Budget 2012: An Inclusive Society, A Stronger Singapore

Budget 2012
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An inclusive Budget for the long haul

Range of new schemes to help the elderly, poor families, disabled

By Li Xueying, The Straits Times, 18 Feb 2012

THE Government trained its sights firmly on long-term challenges, mapping out a Budget to steer Singapore on a path to becoming a more inclusive and stronger society.

Targeted measures were rolled out to tackle - and in some cases, pre-empt - emerging problems that could thwart that vision.

And so, older workers worried about money for retirement will have their Central Provident Fund (CPF) accounts boosted with higher contributions.

Companies that could become casualties as Singapore strives to become less reliant on foreign workers will be nudged with higher cash incentives to improve productivity.

Poor families at risk of being stuck in a poverty trap will benefit from a new permanent scheme - a 'GST Voucher' to help them with utility and medical bills as well as daily expenses.

Those hoping for mass-based goodies all round were however left disappointed - there were none.

As Deputy Prime Minister Tharman Shanmugaratnam said several times in a nearly two-hour speech in Parliament, the 2012 Budget is focused on addressing Singapore's longer-term challenges. 'It is a Budget for the future,' said the Finance Minister.

The Budget, the first since the general election in May last year, also has the Government taking bold steps to assuage frustrations that simmered during and after the hustings: infrastructural bottlenecks.

There will be more buses on the roads - 800 new ones over the next five years - and more hospital beds - 3,700 more in eight years - even as bigger projects are on the way.

Except for a moment of levity as Mr Tharman sought to describe 'ang hoon' - Hokkien for rolled cigarettes, which will attract higher duties - it was a serious speech sketching out a vision of how the Budget would help achieve 'an inclusive society, a stronger Singapore'.

One criticism levelled at the Government in recent years has been that the influx of foreign workers has depressed the wages of poorer Singaporeans, leaving them behind even as the country moved forward.

Mr Tharman marshalled data to show that this was not the case: the median income of households at the bottom 20th percentile grew 13.6 per cent over the past five years.

But he acknowledged that some individuals on the lowest rung, such as cleaners, have not seen this lift.

He also warned that Singapore's increasing dependence on foreign workers was not sustainable.

Hence the need to restructure the economy so it will grow by being more productive rather than by expanding the workforce, he said. This, in turn, will boost incomes across the board.

Showing his determination to wean firms off over-reliance on foreign workers, he announced that the proportion of foreign workers they can hire will be cut. This will mean pain: Some companies will have to downsize or move abroad. Others may fail.

'None of this will be easy,' he admitted, especially for small and medium-sized enterprises.

But he promised them special help, to the tune of $1.4 billion in total.

The main aid will come in the form of beefing up the productivity and innovation credit scheme. Companies will get a hefty 60 per cent payout for up to $100,000 of their spending on productivity. There will also be more training subsidies and cash grants.



Meanwhile, Mr Tharman also targeted three groups who need attention: the elderly, the poor, and those with disabilities.

The danger for older Singaporeans, he noted, is that they have very limited cash savings. To address this, the employer CPF contribution rates for older workers will be revised upwards.

To ensure they remain desirable to employers despite the increased costs, companies who hire older workers will enjoy a new wage subsidy of 8 per cent for these workers.

Meanwhile, older people who downgrade their homes - and unlock their value - will get help. Subsidies for use in hospitals, nursing homes and home-based care will also be raised.

Middle-income Singaporeans, who have complained that they feel neglected, will enjoy some of these subsidies.



Mr Tharman also raised the issue of inequality and stagnating social mobility as one the Government has to work harder at. Unlike in the past where benefits were usually given as one-offs, a new scheme for lower-income families will be a permanent feature of Singapore's social system: the GST voucher scheme, which brings cash handouts, Medisave top-ups and U-Save rebates for utilities.

Given the focused approach of directing resources to areas of greatest need, Budget 2012 is a fiscally prudent one, with a small surplus of $1.3 billion - at 0.4 per cent of gross domestic product.

The lack of short-term measures, however, generated concern among some in the business camp fretting about the economic slowdown.

But Mr Tharman, who said it has to be seen in context of an 'exceptional rebound' in 2010 and last year's healthy growth, made clear the Government will still step in, if needed: 'Should events take a sharp turn for the worse, we will be ready to act decisively, just as we have done in the past.'

Parliament will sit on Feb 28 to debate the Budget.

For Mr Tharman, the way ahead is clear. 'Opportunity, improving ourselves, compassion,' he said. 'They define the character of an inclusive society and must be our common purpose as Singaporeans.'

CPF to be raised for older workers

By Rachel Chang, The Straits Times, 18 Feb 2012

A SWEEPING slew of measures to make older workers more employable and lure more of them back to the workforce dominated the Budget statement.

In the next five years, the Government will spend $470 million a year on subsidising the wage bill of employers, in a move to encourage them to hire older workers.

