcare is low by global standards. I think it is conservative, if Singaporeans want to pay less out of pocket and demand that a bigger share come from the state. Spending may go beyond 3 per cent of GDP - and that money has to be allocated for.

Already, Singapore is spending more than it collects in operating tax revenue each year. The books are balanced by adding half of investment income from past reserves, which raised about $14 billion in recent years. That is more than the contribution from either corporate or personal income taxes or the GST.

Raising the GST to 9 per cent will add about $3 billion to the coffers each year.

Every little bit will help.

The 2018 Budget is fiscally sound, putting the nation on a stronger footing for the future. But it is also politically risky.

Mr Heng, who delivered the Budget with aplomb, is tipped as first among equals in the next 4G, or fourth generation, of political leaders. He has ensured some political wiggle room by having a window for the GST hike.



Still, it takes a confident political leader to announce a major tax hike that may come in three years' time - which will be just after the next election, expected around 2020. People will forget good news three years after an announcement, but the anticipation of pain tends to intensify as the dreaded start date approaches.

On the other hand, in committing to a hike to 9 per cent, the Government is also trying to make things more palatable. It is hard to predict the full political impact, but for now, it is a no-brainer that a GST hike will have a political cost.

That Mr Heng and his colleagues proceeded with the announcement anyway suggests they have confidence in their ability to explain why the move is necessary, as well as fiscal armour to cushion the impact via the usual vouchers and offsets.

Whether voters will buy the sugar-lemon pill remains to be seen. The GST hike will be a litmus test of the bond between the people and a future generation of leaders in the next few years.

The clear commitment to raise the GST suggests a continuation of two aspects of the Singapore political leadership. The first is that the future team of leaders will continue the fiscal prudence of the past, in case anyone doubted it.

The second is that the new team will not duck from unpopular decisions. Some may see the early announcement as indicative of the 4G leaders piggy-backing on the popularity of the current Prime Minister and his Cabinet, and relying on today's leaders to win the ground.

But as Mr Heng is the one to announce the hikes, it is clear that it is a decision he and the future team of leaders will have to carry, not the current Cabinet. By announcing the hikes now, they have guaranteed that the GST will be a dominant issue in the next election.

But the GST hikes and Budget 2018 should not be viewed only through the political lens. More important is the fiscal viewpoint.

As Mr Heng took pains to stress, this year's Budget aims to lay the foundation for the next decade. Raising the GST is part of that move.

The other important innovation also aims to put future Budgets on a firm, and more sustainable, footing. This is the move for statutory boards and government-owned companies to borrow for critical national infrastructure projects and for the Government to guarantee some of those loans.

Statutory boards like HDB have long borrowed or issued bonds for projects, so that alone is not novel. What is different is to guarantee the loans. This will require the concurrence of the elected president and his advisers, as it means committing the Government to use its reserves to guarantee loans that may stretch into decades.

This is a practical measure to smoothen cash flow. An infrastructure project like an airport terminal requires huge sums to be spent upfront, but can generate revenue later.

Rather than spend huge sums to build it and draw down on today's surpluses, the Government allows the agency to borrow from the market, and uses its reserves to guarantee the loan to get lower interest rates. Future revenue from the project, such as an airport terminal, can then be used for interest payments on the loan.

As Mr Heng notes, such a borrowing arrangement will "help distribute the share of funding more equitably across generations". You do not use up today's money to pay for something that will generate revenue in 20 years' time. You borrow today for that long-term project, and use future revenue to pay off the loan.

As Singapore ages, issues of equity and fairness - across income and social groups, and across generations - will become potential causes of conflict. This Budget tries to prepare for that more uncertain future by putting in place two major planks in the fiscal system: A GST hike, and a way to use reserves to facilitate borrowing for long-term infrastructure projects.
















GST hike amid surpluses a hard sell, say analysts
They point to need for the Govt to ensure stable revenue flow to build fiscally sustainable future
By Elgin Toh, Insight Editor, The Straits Times, 20 Feb 2018

The goods and services tax (GST) hike from 7 per cent to 9 per cent has been announced right after one of the largest Budget surpluses in Singapore's history - making it a tough but not impossible sell, say analysts.

The $9.6 billion surplus for the 2017 financial year far exceeded the original estimate of $1.9 billion.

It is also the largest recorded surplus in dollar value - although, at 2.1 per cent of gross domestic product, it is smaller in percentage terms when compared with the 2007 surplus of 2.8 per cent.

This has raised questions about whether it would be difficult for the Government to justify to Singaporeans the need for more taxes.

Analysts and political observers interviewed say it would not be easy.

"Certainly, it is not an easy sell," said Mr Richard Mackender, tax partner at Deloitte Singapore and South-east Asia.

"However, it is the case that the surplus arose in 2017, whereas the GST increase is scheduled for 2021 - four years later. The Government will be looking to demonstrate that it is being prudent and looking ahead, which is what citizens expect of it."

He added that to build a fiscally sustainable and secure future for the country, the Government needs to ensure a stable revenue flow.

"Relying on one Budget surplus is not a sound basis for a sustainable fiscal model," he said.



Finance Minister Heng Swee Keat said yesterday that the two biggest contributors to the bumper surplus last year - revenues from the Monetary Authority of Singapore (MAS) and stamp duty collections - are not stable, recurring income.

"We do not expect either to occur every year. It is not a structural surplus. We cannot base our long-term fiscal planning on the basis of exceptional factors being positive, year after year," he said.

In contrast, the long-term rise in expenditure, which the GST hikes are meant to fund, is a result of recurring items, such as higher spending on healthcare to cope with an ageing population, he added.

MAS put $4.5 billion back into the government coffers last year, despite not paying anything in the six preceeding years. The contributions arose because of much higher returns from the official overseas reserves managed by MAS, which in turn came about, The Straits Times understands, due to currency movements.

Revenues from stamp duty reached $4.7 billion - which was $2 billion more than estimated. This stemmed from a pickup in the property market, said Mr Heng. Private property transaction volume, for instance, grew by 50 per cent in 2017.

The Finance Ministry's outlook statement for 2018 said: "Stamp duty collections are expected to decrease by $1 billion (in 2018)... as the property market softens."



People's Action Party MP Liang Eng Hwa, who chairs the Government Parliamentary Committee for Finance and Trade and Industry, acknowledged that there may be difficulty in explaining the tax hike amid a Budget surplus, as it may not be intuitive to the public.

He intends to emphasise two points to residents in his ward. First, the surplus and tax hike are happening in two different time-frames. Second, the causes of the surplus - currency movement and an active property market - are factors that could well change in the years ahead, and are not recurring.

"In a property market downturn, stamp duty collections can plunge," said Mr Liang.

Workers' Party Non-Constituency MP Daniel Goh said WP MPs are studying the details of the Budget and will meet later this week to discuss the party's response in Parliament for next week's debate.

Political observer Felix Tan of SIM Global Education said the discussion about a possible GST hike in the many weeks leading up to yesterday's statement prepared many Singaporeans mentally for it, and softened its impact.

With the GST hike kicking in only after 2021, the pain is also less acute, added political observer Lam Peng Er, noting: "Human beings are creatures of gratification, and deferred pain has a much smaller impact."

But if the Budget continues to run large surpluses over the next few years, people may start to doubt the claim that the surplus is "non-recurrent", he added. If so, calls for the GST hike to be shelved may start to gain traction - and the opposition may then campaign on this issue at the next general election, he said.

Institute of Policy Studies deputy director Gillian Koh noted that this is the first time a broad-based tax hike here has been announced in one parliamentary term and implemented in the next.

"It risks becoming a political hot potato over a general election, whatever the merit of a long period of advance notice," she said.

One way to cushion the political impact is to work towards strong economic growth, which will make the GST hike "water off the duck's back". Another way is for the Government to build a social compact with citizens such that with the higher GST rate, any future Budget surplus will be shared in some proportion with citizens in the form of cash payouts - as it was this year, she said.




















Higher stamp duty not a cooling measure, say analysts
Rate hike on homes above $1 million is a tax on those with higher incomes, they say
By Rachel Au-Yong, Housing Correspondent, The Straits Times, 20 Feb 2018

A 47-year-old housewife saved $67,000 when she signed on the dotted line to buy a $7.7 million flat in New Futura condominium yesterday, minutes after Finance Minister Heng Swee Keat announced a higher stamp duty for home buyers.

From today, the stamp duty on the value or price of a home above $1 million will be taxed at 4 per cent, instead of 3 per cent.

As the stamp duty is tiered, this means the first $180,000 of the four-room flat bought by the permanent resident will be charged at 1 per cent, the next $180,000 at 2 per cent, the next $640,000 at 3 per cent, and the remaining $6.7 million at 4 per cent.

The higher stamp duty, which has not been changed since 1996, is in line with other changes to the tax system to make it more progressive, Mr Heng said, adding that the Government "will continue to study options to ensure that our tax system remains progressive".

The rates for non-residential properties, however, remain unchanged, he added.

While the move caught many by surprise - Mr Heng announced it at about 5.20pm, when most showflats and law offices were closing - analysts were quick to point out that it was not a cooling measure, but a tax on those with higher incomes.

They noted that most home owners will not be affected, as only a handful of Housing Board flats exceed the $1 million mark every year.

Even among those affected, many will see only a marginal increase in taxes, as 36 per cent of private residential property transactions go for below $1 million, while another one-third buy homes valued at between $1 million and $1.5 million, said ERA Realty key executive officer Eugene Lim.

For a $1.5 million home, this works out to $5,000 in additional taxes, which is not a significantly large sum "to affect the current momentum adversely", he added.

In fact, the higher stamp duty is unlikely to dampen buying demand, as private property prices are expected to grow between 5 per cent and 7 per cent this year, said Cushman & Wake-field Research head Christine Li.

She noted that since the duty is progressive, the effective increase in additional taxes paid is only about 0.5 percentage point for a $2 million property, and around 0.9 point for a $10 million property. Still, she said, the increase may sway some to buy a smaller home in suburban areas.

New launches would also benefit as the current mix of homes in most condominiums tends to tilt towards smaller units.

Developers keeping an eye on the market for collective sales, however, may "pull back a little", as the stamp duty would be hefty for such deals, which run into the hundreds of millions of dollars, she added.

Huttons research head Lee Sze Teck said the Government is "sending a little signal that they are monitoring the market and do not want to see prices increasing beyond fundamentals".

He also noted that many who signed the Option to Purchase (OTP) yesterday could have done so as a knee-jerk reaction. The OTP is a legal document that gives a buyer the exclusive right to buy a flat.

