Tuesday 24 February 2015

Budget 2015: Building Our Future, Strengthening Social Security

Singapore Budget 2015

Budget boost for the middle class
Sandwiched class gets help with childcare, school, training expenses
By Zakir Hussain, Deputy Political Editor, The Straits Times, 24 Feb 2015

SINGAPORE'S Budget, as it celebrates 50 years of independence, was firmly focused on preparing the nation for a challenging future while addressing the present needs of the middle class and the poor.

As widely expected, the "sandwiched class" - caught between taking care of their children and supporting their aged parents - received a big helping hand with childcare, school and training expenses, enhanced Central Provident Fund (CPF) savings and support for elderly parents.

Middle-class parents hailed the expansion of a childcare subsidy scheme and the waiver of national exam fees. Similarly, seniors aged 55 and above cheered the cash fillip of up to $600 in the form of an enhanced GST Voucher to help them with daily expenses.

What is more, Deputy Prime Minister and Finance Minister Tharman Shanmugaratnam, in declaring that "we have to keep the tax burden on the middle income low, so that they get to keep what they earn, as much as possible", announced a 50 per cent tax rebate capped at $1,000 to benefit 1.5 million taxpayers - while slapping a surprise two percentage point hike on the rich in the top-tier tax bracket from 2017.

As for the nation's next phase of development, Mr Tharman outlined major steps in four areas: building a pool of highly skilled workers, helping businesses innovate and expand abroad, investments in economic and social infrastructure, and strengthening the social security network for retirement.

Total government expenditure in the jubilee year is estimated to be $68.2 billion, the largest ever and an increase of almost 20 per cent from financial year 2014's $57.2 billion spending.

While spending on defence and education remains a top priority, transport spending will rise by $4.8 billion, mainly due to a fifth terminal for Changi Airport and new MRT lines. Health-care spending will rise by $2 billion to cater to new facilities and subsidies for MediShield Life.

The Budget will see a bumper deficit of $6.7 billion mainly due to $6 billion set aside for investments in Changi Airport, research and productivity, but which Mr Tharman said will be funded from previous years' surpluses.

To ensure a new generation of craftsmen in a range of sectors, the Government will set aside $1 billion a year on average from now until 2020 on SkillsFuture programmes to encourage lifelong education and training. This includes a SkillsFuture Credit scheme for each adult citizen aged 25 and above, a step mooted by NTUC which welcomed the move.

"We must become a meritocracy of skills, not a hierarchy of grades earned early in life - a society where people keep learning and pushing their potential, and are valued for their contributions at each stage of life," said Mr Tharman.

Small and medium-sized enterprises will get greater support and funding to try out new ideas and venture abroad.

And older workers aged 50 to 65 will gain from enhanced CPF contribution rates.

As for the bottom 20 per cent to 30 per cent of low-wage Singaporeans, those aged 65 and above will get extra help under the new Silver Support Scheme, which will give them handouts ranging from $300 to $750 every three months for life, starting from next year.

Associate Professor Tan Khee Giap of the Lee Kuan Yew School of Public Policy said the Budget sent a clear message that healthy growth is essential to generate enough surpluses that can be redistributed for an inclusive society.

Added Speaker of Parliament Halimah Yacob: "In today's context where many countries are tightening their belts with austerity measures... we are fortunate that our Government through prudent management can increase our social spending instead."

Parliament will debate the Budget from March 3 to 13, during which various ministries will give details of their plans for the year.

Retirement savings boost for older workers
CPF contribution rates of those aged above 50 to go up from next January
By Toh Yong Chuan, Manpower Correspondent, The Straits Times, 24 Feb 2015

RETIREMENT savings for older workers will get a major boost, after the Government moved to raise their Central Provident Fund (CPF) contribution rates.

Workers aged above 50 will see their total CPF rates rising by between 0.5 percentage point and 2 percentage points.

These changes to the CPF will kick in from January next year and boost Singaporeans' retirement savings, said Deputy Prime Minister Tharman Shanmugaratnam yesterday.

In announcing the changes, Mr Tharman said CPF was one of the four main pillars of Singapore's social security system.

The other three are home ownership, affordable health care and Workfare, which is a wage supplement scheme introduced in 2007.

"Each of these four pillars of our social security system seeks to preserve an ethic of work, personal effort and responsibility for the family," said Mr Tharman.

"But the four pillars also reflect collective responsibility."

The Government has stepped up its role to redistribute more to lower- and middle-income Singaporeans in recent years, said Mr Tharman, citing Workfare and the extra 1 percentage point interest for the first $60,000 of CPF savings introduced in 2008 as examples.

The changes announced yesterday are in line with the moves made by the Government to strengthen the social safety net over the past few years.

The CPF rates of workers aged 55 and younger were cut from 36 per cent to 33 per cent in 2003, alongside other CPF changes, because of an economic downturn.

The rate for workers in the above 50 to 55 age group was further cut to 30 per cent in 2005 and 27 per cent in 2006.

The CPF cuts were partially restored over the years from 2007, but the rate for workers in the above 50 to 55 age band continued to lag behind that for younger workers. Mr Tharman said the Government will "take the final step" to restore it fully to the level of younger workers.

Employers and employees will split equally the CPF rate hike of 2 percentage points.

The employer contribution will go to the Special Account, while the employee contribution goes to the Ordinary Account, which can help employees service housing mortgages, noted Mr Tharman.

Workers aged above 55 to 60 will get a 1 percentage point increase in their CPF rates and those above 60 to 65 will get 0.5 percentage point more. The latest change means workers aged 50 to 55 will see the biggest hike of CPF rates, from 35 per cent to 37 per cent, bringing them on a par with younger workers.

These moves will raise costs for firms but Mr Tharman said firms will get help to cope with the higher labour costs.

Firms will be able to claim a Temporary Employment Credit, which pays 1 per cent of wages this year and next, and 0.5 per cent of wages in 2017.

They will also get to claim from the Special Employment Credit an extra 3 per cent of the wages when they rehire staff who are 65 and above, on top of the 8.5 per cent of wages that they can already claim when they hire workers aged 50 and above.

The changes to the CPF have drawn support from both employers and the labour movement.

"The modest increase in the salary cap for CPF contributions was expected, as were the increased contribution rates," said Singapore International Chamber of Commerce chief executive Victor Mills. "Both are fair and just."

Extra 1% interest on first $30k of CPF savings
By Aw Cheng Wei, The Straits Times, 24 Feb 2015

COME January, older Central Provident Fund (CPF) members will earn an additional 1 per cent interest on the first $30,000 of their total CPF savings.

This is on top of the existing 1 per cent extra interest on the first $60,000 of balances, said Deputy Prime Minister Tharman Shanmugaratnam.

The change, which will take effect from Jan 1, will benefit all CPF members aged 55 and above. They will earn 6 per cent interest on the first $30,000 of their CPF funds, up from 5 per cent now.

For CPF members, the higher 1 percentage point in interest rates will translate into higher CPF Life payouts, said Mr Tharman.

A member with $25,000 in his CPF savings can expect to get about $40 more in CPF Life monthly payouts.

For those with a basic retirement sum of $80,500, their monthly payouts will increase by about 6 per cent.

The move is aimed at making the CPF system more progressive, said Mr Tharman.

He added: "It will encourage Singaporeans to retain savings in their CPF accounts, and make top-ups to the CPF accounts of family members."

In all, some 60 per cent of CPF members aged 55 and above will earn 6 per cent on their retirement savings, while 80 per cent will earn at least 5 per cent.

The last time the Government moved to raise interest on CPF savings was in 2008, when it said it would pay an additional percentage point on the first $60,000 in all CPF accounts, up to a cap of $20,000 in the Ordinary Account.

Assistant secretary-general of the National Trades Union Congress Cham Hui Fong welcomed the move, saying "it will definitely boost (workers') savings for retirement".

But Ms Patricia Sim, who turns 55 in May, said the higher interest will not stop her taking out cash from her CPF accounts. She has met the Minimum Sum and wants to take out the excess funds.

"It's safer to have my money with me in case (of) an emergency," said the deputy general manager of a building materials firm.

"Who knows if more changes will be made and I cannot withdraw any money then?"

CPF salary ceiling to be raised to $6,000
By Joanna Seow, The Straits Times, 24 Feb 2015

MIDDLE-INCOME workers will be able to grow their retirement savings as more of their income will be used to calculate Central Provident Fund (CPF) contributions.

The CPF salary ceiling will be raised to $6,000 from Jan 1 next year, up from $5,000, Deputy Prime Minister and Finance Minister Tharman Shanmugaratnam said in yesterday's Budget announcement.

"Middle-income Singaporeans will be able to accumulate more CPF savings during their working years," said Mr Tharman.

Based on the new salary ceiling, a 45-year-old worker who earns $6,000 or more today will save an extra $60,000 by the time he reaches 65, said Mr Tharman.

At least 544,000 CPF members are expected to benefit.

This is the first time since 2011 that the figure has been adjusted. It was last raised from $4,500 to $5,000 to keep pace with income growth at the 80th percentile income.