At the same time, it will raise the Central Provident Fund (CPF) contribution rate of workers 50 years and older. By fulfilling this longstanding wish, the Government hopes to entice seniors to return to work and work longer.

The two-pronged approach to cope with an ageing workforce and reduce the dependence on foreign workers was presented in Parliament yesterday by Deputy Prime Minister Tharman Shanmugaratnam in his Budget speech.

'People are healthier and living longer,' he said, sketching out the challenges facing Singapore's older workers. 'But unfortunately, working careers have not lengthened to the same extent.'

The current generation of older Singaporeans, in particular, has to cope with limited cash and CPF savings because wages were lower 30 years ago, he noted. The Minimum Sum they had to set aside then in their CPF for retirement was much less.

So, to boost their retirement savings and coax more to keep working, the CPF contribution rates of those between 50 and 55 years will be eased up slowly to the 36 per cent younger workers get. Calls for this have been growing in the last year, with the labour movement publicly advocating it in December.

Yesterday, Mr Tharman said the Government - in the face of a tight labour market, better-educated and skilled older workers, and flattening wage scales - believed the right time had come.

From September, employers will pay a CPF rate of 14 per cent for workers between 50 and 55 years old, up from the current 12 per cent. For workers between 55 and 60 years, they will pay 10.5 per cent, up from 9 per cent.

For workers between 60 and 65 years old, they will pay 7 per cent, up from 6.5 per cent.

At the same time, workers aged between 50 and 60 years old must also put in an extra 0.5 percentage point into their CPF accounts.

Mr Tharman did not specify when the next increase would be for older workers, or when the full rate would be restored, only that 'we cannot make this major move in one step'.

'We will have to watch how the employment market develops before making any further moves,' he said.

In another bid to encourage older workers to keep working, he made the historic move of doubling the share of their tax-free income. The last time the earned income tax relief for older workers was raised was in 1983.

From Year of Assessment 2013, those between 55 and 59 will enjoy $6,000 worth of tax relief, up from $3,000. Workers aged 60 and older will enjoy $8,000 of tax relief, up from $4,000.

With the bait for older workers set, the enhanced Special Employment Credit (SEC) should get companies to bite.

Under this wage bill subsidy scheme, which is locked in for at least five years, the Government will effectively pay employers for hiring workers aged above 50.

It will pay 8 per cent of the wages of those earning up to $3,000 a month. For those earning between $3,000 and $4,000, it will pay a smaller proportion.

All together, the scheme will cover 80 per cent of the older workforce or 350,000 people, and cost the Government $470 million a year.

This amount is more than double the $190 million companies will fork out for the higher CPF rates of older workers.

For employers interviewed, the SEC news more than makes up for the rise in CPF contributions.

'I'm very pleasantly surprised,' said Mr Arthur Goh, 47, operations manager for Shine security agency. 'This will be very good motivation for us to recruit more older and able folk.'

The ball is now in the older workers' court, said 68-year-old environment health officer Tan Boon Heng.

'The Government has shown it is serious about helping. Now, us old people must also try harder.'

Health-care spending doubles to $8 billion a year
More subsidies will cut the cost of caring for elderly family members
By Salma Khalik, The Straits Times, 18 Feb 2012

THE Government is keeping its promise to help older Singaporeans stay healthy and live well by pumping billions into health care.

Part of it will go towards increasing infrastructure and manpower. But significant amounts will go towards providing subsidies to more people and raising the amount of such help.

Finance Minister Tharman Shanmugaratnam said yesterday health-care expenditure will double from $4 billion to $8 billion a year for the next five years.

Subsidies will be raised across the board for long-term care, even for patients being cared for at home.

From the third quarter of this year, all patients who choose wards with six to eight beds at community hospitals will receive a minimum subsidy of 20 per cent on their bills, with poorer patients getting as much as 75 per cent off their bills.

Currently, patients whose incomes are above the median - where the per capita family income is $1,400 - do not get any relief even if they choose the subsidised wards. With the change, they will get a 20 to 50 per cent subsidy.

Subsidies will also go up for nursing homes, day care, rehabilitation care and home-based care to help more patients from middle-income families.

Two-thirds of Singaporean households - 80 per cent of the elderly - will qualify.

On top of that, subsidised patients at community hospitals, nursing homes and those using homecare services will not have to pay the 7 per cent goods and services tax on their bills. Currently, the exemption applies only to subsidised patients at public hospitals and polyclinics.



Mr Tharman said that with the new subsidies, a family with an elderly parent in a private nursing home can see their monthly bill go down from $2,800 to $1,700.

But he added: 'Most importantly, we must make it easier and more affordable for the elderly to stay at home with access to quality care services when needed.'

So families who look after an elderly parent at home will see their cost go down from $1,400 to $700 a month with the new subsidies.

With the changes, home-based care will be about 40 per cent of the cost of nursing home care.