To enjoy the old stamp duty rate, these buyers have to confirm the purchase within three weeks of Mr Heng's announcement, meaning by March 12.



Singapore's two biggest realty companies, PropNex and ERA, said at least 15 OTPs were signed in all for flats above $1 million yesterday, calling the total "abnormally high" after a Chinese New Year weekend.

Said agent Douglas Fun, who sold the New Futura flat to the housewife, who had been house-hunting for three months: "Even though rich people are rich, the 1 point increase is not insignificant. It is still money which they can avoid spending."










Higher GST, e-tax on imported services to come
GST to hit 9% between 2021 and 2025, with more help for lower-income families, seniors
By Jacqueline Woo, The Straits Times, 20 Feb 2018

Two changes on the goods and services tax (GST) front were announced yesterday in what were highly anticipated moves.

Consumers are set to pay a higher GST of 9 per cent some time between 2021 and 2025, up from the current 7 per cent.

This comes as the Government's spending on healthcare, infrastructure and security has gone up and is expected to grow further, Finance Minister Heng Swee Keat said.

A new GST will also be pegged to imported e-commerce services in 2020 to ensure Singapore's tax system "remains fair and resilient in a digital economy", said Mr Heng.

The GST is a broad-based consumption tax levied on nearly all goods and services in Singapore. The last time it was raised was over a decade ago in 2007, when it went up from 5 per cent to 7 per cent.

Singapore's consumption tax is one of the world's lowest today.

The exact timing of the GST hike will depend on the state of the Singapore economy, how much expenditures grow and how buoyant existing taxes are, Mr Heng said.

"But I expect that we will need to do so earlier rather than later in the period."

He said the GST is necessary because "even after exploring various options to manage our future expenditures through prudent spending, saving and borrowing for infrastructure, there is still a gap".

The 2 percentage point increase will give the Government revenue of nearly 0.7 per cent of Singapore's annual gross domestic product.

The Government will continue to absorb GST on publicly subsidised education and healthcare. It will also top up the GST Voucher Fund by $2 billion this year to enhance the GST Voucher Scheme and provide more help for lower-income households and seniors.

An offset package will also be rolled out for a period to help people adjust to the GST hike, with lower-and middle-income households set to receive more support.

The GST works hand in hand with the GST Voucher Scheme, which helps lower-income households offset some of their GST expenses.



Meanwhile, a new GST on imported services will apply to overseas suppliers without an establishment here.

It will cover digital business-to-business (B2B) services such as marketing, accounting, IT and management services, as well as business-to-consumer (B2C) services such as video and music streaming, apps, listing fees on electronic marketplaces, software and online subscription fees.

E-commerce for goods less than $400 will not be affected, for now.

The Ministry of Finance (MOF) said B2B imported services will be taxed via a reverse charge mechanism, while B2C imported services will be taxed through an overseas vendor registration model.

The MOF and Inland Revenue Authority of Singapore will continue to consult the industry on the design of the GST implementation on imported services.



As for imports of low-value goods or goods worth less than $400, the Government is looking at the possible measures to take, Mr Heng said.

Ernst & Young Solutions partner and indirect tax leader Yeo Kai Eng believes the new GST rules on imported services are unlikely to have a major impact on end-consumers here. "Many e-commerce services firms have set up a presence in Singapore, which means they are probably carrying out local transactions subject to GST. But consumers holding overseas accounts for such services may get caught by the new rules," he noted.

In-house lawyer Ong Yee Yen, 33, who subscribes to streaming services Netflix and Spotify, is more worried about a possible tax for e-commerce goods.

"My total spending on digital services is small, so I'd imagine that the GST, if any, won't be a big amount. My concern is if there is GST on e-commerce goods and online shopping. That would have more impact. I hardly shop at brick-and-mortar stores any more."










Lower-income groups worry about GST hike
By Ng Jun Sen, Political Correspondent and Seow Bei Yi, The Straits Times, 20 Feb 2018

With the impending goods and services tax (GST) hike, Mr Tony Teng, 43, worries about his young family's growing expenses.

The ambulance driver supports his one-year-old daughter, pregnant wife and elderly parents on a $1,800 monthly salary.

Lower-income families like Mr Teng's are among groups who could be hit hardest when the GST goes up from 7 per cent to 9 per cent some time between 2021 and 2025.

The GST was last raised in 2007 from 5 per cent to 7 per cent.



Finance Minister Heng Swee Keat yesterday said the hike is to help pay for "recurrent needs", such as security demands, healthcare for an ageing population and other social spending.

To help lower-income households and seniors, he said the permanent GST Voucher scheme will be enhanced when the tax goes up.

The GST Voucher Fund will get a $2 billion top-up this year, he said, adding that lower-and middle-income families will also benefit from an offset package for a period to help them adjust.

Mr Teng wonders if these measures will be enough to cushion the long-term impact on living costs.

Others, like cleaner Paul Thanabal, 64, question the logic of having to pay more for daily spending on necessities, to fund social policies that will take time to reach low-income households.

The sole breadwinner for his family of three earns $750 a month, and receives a monthly $120 Workfare supplement. His diabetes treatments are also fully subsidised by a government hospital.

"I know these policies cost money, but many of us are already living day-to-day. Every dollar that comes in is spent on necessities," said Mr Thanabal, who lives in a two-room rental flat.



Academics and experts noted that the lower-income groups will feel the pinch more from a GST increase.

This is even though the bulk of GST is paid by higher-income households that spend more, with 84 per cent of all GST paid coming from those, including the top 40 per cent of households and foreigners.

DBS senior economist Irvin Seah predicted that the offset package could amount to at least $4 billion.

Such a package will be necessary to "soothe the pain for households, particularly the lower-income families", he said.

OCBC Bank's head of treasury research and strategy Selena Ling said Singapore's overall fiscal policy has always emphasised a fair tax regime. She cited last year's income tax hike, which impacted those in the wealthiest bracket most, as an example of addressing income inequality.

The tax hike will give Singapore the "fiscal ammunition" it needs to meet growing infrastructure demands and rising healthcare expenditures that will benefit all, she added.

Said Ms Ling: "At the end of the day, a vibrant and growing economy with healthy job creation is a tide that lifts all boats."

The delayed roll-out of the hike also offers respite to some, like engineer Emily Tan, 25, who has been fretting over upcoming big-ticket purchases. She plans to have her wedding in 2020 and renovate her home in 2021.

Observers noted that there is a political element to the timing, as tax hikes are unpopular moves.

The hike will take place after the current term of government, allowing it to honour its earlier "promise" that there should be no GST increase till the end of the decade, said National University of Singapore (NUS) academic Simon Poh.

Political scientist Derek da Cunha said not fixing an implementation date "gives the Government enough wiggle room on deciding its precise timing based on political circumstances".

Said Associate Professor Stephen Phua of NUS: "Raising revenue is a matter of pure necessity, but where you are going to harvest it from is a policy choice."

















Carbon tax will affect mainly large polluters
Initial rate to be $5 per tonne of emissions; rebates cushion impact on HDB households
By Audrey Tan, Environment Correspondent, The Straits Times, 20 Feb 2018

The carbon tax that Singapore will implement from next year will mainly affect large polluters, but households are also expected to feel the knock-on effects.

The carbon tax, levied on facilities that produce 25,000 tonnes or more of greenhouse gas emissions in a year, will initially be $5 per tonne of emissions, to give companies time to adjust.

However, the Government will review the carbon tax rate by 2023, with plans to increase it to between $10 and $15 per tonne of emissions by 2030, Finance Minister Heng Swee Keat said yesterday.

The impact on households will be smaller - a 1 percentage point increase in total electricity and gas expenses on average, he added.

A household living in a four-room Housing Board flat, for example, can expect their annual electricity and gas bill to go up by about $10.

But households will get help in the form of additional utilities rebates through the GST Voucher U-Save scheme. Eligible HDB households will each receive $20 more per year, from next year to 2021.

"This will cover the expected average increase in electricity and gas expenses for HDB households arising from the carbon tax," Mr Heng said.



A carbon tax is a tool commonly used around the world to control the amount of earth-warming greenhouse gases released into the atmosphere. It incentivises emitters to cut their greenhouse gas emissions and improve energy efficiency.

Between 30 and 40 companies that are together responsible for 80 per cent of Singapore's greenhouse gas emissions will have to pay carbon tax. They are mainly petroleum refining, chemical and semiconductor companies.

The first payment will be in 2020, based on emissions in 2019.



Mr Heng said the Government expects to collect a carbon tax revenue of nearly $1 billion over the first five years, but is prepared to spend more "to support worthwhile projects which deliver the necessary abatement in emissions".

Revenue from the tax will fund green initiatives, via two existing schemes: the Productivity Grant (Energy Efficiency) and the Energy Efficiency Fund.

Executive director for the Singapore Green Building Council Yvonne Soh said the schemes could help companies overcome the cost barrier for green initiatives, as "energy efficiency is usually not on the top of most companies' minds".

Professor Euston Quah, head of the economics department at the Nanyang Technological University, welcomed the adoption of the carbon tax, calling it timely.

He said: "It sends a signal to those whose activities cause damage to society, whether in the form of human health or environment, that they must be responsible for their actions."

Two companies that will be affected by the new tax expressed reservations about it yesterday.

A spokesman for ExxonMobil Singapore said the petrochemical firm was committed to working with the Government to reduce the risks of climate change but added that "affordable energy" was important to support economic growth and ensure Singapore's competitiveness.

A spokesman for oil company Shell expressed concern with the flat tax rate.

He said: "We should be incentivised to perform better and deploy best-in-class technologies - a flat carbon tax will not provide the appropriate incentives to do so."

Yesterday, Mr Heng also noted that the carbon tax will apply uniformly to all sectors, without exemption.

He said: "This is the economically efficient way to maintain a transparent, fair and consistent carbon price across the economy to incentivise emissions reduction."

He added that Singapore's initial carbon tax rate cannot be compared directly with that of other countries, as jurisdictions with higher carbon prices often have significant exemptions for certain sectors, lowering their effective carbon prices.
















More support for firms to innovate and go international
Schemes include tax breaks, grants and innovation platform
By Lester Hio, The Straits Times, 20 Feb 2018

Firms will get more government support to help them devise innovative solutions to business challenges.

The support will come in the form of tax relief for firms that buy solutions and for those that develop their own innovations or team up with partners.

To compensate for the expiry of the Productivity and Innovation Credit scheme this year, existing grant schemes that cover off-the-shelf products will be integrated into a Productivity Solutions Grant, which will provide funding for up to 70 per cent of qualifying costs.