The adjustment to $6,000 brings the salary ceiling back to what it was before 2004. From 2004 to 2006, it was gradually lowered to be in line with 80th percentile income and to reduce the burden on employers.

From next year, the caps on contributions to the Supplementary Retirement Scheme, which are based on the salary ceiling, will also be raised to $15,300 for Singapore citizens and permanent residents.

The scheme gives tax incentives to people who set aside additional money for their retirement besides CPF savings.

Mr Tharman noted that both the CPF Advisory Panel and the National Trades Union Congress (NTUC) had called for the ceiling to be raised in proposals this year.

NTUC assistant secretary-general Cham Hui Fong said the labour movement was pleased that the proposal had been accepted.

"The (measure) will allow our workers to strengthen their CPF savings to meet financial needs in key areas such as health care, home ownership and retirement," said Ms Cham.

Some employees who stand to gain said they would be glad to have their savings topped up more by their employers.

But it also means a reduction in disposable income.

"It's money in CPF which I can't touch," said Ms Lilian Low, 37, a manager in the finance industry.

"When I grow old, I will look forward to using it. Hopefully, the CPF system is more flexible by then."

Higher caps for contributions to voluntary savings scheme
By Grace Leong, The Straits Times, 24 Feb 2015

THE caps on contributions to the Supplementary Retirement Scheme (SRS) have been raised to $15,300 for Singapore citizens and permanent residents, and $35,700 for foreigners.

The SRS is a voluntary retirement savings scheme that complements the Central Provident Fund (CPF) system. Previously, Singaporeans could put up to $12,750 a year into their SRS accounts. For foreigners, the sum was $29,750 as they do not contribute to CPF.

The move to increase caps on SRS contributions is in line with the raising of the income ceiling for CPF contributions to $6,000, from $5,000, to help middle-income workers. Both changes will take effect from Jan 1 next year.

Deputy Prime Minister and Finance Minister Tharman Shanmugaratnam outlined the rationale for the enhancements to retirement savings yesterday.

"In line with the higher CPF salary ceiling, we will raise the contribution cap within the Supplementary Retirement Scheme, which offers tax incentives to encourage voluntary retirement savings to complement the CPF."

Ms Kerrie Chang, partner, human capital, at Ernst & Young Solutions, said: "With a higher CPF salary ceiling, an increase in the maximum allowable contributions to the Supplementary Retirement Scheme will allow taxpayers to claim a higher tax relief. This may further encourage them to voluntarily put aside more for their retirement needs."

Established 15 years ago, the scheme allows anyone to open an SRS account at a local bank. Every dollar put into the account is tax- free. This reduces a person's taxable income, and thus lowers the tax bill. The SRS attracted 91,652 savers between 2001 and 2013.


Grant, top-ups in push for workers to upgrade skills
All S'poreans will have SkillsFuture Credit account with initial $500 grant
By Amelia Tan, The Straits Times, 24 Feb 2015

SINGAPOREANS aged 25 and above will get $500 from next year and more top-ups in future to offset the cost of courses.

The grant is part of the Government's push for workers to develop the skills and mastery needed to take Singapore's economy to the next level.

New study awards and subsidies will also be rolled out while employers and schools will be roped in to help students discover their interests early on, through structured internships.

These moves will cost the state around $1 billion a year, up from the $600 million a year spent now on continuing education schemes.

This investment in training will ensure that Singapore stays competitive, said Deputy Prime Minister and Finance Minister Tharman Shanmugaratnam yesterday.

Cultivating a strong culture of lifelong learning will also empower Singaporeans to develop themselves and move up.

"We must become a meritocracy of skills, not a hierarchy of grades earned early in life," said Mr Tharman. "A society where people keep learning and pushing their potential and are valued for their contributions at each stage of their life."

To drive these plans forward, the Government has launched the SkillsFuture initiative, which encompasses subsidies, study awards and training programmes.

A key feature is the SkillsFuture Credit account for all Singaporeans. The initial $500 grant and top-ups will go to this account, which can be used for a broad range of courses offered by government training agencies.

Mr Tharman stressed that Singaporeans should not rush to use their credits as they will not expire and can be used throughout their lives.

While the SkillsFuture Credit is aimed at helping Singaporeans in general upgrade their skills, targeted schemes will be introduced for specific groups of workers.

Workers aged 40 and above making mid-career switches will get enhanced subsidies that cover at least 90 per cent of the fees of training and education courses offered by the Ministry of Education and the Singapore Workforce Development Agency.

Those who want to develop specialised skills that are needed to support growing sectors will be offered study awards and fellowships. From this year, study awards will be introduced and increased eventually to 2,000 annually to help specialist workers.

Another 100 fellowships a year will be given out from next year to support education and training programmes.

These are funded by employers, the National Trades Union Congress, the public and the Government.

But Mr Tharman said incentives and new training schemes alone will not transform Singapore into a society which values skills. The mindsets of workers and employers must change too.

"We have to view the education that we get when we are young as but the starting point of a journey of personal learning and self-renewal throughout our lives," he said.

"Whichever the job, we must want to master what we do, and gain satisfaction from it."

Employers must also do their part to help workers reach their full potential.

The Government is also pushing for more collaboration between training institutions, unions, trade associations and employers to chart future skills demand and plan for them.

While changing Singapore's social and economic culture will take time, it is important that the process starts now.

"We can only get to where we want in the long term by taking steps now, moving ahead relentlessly and never thinking that the status quo will get us to a better place," he said.

Poly, ITE students to get more career help
Better internships, on-the-job training after graduation among new moves
By Amelia Teng, The Straits Times, 24 Feb 2015

STUDENTS will soon get more help in charting their careers even before they finish school. Those at polytechnics and the Institute of Technical Education (ITE) will be offered better internships, training at workplaces and career counselling.

And when they graduate, these students will get help in finding employers who will enable them to get industry training and experience even as they continue to learn.

Announcing the new moves yesterday, Deputy Prime Minister and Finance Minister Tharman Shanmugaratnam said these are aimed at giving students a head start in their careers.

Over the next two years, two-thirds of polytechnic courses and half of the ITE courses will introduce enhanced internships - which will have more structured learning goals and are likely to be longer than existing stints.

Currently, internships typically last up to three months, and how they are carried out depends on the host firm that students are posted to.

"We have to develop much better internship programmes compared to what we have today, to help our students as well as our small and medium-sized enterprises," Mr Tharman said.

More students in institutes of higher learning, including polytechnics and ITE, will also have a chance to go abroad for internships, he said.

These plans are part of SkillsFuture, a national panel set up last year to develop training and career progression schemes.

Mr Tharman said fresh graduates from polytechnics and ITE can opt for a new programme that will match them to employers and allow them to further their studies at the same time.

The SkillsFuture Earn and Learn Programme, which will be rolled out in phases starting this year, will eventually cover up to one in three polytechnic and ITE graduates. Those who join the programme, which is modelled on the Swiss and German apprenticeship schemes, will start work after they graduate. They will be mentored and given "structured on-the-job training" while they study and earn an industry-recognised qualification.

Both trainees and employers who sign up for the programme will receive support from the Government, Mr Tharman said.

Explaining these measures, he said the Government is not telling young Singaporeans they have to "zero in on a particular career at that stage".

"However, we have to help them discover their strengths and interests, so that they can choose an educational path not determined just by cut-off points, but by informed choices about courses and the career opportunities they lead to," he said.

Silver Support Scheme: Cash payouts for the poorest elderly
Starting next year, they will get an average of $600 every three months
By Rachel Chang, Assistant Political Editor, The Straits Times, 24 Feb 2015

TO FORGE a new compact of "fairness in retirement", the Silver Support Scheme will entrench cash payouts for the poorest elderly in Singapore.

Payouts will start next year and will amount to an average of $600 in cash every three months.

The scheme aims to support the bottom 20 per cent of Singaporeans aged 65 and older, with a smaller degree of support extended to cover up to 30 per cent of seniors, said Deputy Prime Minister and Finance Minister Tharman Shanmugaratnam yesterday.

The scheme will be a permanent feature of Singapore's social safety net for every needy person who reaches the age of 65, unlike the Pioneer Generation Package that was designed for only a specific group, he said.

It is closer in nature to the Government's landmark Workfare scheme of supplementary cash payouts to low-wage workers. Together, the two schemes will "help mitigate life's disparities", said Mr Tharman. Like in Workfare, Silver Support beneficiaries will be enrolled automatically.

The news was cheered by social workers yesterday, who have long advocated for easier access to assistance.

The quarterly payouts range from $300 to $750, depending on three measures: flat type, the amount of household support that the elderly person has, and his lifetime wages as reflected in Central Provident Fund contributions.

Silver Support is not only for the neediest elderly, he noted.

The initial group of beneficiaries totals 150,000, getting a sum to the tune of $350 million a year.

Mr Tharman emphasised that the scheme's cost will grow as more Singaporeans turn 65.

But it is "the fair thing to do: helping fellow citizens who end up with much less in their retirement years", he said. "Silver Support reflects the values we must preserve as an inclusive society."

The poor elderly "have contributed in their own way during their prime years, whether at work or at home raising the family".