He hoped this will result in half the frail seniors continuing to live at home rather than be placed in a nursing home.

Those who need a maid for an elderly family member with dementia or those unable to care for themselves will get a $120 monthly cash grant. This is on top of the $95 concession on the maid levy for families with elderly members.

Details of the subsidies will be revealed on Monday.

A study by the Ministerial Committee on Ageing in Marine Parade found that 15 per cent of the elderly had a fall in the past year.

To improve their safety, the Government will subsidise home modifications in Housing Board flats for the elderly.

Features such as grab bars and anti-slip floor tiles will be worth about $2,000, but residents need pay no more than $250.

This Enhancement for Active Seniors (Ease) programme will benefit 130,000 households and cost the Government $260 million over the next 10 years.

Money will also be spent to ease the bed crunch at public hospitals.

Mr Tharman said the number of public general hospital beds will be increased by 1,900, or 30 per cent, by 2020.

Plans announced so far are for the 700-bed Ng Teng Fong Hospital to open in 2014 and a 500 to 600 bed hospital to open in Sengkang by 2018.

The Straits Times understands that the extra beds will come from expanding existing hospitals.

By 2020, four more community hospitals will be built, adding a total of 1,800 beds. They will be in Yishun, Jurong, Outram and Sengkang.

This will more than double the current number of beds. Community hospitals are far cheaper to build and man than a general hospital. They are suitable for recovering patients who do not need intensive hospital care.

Mr Tharman said the Government will also more than double the services in the long-term care sector. This includes both nursing homes and home-based health and social care services.

To provide all these services, many more doctors, nurses and allied health-care professionals will be needed. Money will also be spent on 'paying them more competitively', said Mr Tharman.

Dr Lam Pin Min, chairman of the Government Parliamentary Committee for Health welcomed the infusion of funds into health care and said it reflects the Government's resolve in managing the long-term needs of the elderly.

'Infrastructural and manpower development take time. I am glad the Government is taking a proactive approach in managing the short-term and future needs of the population,' he added.

GST Voucher: Permanent help for the low-income
New $3.6 billion fund will give out cash, Medisave top-ups, utility rebates
By Leonard Lim, The Straits Times, 18 Feb 2012

LOW-INCOME Singaporeans will get cash, utility rebates and Medisave top-ups, as part of a new GST Voucher that will be a permanent feature of the social safety net.

The Government will set aside $3.6 billion in a GST Voucher Fund to finance the scheme in the first five years. This will ensure that payments will continue even in bad economic years.

'The GST Voucher will provide continuing assurance that our GST does not hurt the poor,' said Deputy Prime Minister and Finance Minister Tharman Shanmugaratnam in his Budget speech yesterday.

The scheme is expected to cost $680 million annually, and is part of the Government's efforts to help the lower income and close the widening wage gap.

How much each Singaporean gets will be based on both his income and the annual value of his home.

The voucher payments will fully offset the 7 per cent goods and services tax that the lower 50 per cent of retiree households pay on their expenses. This generally refers to those living in one-, two- or three-bedroom HDB flats.

As for lower-income families who do not have elderly members, it will offset about half their total GST bills. Taking into account other permanent benefits they receive through Workfare, housing and health care, they will get back much more than the GST they pay.

Adult Singaporeans whose incomes fall in the bottom 40 per cent, and who live in HDB flats or in private properties with an annual value of up to $20,000, will also be given cash payouts.

They will get either $250 or $100, from August.

The second component of the new GST Voucher is an annual top-up to the Medisave accounts of older citizens.

Those who are older than 65 and living in HDB flats or lower-end private properties will receive this from August, and it is set to benefit 85 per cent of the elderly.

Lastly, lower- and middle-income households will get help with utility bills through permanent Utilities-Save (U-Save) rebates, with those in smaller flats receiving more.

The rebates range from $180 to $260.

These will be given out in January and July each year, starting in July this year.

The payouts will help ensure that the Singapore tax system remains a progressive one, with the poor getting more benefits than the taxes they pay, and the more well-off paying more taxes.

Education is another area in which the Government is extending help to the lower-income.

Children in these families will be given financial support, as the Government aims to help them overcome early disadvantages and keep social mobility up.

The household income ceiling for the Education Ministry's Financial Assistance Scheme will be raised from $1,500 to $2,500 per month, with 40,000 more students set to benefit.

Other aid programmes, like top-ups to school advisory and management committees, are also being enhanced so that they can introduce such schemes as transport assistance for students.

Social workers and academics welcomed the move to help the lower- income group amid the rising cost of living and widening income gap.

They say it is a continuation of the Government's recent move towards fair and inclusive growth.

But it is also measured. Sociologist Tan Ern Ser of the National University of Singapore said the Budget, while making an attempt to plug gaps in the low-income, middle-income and senior citizen sectors, was 'ever mindful not to inculcate a handout mentality'.