Firms will also enjoy greater tax breaks. Tax deductions on licensing payments for commercial use of intellectual property (IP) will be raised from 100 per cent to 200 per cent, capped at $100,000, from next year to 2025.

Registering new IPs will also be cheaper: Tax deduction for IP registration fees will rise from 100 per cent to 200 per cent, capped at $100,000, also from 2019 to 2025.



Businesses building their own innovations and solutions will get tax deductions for research and development done in Singapore increased from 150 per cent to 250 per cent, over the same time period.

"We must make innovation pervasive throughout our economy," said Finance Minister Heng Swee Keat.

The Government will help businesses find partners to collaborate and co-create new ideas with. It is piloting an Open Innovation Platform that will allow companies to crowdsource solutions online by posting challenges that can be addressed through digital solutions. The service will be ready in the second quarter of this year.



More efforts will be thrown into commercialising work generated by public sector research. The Government, along with Temasek Holdings, will put $100 million into a joint venture to grow companies that are developing IPs from publicly-funded research.

New transformation programmes for both the aviation and maritime sectors were announced.

"Our airport and seaport will become platforms for companies to develop, test and use new technologies," said Mr Heng.

The Government will provide support of up to $500 million for both programmes, with additional matching investment from industry partners.

Plans to build the capabilities of local firms and workers to be more productive, international and digitally equipped are in the works.



The TechSkills Accelerator (TeSa) programme, which trains infocomm technology professionals, will be expanded to new areas like manufacturing and professional services that are increasingly making use of digital services.

An additional $145 million will be set aside for TeSa over the next three years. It will be expanded to let people learn emerging digital skills, such as data analytics, artificial intelligence and cyber security.

Following the upcoming merger of Spring and IE Singapore in April, a new integrated Enterprise Development Grant will be formed.

This will combine the existing Global Partnership and Capability Development grants. It will provide companies with up to 70 per cent co-funding to build capabilities in scaling up and going international.

The double-tax deduction for internationalism will rise next year from $100,000 to $150,000 to help companies expand internationally.

There will be some adjustments to tax schemes for start-ups as well.

Starting from 2020, exemptions under the start-up tax exemption and partial tax exemption schemes will be restricted to the first $200,000 of chargeable income.

Start-ups will have only 75 per cent tax exemption, rather than the current 100 per cent, of their first $100,000 of chargeable income from corporate tax.

"Even with these adjustments, corporate tax will remain low for start-ups and smaller firms," said Mr Heng.

















More grants for singles to live with or near parents
$10k for those buying resale flats near parents' home; $15k for buyers who live with parents
By Rachel Au-Yong, Housing Correspondent, The Straits Times, 20 Feb 2018

Singles will now get a grant of $10,000 if they buy a Housing Board (HDB) resale flat near their parents - a move that analysts described as being "pro-family".

The announcement yesterday was among a series of changes to expand grants for home buyers who want to live with or near their parents, so as to encourage more caregiving support within families.

Applicants will also get more options to choose a resale unit because of a change in the definition of what constitutes a flat that is "near" their loved ones.

The previous definition of being in the same town or within 2km has been revised to simply being within 4km. This opens up a larger pool of flats they can choose from.

Finance Minister Heng Swee Keat said the enhancements to the Proximity Housing Grant (PHG), which was rolled out in August 2015, and to the 4km definition will take immediate effect.

Singles could previously get a grant only if they bought a flat to live with their parents.

With yesterday's announcement, two things changed for this group: They will now get a grant of $15,000 - up from $10,000 - if they buy to live with their parents; and receive a $10,000 grant if they buy a flat to be near their parents.

Another change to the grant amount affects families buying a flat to live with their parents or their married children. This group will get $30,000 - an increase from $20,000. There is no change for families who buy a resale flat to live near their parents. The grant will continue to be $20,000.

Some 12,000 households made use of the PHG as of the end of last year. They represented about a quarter of the 50,000 resale transactions registered between Aug 24, 2015 and Dec 31 last year, the HDB said last week.

Of these, families made up 93 per cent of applicants, with the rest being singles. About $211 million in PHG has been disbursed to 11,000 families so far. Also, 16 per cent of those who have been given the grant live in the same block or flat as their parents or married children.

The enhancements announced yesterday will cost the Government another $80 million per year.

Together with the Central Provident Fund (CPF) Housing Grant, which was enhanced last year, and the Additional CPF Housing Grant, first-time applicants can now get up to $120,000 in housing grants when buying a resale flat to live with their parents - a 50 per cent increase compared with three years ago.



The new measures could help ease the strong demand for Build-To-Order flats by singles, said PropNex Realty key executive officer Lim Yong Hock, noting the application rate of 6.6 by singles in the sales launch earlier this month.

Three-room flats, in particular, are expected to be in strong demand, he added.

National University of Singapore urban sociologist Ho Kong Chong said extending the PHG to singles was a "logical development of the Government's pro-family policy".

It can help older single children be near their parents, but give them space to develop friendships and, perhaps, even romantic relationships, he added.

Marketing manager Jeffrey Ler, 36, who is single, said the grant is a "good gesture", especially since he has been house-hunting for a four-room flat for the last six months.

He wants to have his own home, which he considers "a form of investment", and would like to live near his 68-year-old mother.

But he said he might not get to use the $10,000 grant as it is hard to afford a flat in a mature estate like Ang Mo Kio, where his mother lives, even with the 4km definition.

"The flats in mature estates tend to be pricier and will be a heavier burden on singles."










Higher maid levies for those without caregiving needs
By Joanna Seow, Manpower Correspondent, The Straits Times, 20 Feb 2018

Employers of domestic helpers will have to fork out more in levies from April 1 next year if they hire maids solely to help with household chores.

The levy for one maid will rise to $300 a month, and $450 for a second maid. This is up from the flat rate of $265 now.

Such households comprise about 20 per cent of Singaporean employers of foreign domestic workers.

The other 80 per cent receive a levy concession as their maids help with caring for children or grandchildren below 16 years old, the elderly, or family members with disabilities.



The monthly concessionary levy rate of $60 will continue to apply for these families and for employers who are elderly or have disabilities.

But the elderly family member must be at least 67 years old to qualify under the aged person scheme. This is up from 65 now.

Finance Minster Heng Swee Keat said this change, which also kicks in from April 1 next year, takes into account the improving life expectancy and health of Singaporeans.



Households that qualify for the levy concession under the aged person scheme before April 1 next year will not be affected, even if the elderly person is aged 65 or 66.

The levy changes come amid a marked increase in the number of maids. There were about 240,000 maids here last year - up about 40 per cent from a decade earlier.

Mr Heng said: "We must ensure that foreign domestic worker demand is commensurate with need, and avoid an over dependency on (them)."

The Manpower Ministry launched a one-year pilot of the Household Services Scheme last September to give families more options. The scheme allows some cleaning companies to hire more female foreign workers to provide part-time household cleaning services.

These workers can come from India, Myanmar, Sri Lanka or Thailand, in addition to the existing source countries for the service sector, such as China and Malaysia.

The ministry said there are no plans to increase the monthly concessionary levy rate for maids.



Employer Cecilia Lee, 47, who pays the full levy now as her two children are aged 18 and 20, said she will continue to hire a helper next year even though she will have to pay $35 more each month.

Ms Lee and her husband work in the banking and media industries.

She said she gets home too late on weekdays to cook dinner or do housework, adding: "Not many households can afford to be on a single income and maintain a desired lifestyle."

Although she tried to do without a maid for six months last year, hiring a part-time helper still cost $100 for each half-day weekly session and she had to stay home to supervise the cleaning.

"I also tried to eat out or order in, but hawker food feels different from home-cooked food and may not be as healthy," she said.

Ms Lee, who lives in a three-storey terraced house, said she will just have to manage the additional cost when the levy rises next year. "I can cut back on one cup of local coffee a day," she said.
















Support network for seniors to be expanded
Scheme involving voluntary welfare groups, volunteers, govt bodies to go national by 2020
By Toh Yong Chuan, Senior Correspondent, The Straits Times, 20 Feb 2018

Seniors can soon look forward to having stronger support networks near where they live.

The Community Networks for Seniors scheme, a programme piloted by the Government two years ago, will go national by 2020.

It involves government bodies, voluntary welfare organisations and volunteers teaming up to visit seniors, getting them involved in community activities, and caring for them when they turn frail.

The scheme was announced as a pilot project two years ago. Yesterday, Finance Minister Heng Swee Keat declared the trial a success.

The programme can "meaningfully improve the lives" of seniors, he said.



Mr Heng noted that the Government has provided more help for citizens in the past decade through programmes such as MediShield Life, the Pioneer Generation Package and Workfare.

"The Government will continue to strengthen social safety nets for those in need," he said. "At the same time, individuals, families and the community play an important role in looking out for and supporting one another."

The spirit of shared responsibility in tackling the challenges brought about by demographic and societal changes was why SG Cares, the national movement to build a caring society, was launched, he added.

The expansion of the support networks for seniors was welcomed by voluntary organisations.

Mr Kevin Lee, chief executive of social service organisation Awwa, said the scheme will encourage greater community involvement.

"As of now, our social workers act as eyes and ears, but it will be good to have additional resources with coordinated efforts in the community."

Mr Kavin Seow, senior director of the elderly group at Touch Community Services, added that the expansion of the programme is timely as it will encourage greater collaboration between government agencies and volunteer groups.

He also suggested expanding the network to more parties: "Not just government agencies and service providers, but also residents, hawkers, shopkeepers and schools too."

Private operators that provide services to seniors said they can also contribute to the network.

Ms Gillian Tee, co-founder of eldercare start-up Homage, which connects professional caregivers with seniors who need help, said private operators can play a supportive role to the government efforts to care for seniors.

Mr Tan Chien-Wei, co-founder of SilverAlly, a company that provides eldercare services such as medical transport and home-based nursing care to those who do not qualify for government subsidies, said: "These seniors need a network of support too."

Retired technician Willie Fox, 84, and his wife Lena, 88, welcomed the expansion of the scheme.

They joined it two years ago when it was piloted in Tampines.

The couple, who live by themselves in a studio flat, took part in activities such as exercises and bingo games organised by the senior activities centre near their home.

"(The network has) helped me make more friends," said Mrs Fox.

Besides giving more support for seniors, Mr Heng also announced yesterday that the Government is topping up two seniors' funds.

It is adding $300 million to the Community Silver Trust fund, which provides dollar-for-dollar matching for donations to volunteer organisations providing long-term care services, and $100 million to the Seniors' Mobility and Enabling Fund that subsidises equipment such as motorised wheelchairs.