Mr Tharman said that given the major, long-term nature of the scheme, the Government will not rush in its implementation. It needs time to properly identify those who are eligible and develop the necessary systems, he added.

To ease the wait of about a year before the payouts start in the first quarter of next year,

Mr Tharman said an extra Goods and Services Tax (GST) Voucher of $600 will be given to seniors aged 65 and older who live in Housing Board flats.

So, this group will get a total of $900 in GST vouchers from this year's Budget.

Observers welcomed the Silver Support Scheme, praising in particular its automatic enrolment feature and the fact that a bigger- than-expected group is eligible.

Experts said the amounts given should be monitored and raised to keep up with living costs.

"It is ground-breaking that Silver Support is based on the needs of the recipient and is not reliant on employment," said women's rights group Aware's research and advocacy director Vivienne Wee. "This is a good first step towards a universal basic pension."

Mr Wee Lin, chairman of non-governmental organisation Sunlove Abode, said there is a lack of understanding among Singaporeans of how poor some of their fellow citizens are.

Welcoming the scheme, he said: "We owe it to the old people. We have to somehow make it such that they can live without having to worry, 'Where's the next meal going to come from?' "

Silver Support Scheme wins praise
Experts like automatic inclusion of elderly and quarterly payouts
By Walter Sim And Rachel Chang Assistant Political Editor, The Straits Times, 24 Feb 2015

THE new Silver Support Scheme has been lauded by experts for its automatic inclusion of needy elderly - as opposed to requiring them to opt in - and quarterly payouts.

The permanent scheme, to be rolled out in January next year, aims to support the bottom 20 per cent of Singaporeans aged 65 and above, with a smaller degree of support extended to cover up to 30 per cent of seniors.

About 150,000 of Singapore's elderly stand to benefit from the scheme, under which they will receive a payout of $300 to $750 every quarter, Deputy Prime Minister Tharman Shanmugaratnam said yesterday. The average recipient will get $600 per quarter.

Institute of Policy Studies research fellow Christopher Gee, who studies ageing and retirement adequacy issues, said that a complicated application process may deter the elderly.

He also praised the quarterly payouts, as opposed to annual ones as had been widely expected, because it was easier for recipients to "regulate their expenses".

Retiree Chew Meng Kai, 85, who lives with his wife in a three-room Housing Board flat in Choa Chu Kang, said he would not sign up had there been a "cumbersome application process".

He added that the quarterly payouts will encourage prudency, as there may have been a tendency to overspend if it had been a lump sum annual payout.

Dr Kang Soon Hock, head of the social science core at SIM University, said the Silver Support Scheme "will not crowd out, but rather complement, the existing support that these seniors enjoy".

Such existing forms of support may include families still providing informal transfers either in cash or in-kind to elderly family members.

Indeed, Dr Vivienne Wee, director of research and advocacy at the Association of Women for Action and Research, praised the scheme for being "based on the individual needs of the recipient and not reliant on employment".

Most of those living in one- and two-room flats are expected to receive Silver Support, with a smaller proportion of those living in larger flats qualifying.

For example, Mr Tharman said a retired couple in a two-room flat comprising a husband who had contributed about $50,000 to his CPF account and a homemaker wife might receive up to $750 per person per quarter.

A lower-income retired couple living in a four-room flat with their children and grandchildren could each get $450 per quarter.

Mr Gee said the system could still expand after it has been put in place. He added: "If the cost of living increases, the Government might increase the threshold."

But former Nominated MP Kanwaljit Soin called for support to be extended to "all silvers and not just one group" - citing schemes in territories like Hong Kong.

"We must not just target absolute poverty, but also relative poverty. We must elevate the whole of our country," she said, adding that those who are worse-off can then "apply for a further living allowance".

Nonetheless, the Silver Support Scheme, described by Mr Tharman as a "new compact (of) fairness in retirement", would likely be supported by most Singaporeans.

Said Dr Kang of SIM: "Each of us grows old eventually and to know that there are sources of support available to ensure retirement adequacy is comforting."

3D way to measure eligibility for payouts
By Rachel Chang, The Straits Times, 24 Feb 2015

THE new Silver Support Scheme will forgo traditional measures and use a three-dimensional way of determining if a senior Singaporean is eligible for cash payouts.

Wages cannot be used as a measure as the scheme is aimed at retired people, while housing types cannot be looked at as a sole criterion as some elderly people who live in large flats share their homes with children who do not earn much.

So, while their flats may be worth more, their household income per member is low - making them a part of the group of elderly needy.

Hence, the Government will look at three factors in combination to assess the eligibility and payout amount: Their lifetime wages as reflected in CPF contributions, the level of household support they have and the type of housing they live in.

Overall, about 150,000 seniors will make up the first beneficiaries of what will be a permanent addition to the social safety net.

The scheme will give the average recipient in the bottom 20 per cent of senior Singaporeans $600 every quarter, with a smaller degree of support extended to cover up to 30 per cent of seniors, Deputy Prime Minister and Finance Minister Tharman Shanmugaratnam said yesterday.

Most of those living in one- and two-room flats will receive Silver Support, with a smaller proportion of those living in larger HDB flats qualifying.

People who have been homemakers for a good part of their lives and so have little earnings will also qualify if their families are not well off.

The Budget did not include details on how the three factors will be combined to determine the quantum of quarterly payouts, but Mr Tharman indicated they would balance one another out.

For instance, he said, a retired couple may live in a four-room flat that is worth more than the smaller flats of other needy seniors, but they may be staying with their children and grandchildren, which brings down household income per member. Such a couple may still be able to receive $450 each every quarter, or together, $300 every month.

Former Nominated MP Kanwaljit Soin lauded the rejection of traditional means-testing measures such as lifetime wages. Such measures leave out lifelong homemakers, who make up a sizeable portion of the current generation of women aged 65 and older.

50% tax rebate for middle-income earners
Sum capped at $1,000; lower-income to get higher GST Voucher payouts
By Charissa Yong, The Straits Times, 24 Feb 2015

ABOUT 1.5 million middle-income earners who pay personal income tax will receive a 50 per cent rebate of up to $1,000.

As for lower-income Singaporeans, they will get a bigger cash payout from the GST Voucher scheme plus a service and conservancy charge rebate to help them cope with the cost of living.

The cap of $1,000 is "to ensure that the benefits go mainly to the middle- and upper-middle-income groups", said Deputy Prime Minister and Finance Minister Tharman Shanmugaratnam in the Budget statement yesterday.

Experts noted that the tax rebate will benefit those in the sandwiched class who support both their parents and children, and struggle with living expenses.

"The sandwiched class represents the group of taxpayers who pay personal income tax but do not obtain sufficient government subsidies," said National University of Singapore Business School Associate Professor Simon Poh.

This sets them apart from both the lower-income earners who pay no personal income tax but receive generous government subsidies, and the high-income taxpayers who earn enough to pay taxes and yet have a decent disposable income, he added.

The one-off rebate for the 2015 tax year adds up to $717 million.

But experts had mixed views on whether the measures counted as an election-year bonus. They noted that the 2011 election-year Budget - delivered before the May 2011 General Election (GE) - gave a personal income tax rebate of 20 per cent, capped at $2,000.

Said political watcher and Singapore Management University law don Eugene Tan: "We could see the measures as a collective combination of an SG50 bonus, election bonus, a government hongbao (red packet), and a sharing of the Budget largesse."

The rebates will generate a "feel-good effect", he said. "But the Singaporean voter still has full autonomy to make a considered choice in voting during the GE."

Chua Chu Kang GRC MP Zaqy Mohamad, however, pointed out that it was "hard to say" whether the Budget signalled an imminent election: "At the end of the day, it's about being sustainable and responsible in distributing the goodies. It doesn't necessarily signal a big bang Budget for the election."

Institute of Policy Studies senior research fellow Gillian Koh said the Budget's redistributive policies address social divides and "take care of important issues raised in and after elections".

She said key concerns usually brought up at elections include whether the Government has done enough to help Singaporeans, particularly the sandwiched generation, cope with the cost of living, and income inequality.

Meanwhile, 1.4 million lower-income Singaporeans will get $50 more in cash payouts a year under the permanent GST Voucher scheme to offset what they pay in goods and services tax (GST).

This means eligible Singaporeans aged 21 and older will receive $150 or $300 worth of GST Vouchers this year, depending on the annual value of their homes.

To qualify, their earned income in 2013 - as assessed by the Inland Revenue Authority of Singapore - must not exceed $26,000.

About 800,000 households in Housing Board flats will also get $80 million in service and conservancy charge rebates.

One- and two-room HDB households will receive a total of three months of rebates for this year, while three- and four-room households will get two months of rebates.

Top 5% of earners to pay more income tax
By Mok Fei Fei, The Straits Times, 24 Feb 2015

THE rich will be giving a little more back to the wider community with higher personal income taxes coming their way.

Income tax rates for the top 5 per cent of income earners - those pulling in at least $160,000 a year - are about to be raised. The move will net the Government about $400 million more a year.

Taxpayers with more than $160,000 in chargeable income, or the income taxable after taking into account personal reliefs, will face a higher tax rate of 18 per cent on the next $40,000 of their income, up from 17 per cent.