Silver housing bonus for downgraders
Those who switch to smaller flats will get $20,000 in cash, CPF
By Jessica Cheam, The Straits Times, 18 Feb 2012

DOWNGRADE to a smaller HDB flat to free up money for retirement - and get a cash bonus from the Government.

In a move to encourage elderly folk to downsize their homes to unlock their wealth, Deputy Prime Minister Tharman Shanmugaratnam yesterday dangled a carrot - a silver housing bonus of $20,000.

It will be given to those aged 55 and above who sell their current homes to buy three-room or smaller Housing Board flats.

He noted in his Budget speech that Singapore's current generation of elderly have significant wealth locked in their homes and this would be an attractive option for them to free up money.

The Government will provide $15,000 cash and $5,000 to the household's Central Provident Fund (CPF) accounts.

Under the scheme, home owners will use the proceeds from the sale of their larger home to top up their CPF savings to the current minimum sum.

This is the amount that a CPF member has to set aside when he reaches 55 to provide for regular income in the retirement years from age 65. It is currently $123,000 and will be raised to $131,000 on July 1.

Any excess above the minimum sum can be withdrawn in cash. Mr Tharman said he expects many to be able to do so.

A retiree couple who move from a three-room flat to a studio apartment, for example, will get an extra $1,200 a month under CPF Life - and also $23,000 in cash.

Those who move from a four- or five-room flat to a studio apartment could gain more than five times this amount in cash, he added.

Studio apartments were launched by the HDB in 1998 as an alternative home for elderly residents so they could unlock the value of their existing properties. They are meant only for owner-occupation and carry a 30-year lease to keep the price affordable.

In the HDB's latest sales launch last month, studio apartments in Tampines cost about $86,000 to $94,000 for a 35 sq m home, and $108,000 to $119,000 for a 45 sq m one. There were 322 applications for 186 units, making for a subscription rate of 1.7 times.

Mr Tharman noted yesterday that HDB's studio apartments have been popular and many senior citizens are keen to downgrade.

'It is not just a desire to unlock their savings but that the apartments are practically designed for them. And they have nearby amenities that cater to the elderly, such as senior activity centres,' he said.

More studio apartments will be built in the next few years, he added.

One retiree who was excited to hear about the scheme was Mr C.S. Wong, 65, who told The Straits Times that he would be keen to take it up.

He lives in a four-room flat in Bishan with his wife and is looking to downgrade in the future.

'I'm getting old and have no income. So if this scheme enables us to get some extra money, it's good news,' he said.

But Mrs Chua Lay Hwa, 56, who owns a four-room flat in Bukit Panjang with her husband, is less enthusiastic.

'I like the space that I have; if I can afford to keep the flat, I would rather do that,' she said. But when her children move out in the future, she added that she could consider taking up the bonus 'if the need arises'.

MP Lee Bee Wah, who is chairman of the Government Parliamentary Committee for National Development, welcomed the scheme.

She noted that there were many elderly residents living in four- or five-room flats on their own or with a spouse after their children had moved out.

'Now this scheme will incentivise them to downgrade to a smaller flat... It will also free up bigger flats in mature estates for the resale market for other home buyers who need them,' she said.

KPMG tax partner Leonard Ong said the scheme would be attractive to lower-income, elderly Singaporeans.

'However, whether the take-up rate is good remains to be seen,' he said, adding that there were other considerations, such as having to uproot to a different environment.

'Nonetheless, this is a positive move towards supporting an ageing population in Singapore,' he added.

The Ministry of National Development said yesterday it would reveal details of the scheme at a later date.

How the Silver Housing Bonus works

OLDER Singaporeans, aged 55 years and above, who sell their existing Housing Board flats and downgrade to three-room and smaller units or studio apartments will receive a bonus of up to $20,000 per household. This is in the form of $15,000 in cash and $5,000 to their Central Provident Fund (CPF) accounts.

Called the Silver Housing Bonus, the initiative - announced by Deputy Prime Minister Tharman Shanmugaratnam on Friday - was introduced for the elderly who wish to downsize their homes and unlock their wealth.

Sale proceeds will be used to top up their CPF Retirement Account, up to the prevailing CPF minimum sum. This is the amount that a CPF member has to set aside when he reaches 55 to provide for regular income in the retirement years from age 65. It is currently $123,000, but will be raised to $131,000 come July 1.

The top-up, along with all other monies in the Retirement Account, will be used to purchase a CPF Life annuity, which will provide a lifelong monthly payout. Any excess above the minimum sum can be withdrawn in cash.

A retiree couple who move from a three-room flat to a studio apartment, for example, will get an extra $1,200 a month under CPF Life - and also $23,000 in cash. Those who move from a four- or five-room flat to a studio apartment could gain more than five times this amount in cash, said Mr Tharman.

More details about the scheme will be announced by the Ministry of National Development soon.