More details of these schemes will be announced in the Budget debate starting next week.






Senior care services to come under Health Ministry
By Linette Lai, Health Correspondent, The Straits Times, 20 Feb 2018

The Ministry of Social and Family Development (MSF) will hand over senior-related social support services to the Ministry of Health (MOH) from April in a move to streamline care for the elderly.

These services include managing senior activity centres, befriending and counselling assistance, and a seniors' helpline.

"Social and healthcare needs are closely inter-related and both have an impact on the well-being of our seniors," said Finance Minister Heng Swee Keat yesterday. Having senior care services come under the roof of a single ministry will "enable these services to be planned and delivered holistically".

The MSF will continue to manage senior group homes and sheltered homes for the elderly who lack family support and need permanent accommodation.

The changes will take place on April 1, with the Agency for Integrated Care (AIC) coordinating all such services.

The Pioneer Generation Office - set up in 2014 to educate seniors on the Pioneer Generation Package - will be merged with this agency and renamed the Silver Generation Office.



Over the next five years, the Government will improve the delivery of social services to other groups in society. This includes working on better coordination between the various organisations, optimising the use of community resources and seeing how volunteers can play a part.

"These efforts will bring quicker and more effective assistance to our citizens, to help them get back on their feet," Mr Heng said, adding that more information will be outlined during the Budget debate.

The MSF, MOH and the Finance Ministry said in a joint statement that there will be no disruptions on the ground when senior support services change hands. "Seniors under the care or services provided by affected organisations will continue to be served," they said.

"Aged-care providers can now work with MOH's AIC as the single agency to coordinate the delivery of aged care services, and to enhance service development and capability-building across both the health and social domains."

These changes will make for more efficient policy planning and execution, said Ms Janice Chia, founder of social enterprise and consultancy Ageing Asia. "For seniors and caregivers, it's really about how they can access information, advice and assistance from one central point of contact as quickly as possible when the situation arises."





Extending schemes to spur giving spirit
250% tax deduction to continue for three more years for donors, corporate projects
By Theresa Tan, Senior Social Affairs Correspondent, The Straits Times, 20 Feb 2018

A tax deduction scheme for donations to charities will be extended for three years, until December 2021, to foster the spirit of giving.

For every $1 donated to a charity that is an Institution of a Public Character (IPC), donors get $2.50 deducted off their taxable income. This 250 per cent tax deduction has been in place since 2009.

This is one of the measures to promote volunteerism and philanthropy announced by Finance Minister Heng Swee Keat yesterday.

The Government is also giving $3 to the Community Development Councils (CDCs) for every $1 they raise in donations, up to a cap of $40 million a year from the 2018 financial year starting in April. The current cap is $24 million a year.

With the higher cap, Ms Low Yen Ling, chairman of the Mayors' Committee, said the five CDCs will introduce new initiatives and scale up their programmes to benefit more people. More details will be given later.



In another move, the Government will match, dollar for dollar, donations to the new Empowering for Life Fund set up under the President's Challenge 2018. The fund supports programmes to help vulnerable Singaporeans upgrade their skills to find jobs.

To boost corporate giving, the Business and IPC Partnership Scheme (BIPS), which started in 2016, will be extended for three years until 2021. Firms get a 250 per cent tax deduction on wages and associated expenses when they send their employees to be seconded at or to volunteer at an IPC, or when they provide services to the charity.

The Community Chest's Share As One scheme will also be extended by three years.

The Government will match, dollar for dollar, any donations to Share that are above the total sum donated to Share in the 2015 financial year, which has been set as the baseline.

In all, the Government has set aside about $190 million a year to support these enhanced measures.

These initiatives come as more people volunteer or give to charity, said Mr Heng. According to the latest Commissioner of Charities Annual report 2016, donations have increased from about $2 billion in 2011 to $2.7 billion in 2015.

The heads of charities interviewed by The Straits Times welcomed the extension of the IPC donation scheme, noting that the generous tax deduction is a draw for some of their donors, especially the wealthier ones.

As for the extension of the BIPS scheme, Mr Alfred Tan, chief executive of the Singapore Children's Society, hopes this will spur more firms to send their staff, such as those working in fields related to innovation and technology, to volunteer at charities.

He said: "The sharing of expertise is very valuable to help charities innovate and progress."

Meanwhile, the National Volunteer and Philanthropy Centre's online portal, Giving.sg, will be improved to better match donors and volunteers with charities.

Mr Heng said people who give back to the community are at the core of a caring society.

He mentioned housewife Patma Gopal, 56, who volunteers as a befriender with Fei Yue Community Services. Madam Patma said: "Since my childhood, I have always wanted to help others. I feel good that I can help in some way."










More aid to defray cost of education
By Amelia Teng, Education Correspondent, The Straits Times, 20 Feb 2018

Lower-to middle-income families in Singapore will receive more support to defray the cost of education for their children, Finance Minister Heng Swee Keat said yesterday.

Primary and secondary school students will also receive $30 and $50 more, respectively, for their Edusave accounts from next January.

Overall, this will result in the Government spending nearly $200 million a year on several schemes.

More students from lower-income families will be eligible for the Edusave Merit Bursary when the Ministry of Education (MOE) raises its gross monthly household income criterion from $6,000 to $6,900. To qualify, these students must be in the top 25 per cent in academic performance in their level and course.

More students will also benefit when the income eligibility criterion for the Independent School Bursary is revised, said Mr Heng, adding that more details will be given at the debate on the MOE's budget.



The ministry will also raise the annual bursary quantum from $750 to $900 for pre-university students - those in junior college or Millennia Institute, which offers a three-year programme leading to the A levels - under its Financial Assistance Scheme (FAS), said Mr Heng.

Secondary school students will have more meals covered under the School Meals Programme, he added. Currently, primary and secondary school students on the FAS get subsidies for seven meals a week in school.

Mr Heng also announced that the annual contribution to the Edusave accounts for primary school pupils will go up by $30 to $230; for secondary school students, it will go up by $50 to $290.

Edusave funds can be used to pay for school-based enrichment programmes or approved miscellaneous fees. The Edusave Scheme was implemented in 1993 to maximise educational opportunities for Singaporean children aged seven to 16.

Mr Heng also said polytechnics and the Institute of Technical Education will pilot a financial education programme for students to help them build a foundation in financial literacy from a young age.



The increased financial support is good news for Madam Norainni Mes Adi, 38, and her 41-year-old husband, who have three sons aged five, 16 and 17. She was diagnosed with stage 1 breast cancer in 2014 and stopped work as a clinic assistant to undergo surgery and chemotherapy. Her husband is a cleaning supervisor.

"I don't expect much, so I'm really grateful for any help that my children can get to study. Education is very important for their future, for them to achieve their ambitions," said Madam Norainni.





One-time SG bonus of $100-$300 for Singaporeans
By Seow Bei Yi, The Straits Times, 20 Feb 2018

Singaporeans aged 21 and older will receive a one-time bonus of $100 to $300 depending on their income, said Finance Minister Heng Swee Keat yesterday.

Those with assessable income of $28,000 and below for income earned in 2016 will receive $300, while those earning $28,001 to $100,000 will get $200.

Assessable income refers to total income after deducting allowable expenses and approved donations.

Singaporeans who earn above $100,000 or own more than one property will get $100.

The one-time SG Bonus will cost $700 million in total.



This hongbao"reflects the Government's longstanding commitment to share the fruits of Singapore's development with Singaporeans", Mr Heng said.

He noted that the Government expects an overall Budget surplus of $9.6 billion for its 2017 financial year, higher than the initial forecast of $1.9 billion.

Mr Heng attributed the additional $7.7 billion mainly to "exceptional statutory board contributions of $4.6 billion" - primarily from the Monetary Authority of Singapore - and increased stamp duty collections of $2 billion due to the recent property market pick-up.

Such exceptional factors are not expected every year, and the Government cannot base its long-term fiscal planning on them, he said.



Besides sharing some of the surplus via the bonus, Mr Heng said $5 billion will go to a rail infrastructure fund, and another $2 billion for premium subsidies and other forms of support when the ElderShield review is complete.

The Government had previously included one-off items in its Budget announcements.

Middle-income earners who paid personal income tax received a 50 per cent rebate of up to $1,000 in Budget 2015, adding up to $717 million. That same year, eligible Singaporeans aged 55 and above also received a one-off Seniors' Bonus of $150 to $600 in cash.

For Budget 2011, the Government gave out $1.5 billion worth of "growth dividends", with 80 per cent of Singaporeans getting $500 to $700 each. In 2008, a $1.8 billion surplus-sharing hongbao was handed out to all citizens.





Tax hike kicks in for all tobacco products
10 per cent rise in excise duty part of push to discourage smoking
By Aw Cheng Wei, The Straits Times, 20 Feb 2018

Lighting up might cost smokers more from now on as an increase in excise duty on all tobacco products kicked in yesterday.

Finance Minister Heng Swee Keat announced that firms will have to pay more in taxes to sell tobacco in Singapore, in a push to discourage people from smoking.

A 10 per cent increase in excise duty for all tobacco products is the latest in a slew of initiatives to keep Singapore smoke-free.



The tax hike is expected to "boost revenues", said Mr Low Hwee Chua, regional managing partner for tax at Deloitte Singapore and South-east Asia.

It will go some way in ensuring additional resources for the country, as "the Government went to great lengths to emphasise that, while the surplus looks good, there are no guarantees beyond 2020", Mr Low added.

Ms Evelyn Lim, executive director and head of tax at BDO tax advisory, supports the hike, calling it a "good measure to make Singapore more liveable".

"The hike, aimed at reducing consumption, is aligned with the national vision to build a smart, green and liveable city," she said, adding that the tax may help to further lower the proportion of smokers here, which hovers between 12 and 14 per cent of the population.



Earlier this month, emerging and imitation tobacco products, such as smokeless tobacco products, chewing tobacco and shisha, were completely outlawed.

The minimum age for smoking will also be raised to 19 on Jan 1 next year.

It will then be raised progressively every January until 2021, when smokers have to be 21 before they can light up.

Currently, the minimum age is 18.

With yesterday's change, each cigarette, which weighs about 2g, will cost firms about 8 cents more, according to the Singapore Customs.

In a circular released yesterday, a customs spokesman said the excise duties for cigarettes containing tobacco and cigarettes with tobacco substitutes have increased from 38.8 cents to 42.7 cents for every gram or part thereof in each stick of cigarette.

A kilogram of cigars, cheroots and cigarillos of tobacco substitutes will cost producers and manufacturers $427, an increase from $388.