From there, the marginal tax rate will be higher as a person's income increases. The top marginal rate will rise from 20 per cent to 22 per cent for the highest income earners with a chargeable income of above $320,000.

For instance, someone earning $250,000 a year will pay an extra $400 in income tax a year while someone earning $800,000 will pay an extra $10,800.

The changes will start with income earned next year with the taxes to be paid in 2017.

Raising the top income tax rate helps the Government to meet its objectives, Deputy Prime Minister Tharman Shanmugaratnam said yesterday. For starters, it builds a fairer and more equitable system of taxes, with the well-off having to contribute more through the progressive tax regime.

As things stand, the top 10 per cent of taxpayers already pay slightly more than 80 per cent of personal income taxes, while a majority of Singaporeans do not pay income tax at all.

Mr Tharman said Singapore had designed its system such that it has lower overall taxes than most countries, while maintaining a highly progressive regime.

"The higher-income group makes a significant net contribution into the system, which enables the lower-income group in turn to get significantly more benefits than the taxes they pay. In other words, when we add up all our taxes - GST, income, property and other taxes - and compare them to benefits received, the low income group gets more benefits than the taxes they pay, while the high-income group pays more taxes than benefits received."

Property taxes have also been tweaked from a flat rate for residential properties to a tiered system where those with higher annual values are taxed more.

Taxes for the middle-income group have been reduced while the lower-income group has benefited from schemes such as Workfare, which supplements the incomes of low-wage workers.

"It is fair that this enhanced support for those with low incomes should come chiefly from revenues contributed by the high-income group," he said.

"Those with higher incomes have also been seeing stronger growth in incomes than the average Singaporean in recent years."

Raising the marginal tax rate of the top income earners also helps to boost government revenues. But the move is not expected to significantly dent Singapore's competitiveness, he said.

Maid levy cut to $60 for eligible families
By Tham Yuen-C, Assistant Political Editor, The Straits Times, 24 Feb 2015

THE maid levy for families with young children and elderly parents will be halved to $60 a month, in a move by the Government to help middle-income households cope with the cost of living.

The new foreign domestic worker levy concession will take effect on May 1. The change comes two years after the last reduction, when it was cut from $170 to $120 a month.

More families will be eligible for the new levy because the cut- off age of children for families that qualify will be raised from below-12 to below-16 years.

These changes are expected to benefit 144,500 households, and will cost the Government $125 million a year.

In announcing them yesterday, Deputy Prime Minister and Finance Minister Tharman Shanmugaratnam said: "These changes will provide greater support for middle-income families who are taking care of their children and elderly parents."

They are among measures in this year's Budget, including tax rebates, that aim to ease the financial burden on such families.

A family eligible for the new maid levy concession can save $720 a year.

Families without young children or elderly parents pay a normal levy of $265 a month.

Part-time taxi driver and insurance agent Ben Lim is among the beneficiaries of the new levy. The 35-year-old and his wife both work, and employ a maid to look after their sons, aged four and six.

The family's combined monthly income is about $4,000.

"With the levy reduced by 50 per cent, it will definitely help us a lot," he said.

Middle-income families like Mr Lim's will benefit most from the cut, said National University of Singapore sociologist Paulin Straughan. "Having a maid is a luxury for them because of their income, yet they have no choice but to hire one because both husband and wife work."

Ms Peh Kim Choo, director of the Hua Mei Centre for Successful Ageing, lauded the move for "providing more support to caregivers of the elderly".

She said: "We don't want to see an increasing trend of older people being sent to nursing homes... Financial support is one way to help caregivers."

Besides families with children, and those with elderly parents aged 65 and older, others with disabled family members also qualify for the levy concession.

The Finance Ministry said yesterday that the new levy will be shown in the levy payment note to be sent to employers of foreign domestic workers from June.

Lower childcare fees for parents under new scheme
By Kok Xing Hui, The Straits Times, 24 Feb 2015

PARENTS whose children are in childcare centres stand to benefit from lower fees under a new scheme.

While details are still scant, the new partner operator scheme will have childcare operators commit to keeping fees affordable.

A median-income household could pay around $100 less in fees a month, said Deputy Prime Minister and Finance Minister Tharman Shanmugaratnam. This example is based on a household paying $500 a month in childcare fees after a $400 subsidy.

The Straits Times understands that one aspect of the scheme is to get small operators to share resources so as to keep costs down, as Social and Family Development Minister Chan Chun Sing had said in January.

Mrs Liaw-Tan Xinhui, director of Ameba Schoolhouse, which has one centre, said operators might not be willing to share resources such as teachers or curriculum as these are their selling points.

But she said she is willing to join other pre-schools in organising events or share back-end resources such as administrators.

Account manager Ong Boon Hua, 33, whose four-year-old son attends NurtureStars @ Safra Mount Faber, said he hopes the pre-school will join the partner operator scheme.

He pays about $350 in childcare fees after subsidies, instead of the regular $1,000, and hopes to pay even less. The money he saves on childcare could then go towards the care of his parents, who live with him in a three-generation household of seven.

The new scheme is meant to complement the current anchor operator programme, where operators get government grants and rental subsidies in exchange for providing affordable and quality pre-school education.

With the two schemes, the Government aims to have about half of pre-school children in Singapore benefit from more affordable and quality pre-schools by 2020, said Mr Tharman. The Government will spend $250 million on enhanced support for both schemes over the next five years.

Families will also get help in paying for pre-school fees with a top-up to the Child Development Accounts of Singaporean children aged six and below this year.

Most children will receive $600, while those with an annual home value of more than $13,000 will receive $300.

The top-up will cost $126 million and benefit 230,000 children.

For a middle-income household, the top-up of $600 can cover more than a month of childcare costs after subsidies, said Mr Tharman.

Fees for major exams waived
By Pearl Lee, The Straits Times, 24 Feb 2015

SINGAPOREAN students in mainstream schools here will no longer have to pay fees for major exams - the Primary School Leaving Examination (PSLE), as well as the O-, N- and A-level exams.

Singaporeans enrolled in full-time courses at the five polytechnics and the Institute of Technical Education (ITE) will also have their exam fees waived.

Yesterday, Deputy Prime Minister and Finance Minister Tharman Shanmugaratnam also announced top-ups to students' education funds and transport subsidies for needy students. "All in, these measures for students from the primary to post-secondary levels will cost about $250 million over the next three years," he added.

Exam fees for the PSLE are $19, while fees for the O-level exam can range between $370 and $520.

The waiver can lead to a saving of up to $900 for national exams from primary to pre-university.

Exam fees in primary and secondary schools and junior colleges were typically paid via Giro, while those for students in the polytechnics and ITE were included in their annual course fees. ITE students pay about $12.60 in exam fees each term. Those in polytechnics pay about $30 each year.

Temasek Secondary student Jaren Pang said the savings in exam fees "will add up to quite a lot of money". "It will reduce the load on my mother," said the 15-year-old. He has three older siblings who are still schooling.

His mother works at a vegetable stall in a market in Bedok, and is the family's sole breadwinner after his father died in 2012.

Financial aid for needy students will also be ramped up.

Those who are already receiving financial help from the Education Ministry will get extra transport subsidies. These "will cover at least half of students' transport costs", said Mr Tharman.

Students can use the subsidies to offset public transport costs, while pupils in primary schools can use them for school bus fees.

The Government will also add $150 to the Edusave accounts of Singaporean students, on top of the annual contribution of $240. About 400,000 students will benefit from this.

Edusave funds can be used for school enrichment activities.

Students aged 17 to 20 will also receive a fund top-up of $250 or $500, depending on the annual value of their homes, in their Post-Secondary Education Account (PSEA). The funds can be used to pay for a student's fees in a post-secondary institution. This will help 160,000 Singaporeans.

Mr Tharman said the PSEA top-up, coupled with existing bursaries, will help a polytechnic student offset a year of diploma course fees.

Foreign worker levy hike deferred for a year
Additional adjustments made for manufacturing, construction firms
By Chia Yan Min, The Straits Times, 24 Feb 2015

LEVY hikes for firms employing foreign workers have been deferred for 12 months.

The move will give companies more breathing space as they battle a tight labour market and rising wage costs.

The higher levies for S Pass and work permit holders in all sectors were to kick in from July this year but will now be deferred until July next year, with additional adjustments for manufacturing and construction firms.

Levy rates for work permit holders in manufacturing firms will be kept unchanged at current levels until June 2017.

There has been no increase in the number of work permit holders in manufacturing over the past year and the sector has been making good progress on productivity, said Deputy Prime Minister and Finance Minister Tharman Shanmugaratnam yesterday.

In another move, the levy rate for higher-skilled workers hired outside of a construction firm's man-year entitlement quotas will be lowered from July.

The man-year entitlement refers to the total number of foreign construction workers allocated to a contractor for a specific development. Construction firms are allocated a number of man-years required to complete a project and the number of foreign workers they can employ.

Levies for basic-skilled construction workers will be raised in July next year and again in 2017, while other levy rates for the sector will remain at current levels.

The move aims to encourage construction companies to upgrade workers and retain more productive, skilled employees.