Govt to co-fund bus fleet expansion

$1.1 billion to be set aside to buy and run 550 new buses over 10 years

By Christopher Tan, The Straits Times, 18 Feb 2012

THE Government will for the first time help fund the purchase and running of buses to ramp up capacity while commuters wait for new rail projects to be completed by 2020.

Finance Minister and Deputy Prime Minister Tharman Shanmugaratnam said $1.1 billion will be set aside for this 'one-off' measure.

'We will partner the public transport operators to add about 800 buses over the next five years,' said Mr Tharman, adding that the move will increase the fleet of about 4,000 public buses by 20 per cent.

He said this was a big increase as it took the transport operators almost 20 years to grow the fleet by 800 buses in the past.

The Government will pay for 550 buses, while SBS Transit and SMRT Corp will fund the remaining 250.

The Government is setting aside $1.1 billion for the fleet expansion as well as to cover the running cost of the 550 buses over 10 years.

Beyond this, Mr Tharman said 'the viability of bus operations will have to rest on improvements in efficiency and a sustainable system of fare revenues'.

He also said that with the fleet expansion, almost all feeder buses will run at intervals of 10 minutes or less 'for two hours during morning and evening peak periods, instead of a one-hour peak currently'.

Transport experts described the news as a dramatic change in policy.

Assistant Professor Paul Barter, who teaches transport policy at the Lee Kuan Yew School of Public Policy, said: 'Singapore desperately needs high-frequency bus services.'

Ideally, he said, waiting times should be 10 minutes or less for most routes throughout the day - even during off-peak periods.

'If we can hit that target, then we'll have a very good bus service,' he said.

Prof Barter has been a vocal advocate for improving the public bus industry, which he said had not received the same degree of public financial support as the rail sector.

The Government has poured billions into building rail infrastructure, but has offered relatively little in the way of direct subsidies to the bus sector.

'We've been under-funding buses,' Prof Barter said, adding that Mr Tharman's describing the bus aid as a 'one-off' package might need a rethink.

'We may need to make it systematic and long-term. We need buses even when the new MRT lines are up.'

Suggesting that the Government might link funding aid to performance targets, Prof Barter said: 'If we buy the buses and they are lying in the depot, it's no use.'

SBS Transit and SMRT Corp welcomed the assistance and will work with the Land Transport Authority to roll out the new buses.

Bukit Panjang resident Toh Boon Teck, 26, welcomed the move to boost capacity. The engineer said commuters in Bukit Panjang and Choa Chu Kang had only bus service 190 to get to town and it was always crowded on weekends.

'With more buses, maybe I'll have a chance to get a seat,' he said.

More buses should also be injected into feeder services, such as the 920 and 922, he said.

'People who don't live near the LRT station have to take these buses, which come only every 20 to 30 minutes.'

Meanwhile, new rail projects such as the Downtown, Thomson, and Eastern Region Lines - when all completed by around 2020 - will give Singapore a metro network as dense as in places such as New York and London, said Mr Tharman.

He noted that by then there will be 400,000 homes within 400m of an MRT station - double the number now.

Tax to be based on carbon emission
Buyers of cars with low emissions may enjoy rebates of up to $20k

By Christopher Tan, The Straits Times, 18 Feb 2012

SINGAPORE will adopt an emission-based vehicle taxation system when the current green vehicle rebate scheme runs out at the end of the year.

Under the new scheme, buyers of cars with low carbon dioxide emissions stand to enjoy tax rebates of up to $20,000.

On the other hand, those who buy high CO2 emission cars may be penalised by up to $20,000.

More car buyers are likely to get the carrot than the stick, because Deputy Prime Minister and Finance Minister Tharman Shanmugaratnam said when announcing this move yesterday, that the Government expects to lose $34 million a year implementing this scheme.

While details of which cars will get which incentives or penalties will not be out until a fortnight or so from now, industry watchers said a petrol-electric hybrid model such as the Toyota Prius C and Volkswagen Polo Bluemotion turbodiesel should be at the high end of the rebate scale.

And cars such as the Range Rover Sport, Maserati GranCabrio and Mercedes-Benz C63AMG will probably attract the stiffest penalties.

Motor traders believe most existing models will fall within a neutral ground - that is, they will not attract any rebate or penalty.

In announcing the new taxation regime, Mr Tharman said the decade-old green vehicle rebate had failed to encourage a wider adoption of 'green' vehicles among motorists.

He said one drawback was that it was based on a 'technology platform'. So, as long as a car was either a hybrid, CNG or battery-powered, it was given a rebate equivalent to 40 per cent of its Additional Registration Fee.

The scheme ignored smaller conventional cars which may be just as or more efficient.

Volkswagen Group Singapore's managing director Zeno Kerschbaumer welcomed the new system, saying: 'We are delighted to hear this. It is something positive and something which we've been saying in the last few years.

'This scheme allows customers to choose what technology he wants.'

But at least one motor company said that the scheme should have taken into account other emissions besides just CO2.