The tax hike took effect at 5.40pm yesterday, added the spokesman.



Excise duty is duty levied on goods manufactured in or imported into Singapore, according to the Singapore Customs' website.

It can be imposed on top of customs duty, which is duty levied on goods imported into the country.

''With yesterday's change, each cigarette, which weighs about 2g, will cost firms about 8 cents more, according to the Singapore Customs.









Lowering infrastructure financing costs
Govt mulls over guarantee for borrowings on critical projects
By Chia Yan Min,Economics Correspondent, The Straits Times, 20 Feb 2018

The Government is considering providing guarantees for long-term borrowings made by statutory boards and government-owned companies to build critical national infrastructure.

This will help lower financing costs while ensuring Singapore does not draw directly on its reserves to fund major spending, Finance Minister Heng Swee Keat said.

Statutory boards and government-owned companies are already using bonds to finance infrastructure projects. For example, statutory boards like the Housing Board, Land Transport Authority and PUB have issued bonds to finance public housing, rail and water infrastructure.

This spreads the cost of major investments over more years and helps boost Singapore's bond market, Mr Heng said.

Where possible, the Government will save ahead to prepare for infrastructure investments.

The Changi Airport Development Fund, set up in 2015, now has $4 billion.



Mr Heng said a Rail Infrastructure Fund will be set up to save for major rail lines, starting with an injection of $5 billion in the 2018 financial year. This can be topped up when the fiscal position allows.

The Government is also looking at borrowing by statutory boards and government-owned companies that build infrastructure.

For example, the National Environment Agency will consider borrowing to finance the upcoming Integrated Waste Management Facility. The LTA may borrow for the Kuala Lumpur-Singapore High Speed Rail and the Johor Baru-Singapore Rapid Transit System Link. The Changi Airport Group will also weigh up borrowing for Terminal 5.

"These infrastructure projects, once completed, will generate economic returns over many years. The borrowing arrangements for these projects will hence help distribute the share of funding more equitably across generations," Mr Heng said.

To lower financing costs, the Government will also consider providing guarantees for some of these long-term borrowings. A government guarantee will enhance the confidence of creditors, he noted.

In addition, a guarantee "is another way to use the strength of our reserves to back our infrastructure projects, without directly drawing on the reserves. The reserves can then remain invested to generate returns".

He said the Government is studying this carefully and is in discussions with the President and the Council of Presidential Advisers.

This would not be the first time the Government would guarantee debt used to finance infrastructure projects. It guarantees debt instruments issued by Clifford Capital, a project financing firm funded by Temasek and other financial institutions, whose mandate is to promote the role of Singapore-based companies in infrastructure projects, both within the country and abroad.

But the Government itself does not borrow to fund its expenditures. Instead, securities are issued for reasons unrelated to the Government's fiscal needs.

One type of debt regularly issued is Singapore Government Securities, which are used to develop the domestic debt market. The other is the Special Singapore Government Securities, bonds issued to the Central Provident Fund (CPF). The bonds issued in this case are to pay the CPF interest rates that CPF members get on their savings.

The Finance Ministry says on its website: "All borrowing proceeds are therefore invested. The investment returns are more than sufficient to cover the debt servicing costs."

Under the Constitution, the Government cannot spend the monies raised from both sets of securities.

CIMB Private Bank economist Song Seng Wun said such a move would give financial institutions - like insurance firms - more options to match their long-term Singdollar liabilities with Singdollar assets.

This will help deepen Singapore's capital markets, he noted.

UOB economist Francis Tan said the Government's triple-A credit rating will stand it in good stead. "At this stage of our development, we should use our credit ratings to tap the capital markets, to reduce the reliance on the reserves and yearly Budget revenues."





Govt's borrowing plan will help fund higher infrastructure spending
Govt looking at using reserves to guarantee borrowings to keep financing costs low
By Yasmine Yahya, Senior Political Correspondent, The Straits Times, 21 Feb 2018

Some statutory boards already borrow to fund their projects but the Government is looking at getting them to do it on a bigger scale as Singapore ramps up its spending on infrastructure.

The Government is also considering using the country's national reserves to guarantee such borrowings. But this would be done on a case-by-case basis.

Elaborating on an announcement that he made in his Budget speech on Monday, Finance Minister Heng Swee Keat said in an interview with The Straits Times yesterday that the proposed move comes as Singapore's upcoming infrastructure spending needs are at levels not seen in more than 50 years.

"In the earlier years of our development, we borrowed from a variety of sources, including multilateral development banks such as the World Bank, Asian Development Bank and so on, to fund some of these major long-term infrastructure developments," he said.

"But as our economy grew and the tax collection was strong, we stopped borrowing some time in the mid-60s for our major infrastructure projects. Now, we are coming back to another major spike in our infrastructure needs."

These include projects such as Changi Airport Terminal 5, the Kuala Lumpur-Singapore High Speed Rail and the Cross Island Line, said Mr Heng.

What is new this time is that the Government is also looking at using the national reserves to guarantee such borrowings to keep the financing costs low, he said.

Any such use requires the Government to seek the approval of the President and the Council of Presidential Advisers, and it is discussing with them what safeguards are needed, he added.

But projects will be judged on a case-by-case basis before the Government decides whether it can guarantee the developer's borrowings. "There has to be certain safeguards that need to be built in, but the specific approval must depend on the details of each project. It has to be scrutinised very carefully. Any project that is put up for this has to be meritorious," he said.

The move to tap financial markets to help pay for infrastructure developments is significant as it opens a new source of funding for these costly projects, rather than relying on tax revenues or dipping into the reserves.

Mr Heng had noted in his Budget speech that infrastructure investments tend to be "lumpy", requiring hefty upfront investments for benefits that will be enjoyed only many years later.

To reduce the burden of such investments on future budgets, he announced the setting up of a new Rail Infrastructure Fund.

It will receive an initial $5 billion injection from the Government for the building of major rail lines in the future. "I'm putting it for a future use which we know is coming soon... and in fact the expenditure will be very significant," said Mr Heng.

The Government would not be "very credible" if it does not have a significant amount to invest upfront in the development of major infrastructure projects - whether it is to build a new airport terminal or to set up a rail infrastructure fund - so it would need a combination of savings and borrowings, he added.

Mr Heng had also said on Monday that the Government must manage its expenditure growth carefully as this would help to ease the tax burden on citizens.

During discussions on the goods and services tax hike with the ministries, all were prepared to review their own books, he said. Some came back, saying "we can think of how to slash this bit of cost and that bit of cost from what was earlier planned", he added.

From next year, Mr Heng would moderate the pace of ministries' annual budget growth from 0.4 times of gross domestic product growth to 0.3 times, he had told Parliament on Monday.

Yesterday, he said: "I'm squeezing all our ministries very hard by limiting their budget growth factor. Some ministries, especially the smaller ones, are complaining it's getting harder and harder to manage.

"But I hope the message gets across to all, that we have to learn to do more with less and it applies right across the public sector as well as the private sector."





Stress on prudence as ministries' budget growth cap is cut
By Yuen Sin, The Straits Times, 20 Feb 2018

The rate at which ministry budgets can expand is to be further reined in, in a move to emphasise the need to be prudent with spending.

From April 1 next year, ministries' "block" budgets can grow only at 0.3 times gross domestic product (GDP) growth, down from the current rate of 0.4, Finance Minister Heng Swee Keat said yesterday.

Last year, a permanent 2 per cent downward adjustment was announced to the budget caps of ministries and organs of state.

Under block budgeting, each ministry is given budget caps for a medium-term period, which are allowed to grow at a rate pegged to GDP growth, subject to periodic reviews. Within the cap, each ministry decides how best to allocate its budget, which encourages ministries to strive for cost-effectiveness.



The latest measure comes as Singapore faces higher healthcare and infrastructure costs in the years ahead. Infrastructure spending will double from $8.5 billion in FY2011 to hit an estimated $20 billion in the upcoming financial year, while healthcare spending is set to have expanded from $3.9 billion to an estimated $10.2 billion over the same period.

Mr Heng said that Singapore has been able to get good value for its money, delivering good outcomes in areas like healthcare and education, which are highly ranked internationally.

The estimated overall government expenditure in the new financial year, at 19 per cent of GDP, is leaner than that of most developed countries, he pointed out.

But Singapore must continue to carefully manage expenditure growth, and "get the best value for every dollar we spend", he added.

Agencies are already taking steps to become more efficient and effective, said Mr Heng. For example, the Land Transport Authority's East Coast Integrated Depot - a four-in-one rail and bus depot - has achieved significant cost and land savings. The project, targeted for completion in 2024, will contain three train depots and one bus depot within a 36ha site, freeing up 44ha of land, an area the size of 60 football fields.

Emerging technologies can also be tapped, he added. In 2016, for instance, Nanyang Technological University and JTC Corporation developed a robot which can inspect buildings for defects, reducing manpower and time needed by 50 per cent.

Singapore University of Social Sciences economist Walter Theseira said that ministries can better manage their spending by evaluating programmes for cost-effectiveness.

For instance, the SkillsFuture credit scheme, which gives $500 in credits to Singaporeans aged 25 and older to pay for training courses, can be reviewed to see if the subsidies provided are meeting national needs.

"Some people who take up the subsidies do not end up working in the industries that they take courses for, or have the wrong idea of what the training can achieve, which may not be the best use of public money."





FY2017 Budget to bank $9.61 billion surplus
The Straits Times, 20 Feb 2018

Singaporeans will reap a one-off bonus, thanks to a hefty Budget surplus of $9.61 billion for 2017 - well up on the $1.91 billion estimated a year ago.

That $9.61 billion - about 2.1 per cent of gross domestic product - will be the largest surplus in absolute value racked up in the past three decades or so, although not the biggest in terms of percentage of GDP. The surplus for 2016 was $6.12 billion.

The country will end up so much in the black for the financial year that ends on March 31, due mainly to $4.9 billion of exceptional contributions from statutory boards - mostly the Monetary Authority of Singapore (MAS).

Initial estimates had put these contributions at just $0.3 billion.

The MAS increased net profits to $28.7 billion in the 2017 financial year, owing to the favourable currency movements of the Singdollar against the greenback and Japanese yen, as well as larger investment gains.

An MAS spokesman said: "Investment gains were much larger than in previous years due to higher interest and dividend income, higher realised capital gains, and lower valuation provisions - all reflecting the strong performance of global markets during the period."

The property market rally chipped in too with stamp duty collections of $4.7 billion, surpassing the $2.7 billion anticipated. However, there were lower-than-expected contributions from the goods and services tax, motor vehicle taxes and vehicle quota premiums.