These tweaks will give companies, especially small and medium-sized enterprises, more time to adapt to "the new normal of a permanently tight labour market, where it is both difficult to find Singaporean employees, and foreign workers are no longer an easy solution", said Mr Tharman.

But he stressed that while the Government is adjusting the pace of its foreign worker measures, it is "not changing direction".

"It remains crucial for Singapore that we restructure towards reducing our reliance on manpower, and find new and more innovative ways to do business."

The Singapore Manufacturing Federation welcomed the freeze in foreign worker levies. "This will provide more time for (manufacturers) to explore ways to transform through innovation."

Mr Leonard See, director of interior construction and specialised carpentry firm A&F Concepts, said the levy changes do not give him the incentive to send staff for training as doing so can be "risky" for small companies.

The firm has about 10 foreign workers, all classified as basic- skilled.

"To improve productivity, we keep our operations lean and emphasise on-the-job training and mentorship," said Mr See.

"There are other avenues to lower levies - if workers stay with me for a long time, I can move them up to a higher pay scale and also pay lower levies."

Package to boost productivity to be phased out
By Chia Yan Min, The Straits Times, 24 Feb 2015

A PACKAGE of schemes introduced in 2013 to help companies become more productive will be gradually phased out to give firms time to adjust to rising costs as they restructure.

The programme, called the Transition Support Package, has three components - the Wage Credit Scheme (WCS), corporate income tax rebate and the Productivity and Innovation Credit (PIC) Bonus.

The WCS and corporate income tax rebate will be extended for two more years but at reduced support levels. The PIC Bonus will expire in the 2015 tax year.

The Transition Support Package has given out $7.5 billion over three years, far more than the original estimate of $5.3 billion.

The PIC Bonus, introduced to supplement the PIC tax credit scheme, provides eligible businesses a dollar-for-dollar matching cash bonus on top of their existing PIC tax deductions or cash payouts.

The bonus was intended as a "transitional measure" to encourage firms to take advantage of the PIC scheme, said Deputy Prime Minister and Finance Minister Tharman Shanmugaratnam yesterday.

The bonus "has been successful in spreading the culture of productivity among SMEs (small and medium-sized enterprises)" and take-up of the PIC scheme has been robust, he added.

The Wage Credit Scheme was introduced to help firms cope with rising labour costs by co-funding 40 per cent of pay rises for Singaporean workers earning less than $4,000 a month.

The scheme was adjusted yesterday: Over the next two years, the Government will co-fund 20 per cent of wage increases given to Singaporean workers earning below $4,000 a month.

This co-funding will apply to salary hikes given next year and in 2017. In addition, if wage increases given this year are sustained next year and in 2017, employers will continue to receive co-funding at the new rate of 20 per cent.

The scheme's extension is expected to cost $1.8 billion over two years. It is intended to help businesses through restructuring and will not be retained for the long term.

A corporate income tax rebate of 30 per cent capped at $30,000 per year of assessment was granted to companies for three years in Budget 2013.

This has been extended for another two years, at the same rate of 30 per cent of tax payable but with a reduced cap of $20,000 for each year of assessment.

The lower cap will ensure that more support is focused on SMEs, Mr Tharman said.

The Temporary Employment Credit, introduced last year to help employers cope with higher Medisave contribution rates, has also been enhanced and extended.

This will help firms with labour costs and offset higher expenses from changes to the Central Provident Fund contribution regime.

NUS Business School Associate Professor of accounting Simon Poh said the removal of the PIC Bonus was disappointing as many businesses had called for the incentive to be extended.

But the "gradual phasing out" of the other two components of the Transition Support Package did offer some consolation, he added.

Ms Tan Bin Eng, business incentive advisory partner at EY, said the fact that measures under the Transition Support Package have not been completely removed "shows that (the Government) has heard companies' woes about rising business costs".

"However, the message is clear that directionally, they are not going to change and it's important for companies to keep up that momentum," added Ms Tan.

She noted the Budget has taken a more long-term focus - instead of further enhancing the PIC scheme, there were more announcements aimed at spurring innovation and overseas expansion.

Investing in companies amid restructuring
By Yasmine Yahya, The Straits Times, 23 Feb 2015

Budget 2015 unveiled measures to "sharpen" support to businesses that are making significant effort to raise productivity, especially by innovating and internationalising.

"Most of our firms are now engaged in thinking about productivity, and many are already adopting basic solutions. But we have to go beyond basic solutions, with a critical mass of businesses in each sector going for more significant breakthroughs in the way business is done," Deputy Prime Minister Tharman Shanmugaratnam said in his Budget speech on Monday.

In the next phase of restructuring, the Government will keep up its broad-based support for productivity but increase support for efforts to innovate, in all forms - new ways of reaching customers, devising a new design or brand; or creating value through major re-skilling of employees and a radical overhaul in the way work is done.

1. Gradual phasing out of Transition Support Package (TSP)

The TSP has been an important source of support to businesses since it was launched in 2013. It has three components: the Wage Credit Scheme, Corporate Income Tax Rebate, and Productivity and Innovation Credit Bonus (PIC Bonus).

It is due to expire this year, but the Government recognises that firms may need more time to adjust to rising costs as they restructure, Mr Tharman said. It will thus phase the transitional support out gradually by extending the WCS and CIT Rebate for two additional years, while letting the PIC Bonus expire.

The Government will extend the Wage Credit Scheme until 2017. During this time, the Government will co-fund 20 per cent of wage increases given to Singaporean employees earning a gross monthly wage of $4,000 and below.

This co-funding will apply to wage increases given in 2016 and 2017, over the employee's wage level in the preceding year. In addition, if wage increases given this year are sustained in 2016 and 2017, employers will continue to receive co-founding, at the new rate of 20 per cent.

The Government will extend the Corporate Income Tax rebate for Years of Assessment 2016 and 2017 at the same rate of 30 per cent of tax payable, but up to a lower cap of $20,000 a year. The reduced cap will ensure that more support is focused on small and medium-sized enterprises (SMEs), Mr Tharman noted.

2. Offsetting CPF changes

Last year, the Government announced a one-year Temporary Employment Credit (TEC), which provides employers an offset of 0.5 per cent of wages to help them adjust to the increase in Medisave contribution rates which took effect in January this year.

This year, it will enhance the TEC in two ways:

First, it will raise the TEC to 1 per cent of wages this year. This will provide additional support to firms for their labour costs, or an extra 0.5 percentage points on top of what was announced last year.

Second, the Government will extend the TEC by two years, to help employers adjust to the cost increases due to additional CPF changes, which include increased contribution rates for older workers.

These new changes will take effect from January next year. The Government will give an additional TEC of 1 per cent of wages next year and 0.5 per cent of wages in 2017.

In essence, the extension of the TEC will offset two-thirds of the employers' costs due to CPF changes next year, and one-third in 2017.

3. Recalibrating foreign worker levies

The Government will defer this year's round of announced levy increases for S Pass and Work Permit Holders in every sector.

Except in the construction sector, the net inflow of foreign workers has slowed significantly from 60,000 in 2011 to just over 16,000 last year (excluding foreign domestic workers), Mr Tharman noted. In the construction sector, the growth was around 10,000 last year, far below that recorded in the previous two years.

"The significant slowdown we have seen in the last year gives us space to adjust the pace of our tightening measures," he said.

In the manufacturing sector, there has been no increase in the number of work permit holders over the past year. The sector is also making good progress on productivity, Mr Tharman said.

The Government will therefore keep the current levy rates unchanged for two more years - this year and next - for work permit holders in the manufacturing sector.

4. Strengthening support for innovation

The Government will strengthen grant support for every form of innovation and help firms capture greater value from research and development (R&D). It also aims to catalyse enterprise financing, which can be especially useful for small businesses attempting breakthroughs.

To begin with, the Government will make it easier for SMEs who are engaging in innovation to apply to Spring Singapore for the Capability Development Grant (CDG), which supports a wide range of innovation activities from developing intellectual properties to new brands.

It will simplify the application process for projects below $30,000. It will also extend the enhanced funding support level, of up to 70 per cent of costs, for three more years, to 31 March 2018.

The Government will also expand Spring's Collaborative Industry Projects (CIP) which incentivises industry players and partners such as trade associations to work with SMEs to develop productive and innovative solutions that are scalable across the industry.

It will also extend and enhance the Pact scheme (Partnerships for Capability Transformation) to foster collaboration between large companies and SMEs in their supply chain.

As part of efforts to continue to invest in R&D and fund future efforts, the Government will top up the National Research Fund by $1 billion this year.

5. Catalysing Enterprise Financing

First, the Government aims to reduce early-stage funding gaps for start-ups. It will increase the co-investment cap for Spring's Startup Enterprise Development Scheme (Seeds) and Business Angel Scheme (BAS), to catalyse more funds for start-ups with greater funding needs.

The Government will also top up the BAS to partner more angel investors with experience in nurturing innovative start-ups.

Second, the Government will pilot a venture debt risk-sharing programme with selected financial institutions. This programme aims to provide high-growth companies with an alternative to equity financing and traditional bank loans.