In a recently concluded study, Toyota distributor Borneo Motors said it found that even if half of Singapore's cars were to be converted to diesel, the CO2 reduction would be 'relatively small'.

But there would be 'a significant increase' in emissions of nitrous oxides, hydrocarbons and particulate matter from current levels.

This is because diesel cars - even those which meet Euro V standards - tend over time to emit more pollutants that will degrade air quality, the company said.

Tax for greener diesel cars slashed

By Christopher Tan, The Straits Times, 18 Feb 2012

FROM January next year, diesel cars that meet the stringent Euro V emission standard will have their annual Special Diesel Tax lowered to 40 cents per cubic centimetre (cc) of engine displacement.

This is a significant reduction from the $1.25 per cc for Euro IV diesel cars.

The announcement, made by Deputy Prime Minister and Finance Minister Tharman Shanmugaratnam yesterday, took many by surprise.

Singapore will adopt the Euro V standard for diesel vehicles in 2014, and the slashing of the Special Diesel Tax is meant to encourage an earlier adoption of newer and cleaner diesel technologies, the minister explained.

The change means the buyer of a 1,600cc Euro V diesel car will end up paying no more than what the average owner of a petrol car incurs in petrol duties a year.

Petrol pump prices incorporate a duty element: 41 cents per litre for 92- and 95-octane fuels, and 44 cents per litre for 97-octane and higher.

The tariff for compressed natural gas at the pumps is 20 cents per kilogram.

Diesel, however, is duty-free.

As such, the Government has been levying special taxes on diesel cars and taxis.

Taxis are each taxed $5,100 per year, while passenger diesel cars are taxed $1.25 per cc if they meet Euro IV standards, and six times their respective annual road taxes if their standards fall below Euro IV.

However, commercial vehicles and buses that run on diesel are exempt from this tax. This is understood to be a pro-business strategy.

Motorist Jonathan Kong, 42, said the substantially lower tax for Euro V diesel cars was 'fantastic news'.

He added: 'I clock about 30,000km a year, and a diesel car makes sense because it is more efficient.'

The real estate agent, who drives a BMW 320i, said he will 'definitely' be looking at a diesel model - perhaps a BMW turbodiesel 3-series - the next time he changes his car.

Mr David Ting, deputy editor of motoring magazine Torque, said: 'This is a step in the right direction, with the Euro V requirement ensuring that only the latest, cleanest diesel passenger cars enjoy benefits.'

Motor companies that sell German brands welcomed the news, as some of them are already offering Euro V models here.

But Japanese manufacturers, which typically have an extremely limited range of diesel cars, are unlikely to benefit from the move.

As of now, however, there are fewer than 400 diesel passenger cars on the road here, out of a population of nearly 600,000 cars.

While welcoming the tax reduction, Volkswagen Group Singapore managing director Zeno Kerschbaumer said the taxation policy on the different types of fuel here is 'not neutral'.

This has resulted in wide price discrepancies.

For instance, diesel is about 25 per cent cheaper than petrol at the pumps, because diesel is duty-free.

Meanwhile, the Finance Ministry said the tax on diesel taxis - even if they comply with Euro V standards - remains unchanged at $5,100 per year, because the policy takes into account the higher annual mileage of a taxi compared to that of a private car.

But Premier Taxis managing director Lim Chong Boo said it is not equitable to have a flat tax for all taxis, because 'some taxis are smaller and are thus more efficient, and some clock far lower mileage than others, and thus have less emissions'.

Scrapped: 2% transfer fee for used vehicles
BUYERS of used cars will no longer have to pay the Additional Transfer Fee (ATF) from today.

This fee, levied at 2 per cent of a vehicle's prevailing market value, has been in place since 1968.

But over the years, many parties have continually called for it to be lifted.

Yesterday, Deputy Prime Minister and Finance Minister Tharman Shanmugaratnam said: 'Arising from feedback from the public and the motor industry, the Government has reviewed and decided that the ATF is no longer necessary.'

Abolishing the 44-year-old tax will cost the Government about $70 million a year in revenue forgone.

But it has brought cheer to many.

Singapore Vehicle Traders Association secretary Raymond Tang said: 'All the traders will be very happy.

'We have been lobbying for this for over 10 years.'

Mr Tang added: 'But this actually benefits the consumer, because it is the buyer who pays the transfer fee.'

Mr David Ting, deputy editor of motoring magazine Torque, said: 'Most buyers and traders of used cars regard the transfer fee as an overpriced administrative fee.

'After all, the procedure to effect the vehicle ownership transfer - even if done manually - should have cost the same in time and labour regardless of each car's value.'

Some traders view the fee as 'double taxation', as every car is already taxed heavily before it is put on the road.

The savings could be significant.

For instance, if a five-year-old Japanese sedan was deemed to be worth $50,000, the ATF would have come to $1,000.

The fee for high-end cars can be a lot more.