Finance Minister Heng Swee Keat warned that similar contributions from the statutory boards and higher stamp duty collections cannot be expected every year.

"We cannot base our long-term fiscal planning on the basis of exceptional factors being positive, year after year," he noted.

As a result, a significant portion of the surplus is being set aside for future spending: $5 billion will be channelled to the Rail Infrastructure Fund to support future MRT projects while $2 billion will go towards subsidising premiums and other forms of healthcare support.

There will also be some left in the kitty to reward Singaporeans in the form of a one-off SG Bonus.

Anyone over 21 this year will get $100 to $300, depending on their income. This will cost the Government $700 million all up.

Total operating revenue for the 2017 financial year will reach $75.15 billion, up 8.2 per cent from the estimated $69.45 billion.

Expenditure will total $73.92 billion, lower than the $75.07 billion anticipated, as there was lower-than-estimated ministry expenditure in the housing, transport, education and healthcare sectors. This was partly due to the changes in the timeline of specific projects.

The net investment returns contribution (NIRC) is expected to rise to $14.61 billion, from the $14.11 billion estimated previously.

Excluding the Government's top-ups to endowment and trust funds and the NIRC, this would work out to a basic deficit of $1 billion, or 0.2 per cent of GDP.

Mr Richard Mackender, tax partner at Deloitte, said: "To build a fiscally sustainable and secure future for Singapore, the Government needs to ensure that there is a stable revenue flow, considering the ageing population and the need to invest in infrastructure, security and education. Hence, relying on our Budget surplus is not a sound basis for a sustainable fiscal model.

"Singapore's approach to a sustainable fiscal budget has been to always bank the good returns, while being prudent in ensuring that tax revenue continues to be stable and reliable to support future needs."





Unexpected currency fluctuations led to surprise $9.61 billion Budget surplus
By Ng Jun Sen, Political Correspondent, The Straits Times, 21 Feb 2018

Much of the surprise $9.61 billion Budget surplus last year is due to currency fluctuations, Finance Minister Heng Swee Keat said.

Making up about 2.1 per cent of Singapore's gross domestic product, the sum is the highest in 30 years. It also surpassed the initial forecast of $1.91 billion by five times.

A large part of the steep increase is due to the exceptional $4.6 billion contributions from statutory boards, mainly the Monetary Authority of Singapore (MAS). This far exceeds the $300 million predicted a year ago.

Such numbers are not normal as the MAS has not been able to make a contribution in the previous six years, Mr Heng said yesterday.

"The MAS has to maintain the stability of the Singapore dollar. Currency fluctuations, in particular, have a very significant impact on its returns because the reserves are invested overseas in different currencies." And the change of the Singapore dollar relative to the various currencies will have a very significant impact on MAS returns.

The other big contributor to the surplus is the higher stamp duty collections of $2 billion following the recent pickup in the property market.



Mr Heng cautioned against expecting either to occur every year.

"These are unexpected factors, which also means it is not a structural surplus and can turn the other way round," he said.

Of the total surplus, $5 billion will be channelled to the rail infrastructure fund for the building of future rail lines while $2 billion will go towards subsidising ElderShield premiums and other forms of healthcare support for Singaporeans.

The remaining amount will be given to adult Singaporeans as a one-off SG Bonus of $100 to $300.

Explaining why most of the surplus is going to the rail fund, Mr Heng said the fund is necessary to fulfil longer-term infrastructure needs. "We're not touching the past reserves. But now that we have a surplus, it's like what our founding generation used to do. When they have a surplus, they put it into reserves. And then the reserves grew."





Slight Budget deficit on the cards for FY2018
By Nisha Ramchandani, The Straits Times, 20 Feb 2018

A Budget deficit of $600 million, or 0.1 per cent of gross domestic product (GDP), is expected for the 2018 financial year, while expenditure is expected to rise.

Ministries are expected to spend $80.02 billion, or 8.3 per cent more year on year than in 2017, mainly on the back of increased outlays in transport, trade and industry, and domestic security.

In particular, transport spending will jump by over 50 per cent to $13.7 billion, while expenditure for home affairs is expected to rise from $5.8 billion to $6.5 billion.

The higher expenditure at the Transport Ministry will come from projects such as the Kuala Lumpur-Singapore High Speed Rail, the Johor Baru-Singapore Rapid Transit System Link, and funding for the renewal of domestic rail operating assets as well as public bus services contracts. This will make transport the second-largest area of spending after defence ($14.8 billion).

The Home Affairs Ministry's outlay will be channelled towards beefing up the police force's existing capabilities, as well as developing new skills amid increased terrorist threats.

On the other hand, health spending is projected to ease from $10.5 billion to $10.2 billion, owing to lower development expenditure as certain construction projects near completion.


Operating revenue for 2018 is projected at $72.68 billion, a 3.3 per cent decrease from the revised estimate for 2017. This will come on the back of lower revenue from statutory board contributions, stamp duty and vehicle quota premiums.

There was an exceptional statutory board contribution from the Monetary Authority of Singapore in 2017, as well as a jump in stamp duty collections. Both are seen as one-off events.

Top-ups to endowments and trust funds will jump from $4.01 billion to $7.3 billion, partly due to the $5 billion injection into the new Rail Infrastructure Fund. In addition, the GST Voucher Fund is being topped up by $2 billion to support payouts under the voucher scheme.

Net investment returns contribution is projected to come in at $15.85 billion, or 8.5 per cent higher than the revised figure for 2017.





Tapping more of reserves may erode savings in long run: Finance Minister Heng Swee Keat
By Yuen Sin, The Straits Times, 20 Feb 2018

Whenever the need to raise taxes is mentioned, the natural question arises of why Singapore does not tap more of its reserves, Finance Minister Heng Swee Keat acknowledged yesterday.

But it has been drawing on the financial reserves for the past decade, he pointed out.

Now that the economy is maturing and the population ageing, "we must husband this resource carefully, prudently and responsibly", Mr Heng said, laying out why taxes, such as the goods and services tax and tobacco excise duty, will have to be raised instead. The full size of the reserves is never revealed for strategic reasons, but it is estimated to be over $1 trillion.

The net investment returns contribution (NIRC) framework allows the Government to spend half of the long-term investment returns generated by the Monetary Authority of Singapore, Temasek Holdings and GIC, the three entities that manage and invest the reserves.

Some have called for more of the investment returns to be used.



But Mr Heng said this may erode Singapore's savings in the long run. If all the returns are used instead of being ploughed back into the reserves, the principal sum will not be able to grow at the same rate as nominal gross domestic product and will stagnate over time.

As Singapore's economy grows, the NIRC's share of the GDP would eventually drop.

"The impact of this will not be trivial, given that our Budget now relies on the NIRC as our largest source of revenue," said Mr Heng, noting that this has more than doubled from $7 billion in financial year 2009 to an estimated $15.9 billion in the upcoming financial year.

In a more extreme scenario where Singapore spends more than its investment returns, "we will eat into our nest egg".

"Doing so would mean that our reserves will shrink over time, generating a progressively smaller stream of income in the years that follow, till eventually our reserves are exhausted," said Mr Heng.

"This is not the Singapore way."

The reserves also give Singapore long-term economic stability and the means to weather crises. This is important for Singapore, he noted, as a small and open economy with no hinterland or natural resources.

During the 1997 Asian financial crisis, for example, Singapore's reserves and strong economic fundamentals kept the Singapore dollar stable even as currency speculators were attacking other regional currencies, said Mr Heng. The reserves anchored Singapore's economy in the 2008 global financial crisis by backing a $150 billion guarantee for all bank deposits here, and funded $4 billion for the Jobs Credit Scheme and Special Risk-Sharing Initiative in 2009.

"We can never predict where or when the next crisis will come. But we know, when the next crisis hits, we will be able to weather the storm because we have our reserves."






Budget 2018 a strategic and integrated financial plan: PM Lee Hsien Loong
By Ng Huiwen, The Straits Times, 21 Feb 2018

This year's Budget is "a strategic and integrated financial plan to build us a better future together", Prime Minister Lee Hsien Loong said yesterday.

He shared his thoughts in a Facebook post a day after Finance Minister Heng Swee Keat unveiled Budget 2018 in Parliament.

Mr Heng outlined four major moves for Singapore to tackle future challenges and seize opportunities. These are: building a vibrant and innovative economy; developing a smart, green and liveable city; fostering a caring and cohesive society; and ensuring a fiscally sustainable and secure future.

PM Lee said that for the economy to be vigorous and innovative, it is crucial for businesses to grow.

He assured companies that the Government will support them to grow and expand overseas, and that they will receive grants to innovate and build their capabilities.

This means continuing efforts to help them and workers develop digital capabilities and skills to adapt to the digital economy, he added.



To build a smart, green and liveable city, Singapore has to reduce its carbon footprint, PM Lee said.

The new carbon tax, at $5 per tonne of greenhouse gas emissions, is meant to encourage industries and consumers to cut back on emissions, he added.

The Prime Minister also highlighted the establishment of the Silver Generation Office to better look after the elderly as they age. It will help to coordinate social and health-related services for seniors.

Now known as the Pioneer Generation Office, it will take its new name in April when it merges with the Agency for Integrated Care.

PM Lee also noted that government spending will rise, especially in healthcare, infrastructure and security. Thus, while Singapore is on a sound fiscal footing, "we must plan ahead to ensure we can always afford to spend what we need".



On the plan to raise the goods and services tax from 7 per cent to 9 per cent some time between 2021 and 2025, he said it will be done in a "fair and progressive" manner. He added: "We will help households to cope with this change, especially poorer households."

Noting last year's better-than-expected surplus, PM Lee said Singaporeans can share in the fruits of the country's prosperity through a one-off SG Bonus of between $100 and $300, depending on income.

The surplus looks set to reach $9.6 billion, higher than the initial forecast of $1.9 billion.

This was mainly due to exceptional statutory board contributions of $4.6 billion - primarily from the Monetary Authority of Singapore - and $2 billion in stamp duty collected from the recent pick-up in the property market.





Massive, whole-of-government effort behind Budget 2018: Heng Swee Keat
By Ng Jun Sen, Political Correspondent, The Straits Times, 21 Feb 2018

While Singaporeans celebrated Chinese New Year over the weekend, Finance Minister Heng Swee Keat spent the holiday at home finalising details of this year's Budget.

Up until Sunday, a day before Mr Heng was due to speak in Parliament, he worked with his team - who returned to their office in the Ministry of Finance - to iron out last-minute issues, illustrating the complexities of preparing a "multi-year" Budget that was more than one year in the making.