Venture debt typically requires minimal collateral as lenders instead receive equity options to share in the company's future growth. Spring will provide 50 per cent risk sharing with selected financial institutions for such loans over an initial period of two years.

Over this period, the Government aims to catalyse about 100 venture debt loans, totalling approximately $500 million.

6. Going beyond our shores

To support companies' internationalisation efforts, the Government will first raise the support level for SMEs for all activities under IE Singapore's grant schemes from 50 per cent to 70 per cent for three years.

Second, it will enhance the Double Tax Deduction for Internationalisation scheme to cover salaries incurred for Singaporeans posted overseas. This will provide greater support to companies venturing overseas, by co-sharing their risks and initial costs of expanding overseas, as well as creating skilled jobs for Singaporeans.

Third, the Government will introduce a new tax incentive, the International Growth Scheme (IGS), to provide support to meet the needs of larger Singapore companies in their internationalisation efforts.

Qualifying companies will enjoy a 10 per cent concessionary tax rate on their incremental income from qualifying activities.

It will encourage more Singapore companies to expand overseas, while anchoring their key business activities and headquarters in Singapore, Mr Tharman said.

7. Encouraging scale

Finally, the Government will help spur Mergers and Acquisitions (M&A). This is a useful strategy for many companies to acquire scale, attract talent, and compete effectively overseas, Mr Tharman noted.

First, the Government will increase the tax allowance for acquisition costs from the current 5 per cent to 25 per cent of the value of acquisition. Companies would be able to claim M&A benefits for acquisitions resulting in at least 20 per cent shareholding in the target company, down from the current threshold of 50 per cent shareholding.

"This will be especially helpful for SMEs, who may not be able to acquire large stakes in their expansion strategies," Mr Tharman said.

The Government will also extend the M&A scheme introduced in 2010 for another five years.

Second, it will extend the scope of IE Singapore's Internationalisation Finance Scheme (IFS) to support M&A that will aid a company's overseas expansion.

Reits stamp duty waiver to lapse
But other concessions will be extended to March 31, 2020
By Rennie Whang, The Straits Times, 24 Feb 2015

STAMP duty concessions for real estate investment trusts (Reits) on the purchase of properties will be allowed to lapse after they expire on March 31.

Their original objective - to enable the industry to acquire a critical mass of local assets, as a base from which the Reits can expand abroad - has been achieved, the Government said yesterday.

Still, the Reit industry was cheered by other Budget moves: Tax exemption on qualifying foreign sourced income, concessionary income tax rates for qualifying non-resident, non-individual investors and Reit GST concessions.

All had been due to expire next month, but will be extended until March 31, 2020.

Reits, which own portfolios of property such as factories or shopping malls, pay investors regular returns from the rental income.

They have proved very popular, with 28 Reits and six stapled securities - that is, a Reit stapled to other forms of investment - listed here.

Mr Chua Tiow Chye, president of the Reit Association of Singapore, said the stamp duty move would affect yields slightly, and came as a "bit of a disappointment".

However, it was not expected to deter good managers from acquiring good local assets.

Transaction costs apply as well in other jurisdictions, and the change places Reits on equal footing as other potential buyers of property here, he noted. "(It) will not affect our objective of making Singapore the leading Reit listing hub in Asia," Mr Chua said.

Last year, Singapore Reits transacted $3.2 billion in investment sales, or 19 per cent of the total investment tally, said Mr Desmond Sim, CBRE head of research for Singapore and South-east Asia.

The lapse of stamp duty concessions will pose "another barrier among the already comprehensive checklist" for property acquisitions by Reits here.

With the added acquisition costs of about 3 per cent, the volume of acquisitions could be under pressure, he said.

But it is only newly set up Reits such as those in the industrial segment that might have to be less aggressive in acquiring properties here, said Ms Christine Li, director of research at Cushman & Wakefield. The possible removal of the waiver had already been anticipated pre-Budget.

The extension of other concessions will allow Reits to maintain the competitive edge over other Reits markets in the region, said Mr Leonard Ong, a tax partner with audit firm KPMG.

"The message appears to be that Reits should look to buying overseas properties, for them to grow their portfolio and maintain good returns to investors," he said.

While tax extensions could encourage further development of the Reits market here, added demand for office space by any new Reit listings would be marginal in the light of the large upcoming office supply, said Dr Chua Yang Liang, JLL head of research for South-east Asia.

"As expected, the 2015 Budget has limited bearings on the property market, at least in the short term.

"The lack of any mention of the existing measures on the housing market is of no surprise either," said Dr Chua.

Boost in funding for Singapore's infrastructure development
Singapore will commit S$26 billion to the public transport system over the next five years, says Deputy Prime Minister and Finance Minister Tharman Shanmugaratnam.
By Saifulbahri Ismail, Channel NewsAsia, 23 Feb 2015

A new Changi Airport Development Fund (CADF) will be set up to help in the building of Terminal 5.

Presenting the Budget in Parliament on Monday (Feb 23), Deputy Prime Minister and Finance Minister Tharman Shanmugaratnam said an initial S$3 billion will be injected into the fund. This can be topped up subsequently when Singapore's fiscal position allows.

Changi Airport’s Terminal 5 will be able to process up to 50 million passengers a year - more than Terminal 2 and 3 combined.

"This will be a major outlay for the Government over the next 10 to 15 years. It is right and prudent to set aside monies today for this large investment, while we have the resources to do so,” said Mr Tharman.

In 2017, the new Terminal 4 is expected to be ready. Another key project is Jewel Changi Airport, a S$1.7 billion mixed-use project that will open in 2018.

Mr Tharman said the development of the Tuas seaport will also secure Singapore's place as a logistics hub in the region.

Improvements are also being made in public transport - with more lines, trains and buses added to the network.

"About S$14 billion has been deployed to the public transport system over the past five years, and another S$26 billion has been committed for the next five years."

Singapore's healthcare infrastructure will also be expanded. There will be more beds in acute hospitals, community hospitals and nursing homes.

The last time Singapore made such significant investments in infrastructure was in the 1990s. Some of the investments then included the development of Jurong Island, the North-East MRT Line, the Light Rail Transit network and Changi General Hospital.

"Just as these investments two decades ago laid the foundations for better living standards over many years, we must now invest in the next era of jobs and incomes, and a higher quality of life," said Mr Tharman.

Mr Tharman said Singapore's spending on infrastructure will be increased by 50 per cent to about S$30 billion by the end of this decade. This is about 6 per cent of the country's gross domestic product.

"As we embark on large infrastructural projects, we are placing great emphasis on optimising project design and cost efficiency. Overall, we must spend judiciously, achieving value-for-money and providing subsidies to Singaporeans in a fair and targeted manner,” added Mr Tharman.

Mr Tharman said all developments will be complemented by the country's Smart Nation initiative to improve the quality of life of citizens.

Professor Lee Der Horng from National University of Singapore's Department of Civil and Environmental Engineering said the increased amount of investment in the transport system in the next five years is a "very necessary" move. He added that it is still too early to tell if the cost of the investment will be passed on to commuters.

Temasek to contribute more to govt income
Change could boost govt coffers by $4b-$5b annually, says economist
By Wong Wei Han, The Straits Times, 24 Feb 2015

THE Government is moving to include up to half of long-term investment returns from investment company Temasek Holdings in the national financial accounts.

One expert has given a rough estimation that the move could add $4 billion to $5 billion a year to the Budget bottom line.

The Government will seek a constitutional amendment later this year allowing it to include Temasek as a contributor to its Net Investment Returns (NIR) framework as it prepares for more social and infrastructure spending.

The NIR framework was set up in 2009 to allow the Government to spend up to 50 per cent of the expected long-term real returns on its net assets managed by the Monetary Authority of Singapore (MAS) and GIC. These are both realised and unrealised capital gains - that is, future projected returns.

The change will help Singapore strengthen its long-term fiscal position as its funding needs rise, Deputy Prime Minister Tharman Shanmugaratnam said yesterday.

The inclusion of Temasek as a contributor to the framework was deferred owing partly to a lack of established methodologies for projecting its returns.

"We are now ready for our spending rule to be based on the total expected returns of all three investment entities, including Temasek," Mr Tharman said.

"(The inclusion) would enable us to spend based on its total expected returns, including realised and unrealised capital gains, and not just actual dividends paid by Temasek to the Government."

CIMB economist Song Seng Wun said the move will be a boost to the Government's coffers.

"Temasek's total shareholder return rate over 20 years is 6 per cent in nominal terms and likely around 4 per cent in real terms. With a portfolio value of $223 billion as of last year, Temasek may contribute some $4 billion to $5 billion to government revenue annually. With the higher NIR revenue and tweaks to tax income announced this year - not forgetting the previous surpluses - the Government has more than enough to fund its social and infrastructure projects," he said.

Government spending is set to rise to about 19 to 19.5 per cent of economic output on average over the next five years, Mr Tharman said, owing to higher spending to enhance health care and transport infrastructure among other needs.

Health-care spending will jump from over $9 billion this year to over $13 billion in 2020, while $26 billion has been committed for the next five years to improve public transport, he added.