With the change, buyers of second-hand vehicles need only pay the transfer fee, which, incidentally, goes up from $10 to $11 from today.

The change is especially timely now, as used car sales have risen to their highest level since 2000 because the supply of certificates of entitlement, which motorists must secure before they can own a new car, has fallen to a record low.

Last year, more than 72,000 used cars changed hands - 21/2 times the number of new cars sold.

Foreign worker quotas to be cut

By Jonathan Kwok & Esther Teo, The Straits Times, 18 Feb 2012

FACTORIES and services firms will have to manage with fewer foreign workers under the latest round of changes aimed at cutting reliance on this type of labour.

The Government yesterday unveiled cuts to foreign worker quotas.

Firms in manufacturing will see their dependency ratio ceilings (DRCs) - the maximum proportion foreign workers can make up in a workforce - fall to 60 per cent, from 65 per cent.

Services firms will be able to have foreign workers fill up 45 per cent of positions, down from 50 per cent.

Finance Minister Tharman Shanmugaratnam said the Government may look at more rises to the foreign worker levy later, depending on foreign worker growth in the next year.

The DRC for S Pass holders, mid-level skilled foreigners, was also cut to 20 per cent from 25 per cent.

The changes kick in on July 1, when firms will not be allowed to bring in new foreign workers beyond the new DRCs. As many firms would have invested in existing foreign workers, they have until June 2014 to comply in relation to these workers.

In construction, man-year entitlement (MYE) quotas, which specify how many foreign workers a main contractor may hire for a specific project, will fall by a further 5 per cent in July. Levies for basic skilled workers hired outside the MYE quotas will be raised.

The moves are just the latest in a series of steps, since 2010, to reduce Singapore's demand for foreign workers.

The Government unveiled rises in foreign worker levies in the 2010 Budget, extended last year, and still being phased in. It has also tightened rules for Employment Passes and S Passes, for skilled foreign labour.

But it will take time for these measures to affect demand for foreign labour, said Mr Tharman. The foreign workforce grew by 7.5 per cent a year over the last two years.

Mr Tharman said that Singapore should use the slow growth year to lower the DRCs across the board. He expects about 500 manufacturers and 8,500 services firms to be affected.

The moves are in line with a government goal of restructuring the economy to grow more through productivity and less by boosting the workforce.

The Government also announced measures to help firms make the transition, such as an incentive to employ older workers.

Mr Tharman said Singapore needs to do more to tap the 'latent pool of local manpower', including homemakers, by offering better pay and working conditions, for instance.

He cited the example of restaurant chain Sakae Sushi, which has been actively hiring homemakers.

Mrs Mildred Tan, managing director at Ernst & Young Advisory, said: 'The initial reaction from companies will be that they will be affected, but in the medium term, it will be adjusted as they use the schemes to raise their productivity.'

Companies were unsurprised by the move but expected pain.

'This is a good move for the longer term but it would be better if we had more time to make the transition,' said Mr Andrew Kwan, managing director of Pastamatrix International, which runs restaurant chain Pastamania and is the majority owner of the Swissbake chain of bakeries.

Some 46 per cent of the firm's 820 employees are foreign.

His worry is that the new DRCs will affect his ability to hire new foreign workers, especially as the company aims to grow strongly this year.

'This is quite sudden. For instance, we've already committed to several new outlets. We will have to go back to the drawing board and adjust our plans accordingly, perhaps looking at more mature workers instead.'

Mr Francis Koh, chief executive of construction group Koh Brothers, said the new MYE and higher levies are likely to lift his labour costs by 8 to 10 per cent. But government productivity initiatives will help offset some of this.

'While it might be hard in the short term, we believe, like the Government, in the long term we need to reduce our reliance on foreign workers and increase our productivity instead.'

His firm has 1,000 staff, including 400 foreigners.

Mr Chris Woo, tax partner at PwC Singapore, said: 'The Government is reacting well to the undercurrent of unhappiness over the sharp increase in recent years of foreign labour.'

He said Singapore-based firms will be forced to hire more Singaporeans.

Incomes up for most families

By Phua Mei Pin, The Straits Times, 18 Feb 2012

DESPITE rising costs, the incomes of most Singaporean families have risen.

This growth in real income was pointed out by Deputy Prime Minister Tharman Shanmugaratnam yesterday when he cited figures to illustrate the benefits of having foreign workers.

He picked the median Singaporean household - which is in the midpoint of a range - to make his point.

The income per member of this household grew by 16.9per cent in the last five years, after taking inflation into account, he said.

Even those in the bottom 20 per cent saw their per member income going up, albeit at a slower rate: 13.6 per cent, added Mr Tharman who is also the Finance Minister.

He produced these figures to show that foreign workers do not just benefit businesses, but Singaporean workers as well.

He explained that the growth in the income of each household member was not just due to individual wages going up but also because more members of each household obtained jobs.