"I have the master document, so every time we make a change, it sort of percolates to various channels," he said, adding that there have been numerous drafts - so many that he cannot remember the number.

"It is a massive effort."

In an interview with The Straits Times yesterday, Mr Heng eased the largely serious session with moments of light-heartedness, such as when he responded on whether his new haircut was a "Chinese New Year or Budget haircut".

"It was a bit of both," he said with a laugh.

But clearly, what occupied him more was polishing the Budget.

He said yesterday: "It is not an accounting exercise; it is really about our priorities: Where do we want to go? It is about our future - what are the trends and expectations and uncertainties, and how we can navigate this in a very turbulent sea."

Elaborating on his Budget speech delivered on Monday, Mr Heng said he saw the rise of Asia in the global economy, the impact of new technologies on jobs and competitiveness, and Singapore's ageing population as the impetus behind the announcements.

In each of these three shifts, there are what he called "critical uncertainties". For instance, it is not clear how the current global tide of inward-looking nationalism will play out in the next decade and affect Singapore's economy. It is not clear how new technologies will disrupt jobs. It is also not clear whether Singapore will go the way of some countries that do not welcome foreigners, if its population declines.

Said Mr Heng: "It is not to be taken for granted that we will succeed in doing this or that. But if we don't set out the issues, the challenges and opportunities clearly and plainly, we will not be able to respond."

And that, he said, is what he strove to do with the Budget, to get Singapore thinking about where it is heading as a society.

Work on the Budget started early last year, when he knew the Government would be short of revenue after 2020 in view of the challenges. To establish the size of the shortfall, teams of Finance Ministry officers pored over revenue and expenditure projections, while others held discussions with the Health Ministry over healthcare spending - a major component in the future. Questions were debated: How many hospitals would be needed? Eldercare homes? Polyclinics?

"There was really a whole-of-government effort," recalled Mr Heng.

From day one, his fellow office-holders in the Finance Ministry - Second Minister Lawrence Wong and Senior Minister of State Indranee Rajah - were involved in "many, many good"discussions with him.



And once he flagged the impending fiscal challenge, the entire Cabinet was "very supportive".

Various options to raise revenue were mooted. Prime Minister Lee Hsien Loong and Deputy Prime Ministers Teo Chee Hean and Tharman Shanmugaratnam were consulted on a goods and services tax hike.

By last November, said Mr Heng, the conclusion was that a GST hike by two percentage points was the right answer. This was also when PM Lee spoke of the need to raise taxes during a People's Action Party convention.

On whether the other fourth-generation ministers were all on board, given that the politically sensitive tax hike will kick in during the next term of government - when the team is expected to be holding the reins, Mr Heng said that the matter was discussed early on, and there was "very good consensus among Cabinet colleagues that this is the right thing to do", including the need to cut ministries' budgets.

"I am very glad that even though this is a difficult decision, everyone was prepared to back it," said Mr Heng.

It was the projection figures that convinced his colleagues on the necessary course of action. "We were confident that despite not being able to foretell the future, we knew for a certainty that there was - like Jack Neo's lovely movie - Money No Enough," said Mr Heng.

With the GST hike set to take effect some time between 2021 and 2025, some have asked if the announcement came too early.

To this, Mr Heng said he believes Singaporeans would appreciate him speaking "plainly" on the need for tax changes. The easy path would be to "put our heads in the sand" and assure people there is no problem. But it is better to set the problem out clearly, though it may be the more difficult route, he said. "It is important for us to be quite honest about it because I don't think we should duck difficult issues."

In fact, once the Budget debate ends, the Government will look at revenue numbers in even greater detail, factoring in trends like fewer future taxpayers, he said.

One question that has been raised is why there were no tax changes targeting wealthier Singaporeans, aside from a 1 percentage point increase in the top rate in the Buyer's Stamp Duty. To that, Mr Heng said the tax system has been tweaked over the years to make it more progressive. This includes a move in 2015 to raise the marginal personal income tax rates for the top 5 per cent of income earners here.

But back to the hot-button issue, does he think being the face of the GST hike will hurt him politically?

Mr Heng, touted as one of three men in the running to become Singapore's next Prime Minister, said simply: "I believe in doing the right thing and so if we are convinced that this is the right thing to do, I think we must have the courage to say it and to do it because we cannot be making national decisions of such a nature by just thinking about, what does it mean for me.

"I think that would be very selfish."









Spending only half of investment returns allows Singapore to 'preserve and grow wealth': Indranee Rajah
By Toh Ee Ming, TODAY, 21 Feb 2018

Senior Minister of State for Law and Finance Indranee Rajah on Wednesday (Feb 21) stressed the need to not only preserve Singapore’s wealth but to grow it for future generations.

Addressing questions over whether the Net Investment Returns (NIR) framework should be adjusted for the Government to spend more than half of long-term expected real returns, she referred to a Chinese saying that wealth does not last beyond three generations. “It’s wisdom of the ages, as time and time again, experience has shown that the first generation accumulates, saves and builds up, the second generation preserves it, and the third generation comes along and spends it,” she told the media on the sidelines of a visit to Fei Yue Community Services at Teck Whye.

Noting that the current generation has benefitted from the efforts of the pioneers, she added: “The way we approach it, is that the fourth generation of Singaporeans must not only continue to preserve but to grow the wealth.”



The NIR framework allows the Government to spend up to half of its long-term expected real returns from the assets managed by the Monetary Authority of Singapore, state investment firm Temasek Holdings, and the Government of Singapore Investment Corporation.

Ms Indranee said: “Today, we are in a good position (because of that) and this is an approach we would like to continue going forward...As to whether it should be 50 or 60 per cent, it is not a science, but a discipline.”

That discipline is that we use half now, keep half for the future, and that’s how we preserve and grow the inheritance, not just now, but for future generations.”

In his Budget statement on Monday, Finance Minister Heng Swee Keat had explained why Singapore cannot fully spend the returns accrued from the NIR framework.

It will mean that the principal sum of the reserves will “stagnate over time” and, as a result, the NIR contribution as a share of the gross domestic product will fall as the country’s economy grows, he noted.



On Tuesday, Ms Indranee also spoke to reporters about the topic on the sidelines of a post-Budget dialogue. Then, she said that drawing up to 50 per cent of the returns is a “fair figure”, with the remaining half kept in the reserves. Spending a higher percentage of the returns could be going down a “slippery slope” and the authorities will have to make the principal sum of reserves “work a lot harder”, she had also noted.

Any changes to the NIR framework can only be made through amendments to the Constitution.

Mr Heng also said during the Budget statement that the Government is considering providing guarantees for long-term borrowings undertaken by statutory boards and state-owned companies to build critical national infrastructure.

The Government’s move to explore different models of funding, such as through borrowing is necessary, said Ms Indranee on Wednesday.

“This marks a shift, simply because the expenditure for infrastructure is very large and it is a bit lumpy, as certain portions would have to be paid first, and then you would have to wait awhile before another big portion,” she said.

“It is necessary to explore different models, so we hope Singaporeans can understand why we are doing this.”

The funds would support large scale projects such as Changi Airport’s Terminal 5, as it would position Singapore as the connectivity hub for Asia, as well as boost employment and making Singapore as the focal point of economic activity.

Asked about the risks of adopting a borrowing model, she stressed that it would be a “mixture” of borrowing, as well as government and private sector funding to help mitigate the risk.





Singaporeans benefit today from having strong reserves, Singapore dollar: Chan Chun Sing
Chan Chun Sing says this is one reason the 50 per cent spending cap cannot be raised
By Seow Bei Yi, The Sunday Times, 25 Feb 2018

Keeping half of Singapore's earnings from its reserves is important as it signals to currency markets the strength of the Singapore dollar, Minister in the Prime Minister's Office Chan Chun Sing has said.

Mr Chan cited this as an "important reason" the Government does not spend more than half of returns from past reserves.

His defence of the Government's position came at the end of a week when some calls were made to raise the 50 per cent spending cap, so as to reduce the need to hike taxes - after it was announced that the goods and services tax (GST) will go up from 7 per cent to 9 per cent sometime between 2021 and 2025.

Under the Net Investment Returns Contribution framework, the Government is allowed to spend on current needs up to 50 per cent of actual income and long-term expected returns from past reserves. This contributed $14.6 billion to last year's Budget - about 16 per cent of total revenue.



Speaking last night at a Chinese New Year dinner for Tanjong Pagar GRC and Radin Mas SMC, Mr Chan drew a link between beefing up the reserves and the strength of the currency - noting that this had implications for the present generation.

"If the world thinks that we are running an irresponsible or unsustainable fiscal policy, you can well imagine what they will do to the Singdollar," he said, before pointing out the reverse: "If the world does not believe in the strength and stability of the Singdollar, you can also well imagine what will happen to our savings and our reserves."

This is why Singaporeans should not take the use of reserves lightly, said Mr Chan, who is also leader of the labour movement.

He noted the present benefits of a strong currency: Singaporeans today enjoy more affordable imported goods and cheaper holidays.

This was one of two arguments he made to explain the 50 per cent cap.

The other argument stressed the importance of setting aside money for future generations, especially as the population is ageing.

Though the full size of Singapore's reserves is not revealed to the public - to protect the country from currency attacks - it is estimated at more than $1 trillion.



In a wide-ranging 25-minute speech, Mr Chan also spoke on other long-term Budget priorities: productivity growth, education and infrastructure projects.

On raising productivity, he noted the importance of the task, given that Singapore cannot rely solely on manpower growth, as a larger foreign workforce will come with social integration issues.

Singapore's productivity strategy involves helping firms expand overseas, while concurrently improving domestic-oriented industries, especially manpower-intensive ones such as healthcare, offline retail, food and beverage and construction.

"As our ageing population grows, we must find ways to take care of our elderly without committing a disproportionate part of our workforce to the care sector alone."

On education, he stressed lifelong learning and investments in early childhood education to level up less-privileged pupils.

"Even as economics and human nature threaten to make society more unequal over time, we must redouble our efforts to ensure that every Singaporean child has the best chance in life to fulfil his or her potential in different and multiple dimensions," he said.



On infrastructure investment, he said this will make Singapore attractive to companies, and will create "good jobs for our people".

Singapore is building for the next 100 years, "with investments in an underground electricity distribution network to replace the ageing electricity network left for us by the British", he said.

He also cited the Deep Tunnel Sewerage System, noting that it helps ensure as much water is recycled as possible, so that the nation will have adequate water "before the (2061) expiry of the second water agreement with Malaysia".