"It is now timely that we have this further enhancement to include the expected returns of Temasek in the NIR framework… It continues to ensure that we spend from our reserves in a sustainable manner, so as to benefit both current and future generations."

Bigger tax relief for donations to charity
Those giving to good causes in Jubilee year can claim 300% tax deductions
By Kok Xing Hui, The Straits Times, 24 Feb 2015

IN A bid to foster a spirit of giving in the Jubilee year, those donating to charities this year can claim tax deductions of 300 per cent instead of the usual 250 per cent.

Announcing this in his Budget speech in Parliament yesterday, Finance Minister Tharman Shanmugaratnam said enhanced tax incentives for donations have helped.

He cited how individual donations hit $1.25 billion last year - a 30 per cent increase from 2008.

The 250 per cent tax deduction, which was increased in the 2009 Budget from 200 per cent and was due to expire by the end of this year, will be extended to 2018.

The Care and Share matching grant - in which the Government matches donations to Institutions of a Public Character (IPC) charities dollar for dollar - will be extended until March 31 next year, it was announced earlier.

Mr Tharman said that with this extension and the increased tax deduction, the Government is more than doubling every dollar donated this year.

The tax deduction of 300 per cent of the amount donated is for qualifying donations made from Jan 1 to Dec 31 this year.

Mr Manmohan Singh, director of the Asian Women's Welfare Association Centre for Caregivers, said he welcomes the increased tax deduction. He added that this could be an incentive for those who have never donated before to start doing so. Big corporations, in particular, can donate large sums and get greater tax relief.

"For regular donors, maybe it will not make a difference. I think individual donors who are already donating and identifying with a cause will continue donating anyway," he said.

Analyst Shaun Toh, 27, agreed. "I'll donate to a cause that I feel more passionate about, not because of the tax deduction, which will affect only those who earn a lot of money because those in the middle-income bracket do not pay a lot in taxes," he said.

The Government will also be donating money to schools so that students can use the money to work on projects with charities as part of the SG50 celebrations. Each school will receive $20,000 to use for causes students identify with, said Mr Tharman. Each polytechnic will get $150,000 and each Institute of Technical Education college will get $250,000.

"We want to encourage the spirit of giving and to raise the awareness of community causes in our students from young," said Mr Tharman.

"The idea is for them to choose IPC charities - not only to raise funds for them but to do projects with them in the community."

Clampdown on big emitters in green vehicle drive
By Christopher Tan Senior Transport Correspondent, The Straits Times, 24 Feb 2015

CHANGES to the Carbon Emissions-based Vehicle Scheme should encourage the drive towards more environmentally sound vehicles while punishing the big emitters.

The changes, effective from July, mean fewer cars will get rebates while the surcharges on less "green" vehicles will be much heftier.

Many motor traders had felt the two-year-old scheme was too lax and had anticipated the alterations announced yesterday.

Car dealer and taxi operator Neo Nam Heng said: "Even big and luxurious cars from Mercedes-Benz, Audi and BMW are entitled to rebates. I don't think that was the intent of the scheme."

Finance Minister Tharman Shanmugaratnam said nearly two-thirds of new cars registered last year qualified for rebates, which ranged from $5,000 to $20,000 for cars and $7,500 to $30,000 for taxis.

And only 5 per cent attracted surcharges. The rest were in the neutral band, attracting neither incentives nor disincentives.

"By tightening the scheme, the Government will encourage really green vehicles," Mr Neo said.

Under the revised scheme, cars and cabs must emit no more than 135g/km of CO2 to qualify for a rebate - down from 160g/km previously.

The new maximum rebate will be $30,000 for cars and $45,000 for cabs if they emit no more than 95g/km of carbon. The top rebates now are $20,000 for cars and $30,000 for cabs that emit no more than 100g/km of carbon.

Electric cars, petrol-electric hybrids and diesel models will be among those that qualify for the revised top-tier incentive.

But more cars will attract penalties from July, starting with those that emit more than 185g/km of CO2. This is down from the cut-off of 210g/km now.

The $5,000 surcharge will apply to the Audi A7, Honda Odyssey, Porsche Boxster, Lexus ES250 and Volvo S60 T5, among others.

Vehicles that will incur the heftiest surcharge of $30,000 ($45,000 for cabs) include the Volvo XC90, Ferrari 458 and Rolls-Royce Wraith.

Asian Clean Fuels Association executive director Clarence Woo said: "The world over, countries are looking at improving fuel efficiency. The question is whether the auto industry can produce better and better engines."

The European Union, for instance, is aiming to achieve a fleet average of 130g/km by this year and 95g/km by 2021.

Petrol duty up but there's a one-year road tax rebate
By Adrian Lim, The Straits Times, 24 Feb 2015

PUMP prices are set to rise, with the Government announcing an immediate hike in petrol duties during its annual Budget yesterday.

The tariff for premium grade petrol is now 64 cents a litre, up by 20 cents, while the duty for intermediate-grade petrol is 56 cents per litre, up by 15 cents.

The increase in petrol duties, which have remained unchanged since 2003, will "encourage less car usage and reduce carbon emissions", Finance Minister Tharman Shanmugaratnam said in Parliament.

The hike took effect yesterday. Intermediate-grade petrol such as 95-octane ranged in price from $1.85 to $1.89 a litre, but, with the increase, it will cost between $2 and $2.04 before discount.

The price for premium petrol such as 98-octane, which was between $1.99 and $2.40 a litre, will range from $2.19 to $2.60.

A motorist driving a 1,600cc car and who pumps an intermediate-grade petrol will have to pay about $230 more a year.

This is assuming the vehicle has a typical fuel efficiency of 8.6 litres for every 100km and clocks about 17,800km, the average annual mileage for cars in Singapore.

Comparatively, a motorist who drives a 2,000cc car with a fuel efficiency of 10 litres per 100km, and who pumps a premium grade of petrol, will have to fork out about $360 more a year.

Deputy Prime Minister Tharman said: "With falling oil prices, pump prices after the petrol duty changes would remain lower than the levels in the last 2 1/2 years."

Along with the higher petrol duty, the road tax for petrol and petrol-CNG (compressed natural gas) cars will be reduced by 20 per cent from Aug 1 to July 31 next year. For a typical 1,600cc car using an intermediate grade of petrol, the rebate of $149 will offset about two-thirds of the increase in petrol duty.

The road tax for motorcycles using petrol will be reduced by 60 per cent.

Petrol and petrol-hybrid taxis and commercial vehicles will enjoy a 100 per cent rebate - in other words, they will not need to pay road tax for one year.

The one-year rebates are expected to cost the Government $144 million.

Meanwhile, the hike in petrol tariff is expected to yield about $177 million more a year.

Mr Roger Tan, 55, a deputy director of administration, estimates that he uses 200 litres of 95-octane petrol every month. With the tariff hike, he will be paying $360 more a year for petrol.

Still, he will not be driving any less, unless public transport becomes a more convenient option, he says.

Mr Tan, who lives in Bukit Timah and works at Nanyang Technological University, says: "I take 15min to reach the office by car, but if I take public transport, the journey is an hour or more."

Median S'porean wages among highest in Asia
Higher education key factor in driving pay rise over the years, says Tharman
By Mok Fei Fei, The Straits Times, 24 Feb 2015

SINGAPOREANS have seen their pay rise over the years to enjoy one of the highest median wages among Asia's newly industrialised economies, said Deputy Prime Minister and Finance Minister Tharman Shanmugaratnam yesterday.

In 1975, the median Singaporean worker's wage was only about 60 per cent that of workers in Hong Kong, and less than half of that of those in Japan.

Fast-forward 38 years and Singapore has surpassed Hong Kong while the gap with Japan has narrowed significantly.

Higher education is a key factor in driving the growth, said Mr Tharman.

More than 95 per cent of young adults now, or those aged 25 to 34, have been able to progress to post-secondary education.

That is more than four times as many compared with the generation of "baby boomers", or those who are now between the ages of 55 and 64.

"It enabled better jobs and much higher living standards for Singaporeans. Everyone has moved up, including poorer Singaporeans," Mr Tharman said.

The workforce has developed new skills and built up new competencies, transforming itself along with the economy.

Citing the example of the Swan brand of socks made at a factory in Julan Tukang in Jurong, Mr Tharman said the factory no longer exists and has been replaced by the Tukang Innovation Park.

The area now houses firms that utilise new technologies, and which are moving up the value chain, beyond just manufacturing goods.

Just as Singapore's economy has moved with the times, workers too have progressed.

Lower-income workers were paid about $87 a month in 1965, or about $340 in current dollar terms - slightly less than half the average wage then, he said.

A lower-income Singaporean worker at the 20th percentile of the income range now would earn $1,860, or more than five times what it used to be, after adjusting for inflation.

Mr Tharman said: "Wages for some of our lowest-paid jobs, like cleaners and security guards, were stagnating a decade ago but have begun moving up in a tight labour market. Our cleaners have seen a significant increase in pay with the introduction of the tripartite Progressive Wage Model."

Middle-income Singaporeans have also improved their lot, with the median worker's pay about six times what it used to be in 1965, after accounting for inflation.