Mr Tharman, however, acknowledged the rise in income had not been felt by Singaporeans 'at the lowest rungs of the income ladder'.

'We take that seriously, and are tackling the problem,' he said.

He also said that Singapore's increasing dependence on foreign workers was not sustainable.

It will put pressure on Singapore's infrastructure and limited space, affect the character of society and reduce the urge of companies to raise productivity, he added.

So, further measures will be introduced to reduce the inflow, he said.

Delivering on the talk about inclusivity
By Chua Lee Hoong, The Straits Times, 18 Feb 2012

THE first SMS arrived at 4.56pm.

'Tharman v generous!!! Give away lots of $. My jaw still on the floor. They giving old folks a lot n it's not even election year.'

The second came at 5.04pm. 'Wah budget with HEART', followed by a big smiley.

My two correspondents must have been watching the live telecast of the Budget statement, for the text messages came even as Deputy Prime Minister Tharman Shanmugaratnam was still delivering it.

But I must say I agreed wholeheartedly with the sentiments in the two messages. I should also add that I am glad there are no mass handouts - unless you count the 'GST Voucher' or the Medisave top-ups to those who are on MediShield. As a taxpayer, I would rather that my tax dollar goes to those who need it the most.

Four other things struck me about this year's Budget.

One is its ideological continuity from when Mr Lee Hsien Loong first became Prime Minister. It was Mr Lee who catapulted the word 'inclusive' into the national lexicon years ago, and since then his Cabinet - with Mr Tharman at the forefront - has kept its focus on building an inclusive society.

Where at the start the emphasis was on the economic, especially on reducing the income gap between the rich and poor, the notion of inclusivity is now being extended to other groups. In this year's Budget, the disabled and those with special needs are among those receiving the biggest leg-up in terms of subsidies and wage support.

'Inclusivity' is, however, a highly elastic notion, and one of the challenges the Government will face is dealing with calls to extend it to groups like single mothers and people with Aids, both of which are often financially challenged.

The second point: The seriousness of intent and sense of urgency behind many of the declared aims.

Regarding the pledge of an inclusive society, for instance, it was reassuring to know that, instead of just giving handouts, the Government would also be looking into 'growing a spirit of responsibility and community'.

One important priority in this regard is attracting more Singaporeans into the social sector, and rewarding them better. Social workers deserve the fullest respect from Singaporeans.

There was a similarly palpable seriousness about helping those in the cleaning industry. Remarking that cleaners have not seen the same lift in income experienced by most other Singaporeans in the last five years, Mr Tharman said: 'We take that seriously, and are tackling the problem.' Word has it that among options being considered is unionising the sector so that cleaners have better bargaining power.

The third thing that struck me was the Finance Minister's emphasis on 'sustainable financing'. While it was unsaid, one reason for the absence of generous handouts to all and sundry this year is obviously the fact that there is limited money in the state coffers, and the Government has chosen to spend what is there in a more targeted fashion. The Government is only into the first year of its five-year term and the accumulated surplus is small.

Indeed, if it had not been for the change made to the Constitution in 2008 that redefined the returns from past reserves and thus enabled the Government to draw a bigger sum of money, the Budget would probably be showing a projected deficit this year. The 'net investment returns contribution' to this year's Budget amounts to $7.3 billion - a substantial sum.

The fourth point: the restructuring of the economy. This is a recurring theme in many Budgets, and underscores the difficulty of the political balancing act involved.

The aim is clear: to reduce dependence on foreign workers and increase productivity, so as to increase the real wages of Singapore workers.

The scary statistic that Mr Tharman produced yesterday was that the same value of output produced by 10 workers in Singapore takes only seven workers to produce in the United States, or six in Switzerland.

I was in Switzerland recently and indeed I was impressed by how in one restaurant, there was just one waitress and one waiter serving a room chock-full of diners, and doing it very efficiently and knowledgeably.

Productivity in most local small and medium enterprises (SMEs) is low. The Government is setting aside millions of dollars for them to boost their productivity, but most lack the know-how and the will. Many SME bosses prefer to be boss of a small, struggling company than a partner or employee in a merged, bigger and more thriving company.

For the Government, there is major political risk in pushing the productivity pedal too hard by curbing foreign worker numbers. More than a million Singaporeans work in SMEs and when one folds, local unemployment increases. SMEs have been putting tremendous pressure on the Government not to tighten the foreign worker tap - hence, even as Mr Tharman declared that 'we have no alternative but to slow down the growth of our foreign workforce', he also said that reductions in foreign worker dependency ratio ceilings would be 'calibrated'. In short, gradual.

What is significant in his statement this year: There is a recognition that a 'collective effort to re-instil pride in every job' is needed.

'Waiters and cooks in restaurants; chambermaids in hotels; crane operators... construction tradesmen; machine operators and salespersons... these are good jobs in every developed society,' he said.

Perhaps the Finance Minister should set aside some funds for stories and dramas highlighting this point. It would be worth the money.