Beyond the 2050s, Singapore will also look to redevelop Housing Board towns, to overcome the current situation of some estates having a higher proportion of older residents.

"Tonight, as in previous Lunar New Year dinners, I have chosen to speak frankly with all of you about our challenges," he said.

"We have strong fundamentals. But we must make sure that we maintain such fundamentals and maintain our discipline, so that we can continuously provide our people with the best opportunities.

"So long as we stay united, be clear-eyed about our challenges, and face them squarely together, there is absolutely no reason why we cannot celebrate SG100 with even greater pride and confidence."





Cost of spending more from national reserves: Ong Ye Kung
By Seow Bei Yi, The Sunday Times, 25 Feb 2018

Spending more from the national reserves may provide short-term gratification, "but what you deprive yourself of is interest income in perpetuity," said Minister for Education (Higher Education and Skills) Ong Ye Kung.

In a video shared on Facebook on Friday, Mr Ong explained the need for an upcoming goods and services tax (GST) hike, which was announced by Finance Minister Heng Swee Keat in his Budget speech on Monday.



GST is set to rise from 7 per cent to 9 per cent sometime from 2021 to 2025. This prompted some to ask if there are other ways to raise revenue for spending needs, such as by using more than 50 per cent of the returns from investing the reserves.

Citing a Chinese idiom, Mr Ong urged Singaporeans to opt for a longer-term good, rather than short-term gratification. He said: "The previous generation plants the tree for the next generation to enjoy its shade.

"The income stream today was planted by the previous generation."



Noting that Singapore has a greying society, he said annual healthcare expenditure has ballooned.

While it was around $4 billion in 2011, it grew to $10 billion in 2016. By 2030, he added, one in four Singaporeans will be aged 65 and older, compared to one in seven currently.

The fiscal system should allow the country to support an ageing society, he said, adding that this is why the GST hike, among other measures, has to be taken. "We know the numbers," he said. "This is inevitable, and we have to be ready for it."





 






Political risk in announcing GST hike? Govt has to do ‘the right thing’, says Heng Swee Keat at post-Budget TV forum
Finance Minister Heng Swee Keat acknowledges the concerns surrounding the rise in the Goods and Services Tax (GST), but hopes that Singaporeans can see the bigger picture.
By Tang See Kit, Channel NewsAsia, 22 Feb 2018

While he recognises the concerns surrounding the planned increase in the Goods and Services Tax (GST), Finance Minister Heng Swee Keat said that Singaporeans need to understand that the tax hike is necessary and being done for a “very important purpose” - to finance the country’s growing expenditure needs.

He was speaking to reporters on Wednesday (Feb 21) after a post-Budget forum held at Mediacorp.

Mr Heng on Monday delivered the Budget for 2018, which he described as a “strategic and integrated financial plan to position Singapore for the future”. With a focus on longer-term challenges, the all-encompassing Budget included measures targeted at the economy, society, environment and maintaining the country’s fiscal sustainability.



The GST hike from 7 to 9 per cent, slated to take hold sometime from 2021 to 2025, was the hot topic among Singaporeans who got a chance to ask the finance minister questions about the Budget on Wednesday.

Most raised concerns about the potential rise in living costs, such as in the area of childcare, and whether there will be adequate wage growth to help Singaporeans cope with that.

When asked how he would alleviate these worries felt by the man on the street, Mr Heng said: “I appreciate their concerns but it is important to understand why we need to do this.”

“I’ve tried to explain as much as possible what are the rising expenditure patterns,” he added, referring to his Budget statement which outlined the need to continue spending on areas like healthcare, homeland security and infrastructure.

“We’ll have to find new sources of revenue so that is what we started with,” he said. “It is important to bear in mind that we are doing this for a very important purpose.”

One of the forum's participants asked whether Singapore has alternative revenue sources apart from raising taxes. To this, Mr Heng pointed out that the net investment returns contribution (NIRC) is now the biggest contributor to the Government’s coffers – larger than any single tax, including the GST, as well as the corporate and personal income taxes.

Over the past 10 years, that has more than doubled from S$7 billion in FY2009 to an estimated S$15.9 billion in FY2018.

Singapore introduced the NIR framework back in 2008. It started out with the reserves managed by GIC and the Monetary Authority of Singapore (MAS) before the inclusion of Temasek Holdings in 2015. Under the NIR framework, the Government can spend up to half of the expected long-term investment returns generated.

“I must say that as the finance minister, I feel very grateful that our forefathers have left this with us," Mr Heng said. "It is very important when we think about how we use that money, (we need) to make sure we look after our children as well.

“As our economy grows, I hope that our reserves will also grow together with the economy and in that way, our younger people can have the same assurance that we inherited from our forefathers.”



In response to Channel NewsAsia’s question on whether the larger-than-expected Budget surplus for financial year 2017 made the GST hike a tougher sell, Mr Heng replied: “It certainly has made the job of explaining it more difficult, but it is very important for all of us to bear in mind that the surplus we had last year is not likely to be repeated again and again.”

Singapore is expecting a bumper surplus of S$9.6 billion for the year ending March 31, thanks to “exceptional” statutory board contributions, primarily from the MAS, and higher stamp duty collections due to the recent boom in property transactions.

Mr Heng emphasised that this large contribution from the MAS, due to higher investment returns and gains from currency fluctuations, is not a “structural feature”.

Hence, long-term planning for the country will need to done on "more structural factors", such as the rise in spending needs.

But Mr Heng stressed that when the GST hike is implemented, there will be efforts to make sure it remains “progressive” with the roll-out of a “good offset package”, particularly for the lower- and middle-income households.

The timing of the GST increase will also be chosen carefully, with various factors to assess including the state of the economy, changes in the country's expenditure patterns and the global environment.

Mr Heng said he hopes that the economy continues to grow. "If we are in a deep recession or if there’s a global financial crisis again, then we have to redo our sums to see what else we need to do,” he added.

Nonetheless, current projections show that the 2 percentage point hike is the “appropriate rate for us to go”, he said, given that it would translate into revenues amounting to 0.7 per cent of gross domestic product (GDP) every year.

“I’m not saying that that itself will be sufficient (because) how our healthcare cost would grow, we cannot predict with certainty,” he said.

“But as far as the GST is concerned, looking at our current projections and trends, 2 percentage point is likely to be the right one.”

Even for businesses, the “very advance notice” given by the Government, which Mr Heng admitted to be “quite exceptional”, will help them to adjust to the planned increase in GST.



IMPORTANT TO DO THE RIGHT THING: HENG SWEE KEAT

Some observers have also raised the political risk that the ruling People’s Action Party is taking with the GST hike.

In 2015, then Finance Minister Tharman Shanmugaratnam stated that the revenue measures the Government had undertaken would provide sufficiently for increased spending planned until the end of the decade.

Prime Minister Lee Hsien Loong reiterated at the PAP convention on Nov 19 that “for this current term of government, we have enough revenue”.

That remains correct based on the Government’s projections, Mr Heng said.

“If it was a wrong assessment, we would be prepared to say so but it is not. It is the correct assessment that we are in good position right until at least 2020 but beyond that, we know that there are so many new areas of expenditure that we will need.

On whether he was worried that the opposition could campaign on this issue at the next General Election, he said:“Those of us in positions of responsibility must act responsibly and therefore the way to act responsibly is when we know that this is the right thing to do, we must have the courage to do it and not make narrow personal calculations.”










Decision to raise GST made after all other options studied, says Heng Swee Keat
GST hike the most appropriate measure to help raise revenue at this stage, says minister
By Yasmine Yahya, Senior Political Correspondent, The Straits Times, 21 Feb 2018

The decision to raise the goods and services tax (GST) was a difficult one, but it is the most appropriate option to help Singapore raise revenues at this stage, said Finance Minister Heng Swee Keat.

Over the past year, the Government thoroughly scrutinised all possible alternatives, he said.

"We looked at all the different taxes that we could change, even non-tax measures that we could take. Each of these has its pluses and minuses and when we looked at the overall scheme of things, we decided that at this stage the GST is still the most appropriate."

For instance, other countries are reducing corporate taxes, he noted. So a corporate tax hike could have "unpredictable consequences" - including the possibility of businesses shifting out of Singapore.

Mr Heng was speaking to The Straits Times one day after he delivered a wide-ranging Budget on Singapore's long-term challenges and how they would be addressed - one that he terms a "multi-year agenda" for the country.

The most widely expected announcement - a GST hike from 7 per cent to 9 per cent - materialised. It will kick in between 2021 and 2025.

It is difficult news for Singaporeans, Mr Heng acknowledged yesterday, but he added that he hoped they can see the bigger picture.

"We are in a very tight fiscal situation, not this year, not next year, but over the longer run," he said.

While there was a budget surplus of $9.6 billion last year, this was due to "unexpected factors" - a buoyant property market brought in higher stamp duties and financial market fluctuations led to a big jump in investment returns for the Monetary Authority of Singapore (MAS) - which means "it can turn the other way round". Meanwhile, long-term trends such as an ageing population necessitate healthcare spending.

"Revenue will not be enough," he said. As it is, money from the GST hike will not cover healthcare spending; the latter is estimated to rise to 3 per cent of gross domestic product a year over the next decade, while the GST hike is forecast to bring in revenues amounting to 0.7 per cent of GDP every year.



As for when exactly the hike will take effect, Mr Heng said it depends on the economy and financial markets. Even new medical technology, which can drive healthcare costs up, will play a role.

On whether a confluence of factors later on could render the hike unnecessary, he responded: "I'll be very happy if that happens, but I will caution it is unlikely because the existing taxes will have to be extremely buoyant and the growth will have to be very, very high in order for us to be able to come up with that extra revenue to meet the expected rise in expenditure."

Mr Heng said the Government has been very careful in managing its expenditure, and the money raised is channelled to long-term needs.

"It is not as if tomorrow we're going to spend on something that is totally superfluous. If people feel that this is profligate spending, then I will be very sad," he said, addressing criticism from some quarters.



On whether he considered tapping more of the reserves - tweaking the net investment returns formula so the Government can spend over half the long-term returns from assets managed by GIC, Temasek and MAS, Mr Heng said the numbers might be debated but what is more crucial is the principle that every generation pays its fair share.

For example, investments in infrastructure are upfront and very lumpy, but the benefits come many years down the road, so it is only right that future generations should pay for them. Looking ahead, Mr Heng did not rule out the possibility of more measures to raise revenues in future. "Will there be other possible revenue measures that we have to take later on? We will have to look at how our expenditure growth pans out in the coming years."





















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