Mr Tharman said the experiences of developed economies show that it could be harder for incomes to rise.

"We must therefore stay the course in restructuring our economy, lift productivity and develop new capabilities for the future."

Fiscal position still healthy in spite of major deficit
Sufficient surpluses from past years allow for spending for the future
By Wong Wei Han, The Straits Times, 24 Feb 2015

THE Government is projecting an overall deficit of $6.7 billion for 2015.

This comes as Singapore is set to see its largest increase in budgeted expenditure in one year amid heavy investments in health care and infrastructure projects.

But operating revenue is also set to increase this year on the back of higher tax income and contributions from investment returns, Budget data provided by the Ministry of Finance (MOF) shows.

This year's estimated $6.7 billion deficit - 1.7 per cent of gross domestic product - comes as the Government sets aside $3 billion for a fund to develop Changi Airport's fifth terminal and $1.5 billion to top up the National Productivity Fund.

Aside from special transfers and fund top-ups, government expenditure will run to $68.2 billion this year, an $11 billion or 19.3 per cent jump from 2014's $57.2 billion. This is the biggest jump in dollar terms, MOF said.

Deputy Prime Minister and Finance Minister Tharman Shanmugaratnam said, however, that the Budget position is "quite close to balance" this year, excluding the special funds and top-ups. "We have sufficient surpluses from previous years of this term of government to enable us to invest ahead and fund the overall deficit in financial year 2015. There is no draw on past reserves," he said.

Barclays senior economist Leong Wai Ho noted that while a $6.7 billion deficit will be the Republic's largest, Singapore's fiscal position remains healthy.

"The deficit is a result of government spending on infrastructure - spending for the future. The Government is paying it forward to ease the burden of subsequent Budget plans, so I'm not concerned. In fact, it reflects a consistently prudent fiscal approach."

Transport and health-care spending will see the biggest surge this year. Outlays on transport are estimated to be $10.9 billion, up 80.6 per cent from last year's $6 billion. Along with Changi Airport's development, the budgeted expenditure will also fund rail expansion projects such as the Thomson-East Coast Line and Tuas West Extension.

Health spending will also grow 29.3 per cent to $9.3 billion this year from 2014's $7.2 billion. This will cover subsidies for MediShield Life, as well as construction and redevelopment of major health-care infrastructure such as the National Centre for Infectious Diseases and Yishun Community Hospital.

Other notable spending pencilled in for 2015 includes a 39.8 per cent rise in culture, community and youth expenditure to $2.7 billion, in order to provide for SG50 celebrations, the South-east Asian Games and Asean Para Games being held here this year.

With the introduction of the Silver Support Scheme and initiatives under SkillsFuture this year, manpower expenditure will grow 16 per cent to $1.5 billion in 2015.

Education outlays are expected to grow 3.2 per cent to $12.1 billion this year, when the Government will fork out higher budgets for autonomous universities and SIM University, as well as for polytechnics and ITEs in conjunction with SkillsFuture.

The total expenditure this year will come in slightly above a projected operating revenue of $64.27 billion, resulting in a $3.95 billion primary deficit.

Despite the deficit, this year's operating revenue will be $2.92 billion or 4.8 per cent higher than last year's $61.35 billion, helped in part by a $1.4 billion or 38.7 per cent jump in vehicle quota premiums to $5.1 billion.

Goods and Services Tax collections will also increase $400 million or 3.7 per cent to $10.5 billion, while corporate income tax revenue is set to stay flat at $13.5 billion.

Personal income tax collections will fall by $30 million this year, owing to rebates.

Along with its stable tax income, the Government also expects a rise in net investment returns (NIR) contribution this year, with NIR - which comes annually from a mixture of returns from GIC and Monetary Authority of Singapore - growing 4.6 per cent to $8.94 billion.

NIR contribution - which accounts for around 12 per cent of total revenue - is set to increase in the years ahead as the framework will soon be expanded to include Temasek Holdings as a contributor, Mr Tharman said yesterday.

At a glance: How does Budget 2015 affect you?
The New Paper, 23 Feb 2015

Budget that looks forward and corrects a policy course
By Lydia Lim, Associate Opinion Editor, The Straits Times, 24 Feb 2015

A MEASURE of any government Budget is the extent to which it positions a nation for the future, rather than merely plugging gaps in the present or, worse, making up for past mistakes.

The two clearly future-focused parts of Budget 2015 are SkillsFuture, to help workers gain expertise and mastery, and new moves to spur small and medium-sized enterprises (SMEs) to innovate and internationalise.

The same cannot be said for the Central Provident Fund changes. Although welcome, they effectively restore contribution rates for older workers and salary ceilings to what they were before controversial cuts in 2003 that have eaten into people's retirement savings.

But first, SkillsFuture.

It "marks a major new phase of investment in our people", said Deputy Prime Minister Tharman Shanmugaratnam. It is a vision to transform Singapore from "a hierarchy of grades earned early in life" to a "meritocracy of skills". And it puts the skilled worker front and centre, which is apt for a nation whose only resource has always been its people.

Mr Tharman shared an anecdote to show how far Singapore workers have come, a story centred on Jalan Tukang in Jurong, so named as tukang is Malay for skilled worker. It used to be home to the Swan Socks factory, founded with Japanese investment, opened by former deputy prime minister Goh Keng Swee in 1964 and one of the first to offer significant employment for women.

Today, Swan Socks is no more. In its place are Tukang Innovation Park and MedTech One, a dedicated facility for the fast-growing medical technology industry.

Another big change is in wages. Since the 1960s, the average pay of a lower-income worker has risen by more than five times, and that of a median-income worker by six. Where Singapore used to lag behind other Asian economies, its median wage is now higher than that of Hong Kong, South Korea and Taiwan and only 10 per cent lower than that in Japan.

But workers here and worldwide now face a brave new world where jobs are constantly reshaped by technology, and "no one can honestly tell what they will be doing a decade or two after leaving school".

Singapore workers must be prepared to learn and adapt at every stage of their lives. The Government will help them with deposits and regular top-ups to their SkillsFuture Credit accounts, starting with $500 for every Singaporean aged 25 and older. The aim is to enable "every individual to decide on his or her own learning journey: when to go for fresh infusions of skills or knowledge, and whether it should be in specialised professional training, acquiring soft skills or developing a new interest", Mr Tharman said.

Also in the pipeline are professional career counselling and internships for students, enhanced education and training subsidies for mid-career workers, and SkillsFuture Study Awards and Fellowships.

They form an exciting vision to empower workers to chart their own way forward. The estimated cost: $1 billion a year on continuing education and training from now until 2020, up from $600 million a year for the last five years.

Success, however, hinges on how well the plans are executed, and many questions hang over how the vision will be translated into reality. Singaporeans, too, will have to step up to the challenge of lifelong learning.

The efforts of workers have to be complemented by those of enterprises. The bar for them has been raised, from value adding - which may have earned them a good living in the past - to the next frontier of value creating.

The Government will stay the course on economic restructuring, even though its productivity drive has so far produced dismal results in non-export sectors. Mr Tharman appealed for yet more time, saying "the business transformations that underpin a major shift in productivity will take time, and it also takes time for the market to restructure, with adopters of new ideas and technologies gaining share at the expense of those who stand still".

Budget 2015 sharpens support for SMEs that innovate, by providing grants, R&D investments and a pilot venture debt risk-sharing programme to help high-growth enterprises secure financing. To succeed, these will have to yield better results than previous rounds of productivity incentives.

On the second big theme of strengthening social security, CPF changes took centre stage. The big criticism here is that several changes announced yesterday simply reverse what some consider to be ill-judged policy decisions of the past. These include significant cuts to contribution rates of workers aged 50 and above - which many resented and found unfair - and the lowering of the CPF salary ceiling from $6,000 to $4,500. Both took place in 2003, in the wake of the Sept 11, 2001 attacks and the Sars outbreak, which caused unemployment to spike.

What accounts for this course correction? Well, the employment rate among older workers has risen, as Mr Tharman noted, from 64.4 per cent in June 2004 to 71.4 per cent in June last year, an improvement he linked to schemes such as the Special Employment Credit introduced post-2003.

Still, as any financial planner knows, time is of the essence in building up one's nest egg and the CPF cuts cost thousands of workers over a decade in lost savings.

Yesterday's announcement that the CPF Board will pay an extra 1 per cent on the first $30,000 in the accounts of members aged 55 and older, will be a significant boost to those with lower balances. Lower-income seniors with insufficient CPF savings will also benefit from a new Silver Support Bonus that tops up their retirement income every quarter.

In this age of austerity, what is worth celebrating is that Singapore still has enough in its coffers to make big investments for the future - including $26 billion on public transport infrastructure over the next five years - and still balance its Budget.

But spending has outpaced revenue and continues to rise. The country would be in deficit if not for the returns on past savings known as the reserves. Overall spending is projected to hit 19 per cent to 19.5 per cent of gross domestic product on average over the next five years, 1 per cent more than the revenues of today. To bolster fiscal resources, the returns from Temasek Holdings' investments will be included in the Net Investment Returns framework, and the top personal income tax rate will rise from 2017.

No comments:

Post a Comment