SINGAPORE: The Government’s Budget statement for financial year 2017 was delivered on Monday (Feb 20) by Finance Minister Heng Swee Keat who outlined three main themes of economy, environment and society.
“Advances in technology are picking up pace, disrupting traditional businesses and jobs,” said Mr Heng, in his first speaking appearance in Parliament since suffering a stroke in May last year.
“These deep shifts around the world will create new challenges but also open up new opportunities for many years to come. We must understand these shifts and do our best to adapt and thrive.”
He added: “Singapore is undergoing a key transition as our economy matures. With falling birth rates and a rapidly ageing population, labour force growth will eventually fall to zero.”
Hence the need for Singapore to develop deep capabilities and partnerships in its economy, firms and workers as well as establish a balance between government action and community initiative, he said.
“It is critical we take decisive action to re-position ourselves for the future,” said Mr Heng. “We will take a learning and adaptive approach, try new methods, continue with them when they work well, cut losses when they do not, and draw on feedback and experience to adjust and refine our plans. That is the Singapore way.”
STRENGTHENING CORPORATE CAPABILITIES
Firstly, to achieve an innovative, connected economy, Budget 2017 will provide near-term support measures to address sector-specific needs while also catering to the Committee on the Future Economy’s (CFE) strategies for the medium to longer term.
The corporate income tax rebate cap will be raised from S$20,000 to S$25,000, at 50 per cent of tax payable. It will also be extended by a year to Year of Assessment 2018, capped at S$10,000, 20 per cent of tax payable.
Mr Heng announced over S$80 million to be made available for programmes to strengthen corporate capabilities, particularly in promoting digitalisation for Small and Medium-Sized Enterprises (SMEs). These include industry digital plans on the technologies to use at each stage of growth as well as advice and funding support when piloting emerging Information and Communications Technology (ICT) solutions.
For small companies that want to do prototyping, the Agency for Science, Technology and Research (A*STAR) will provide access and training to use advance machine tools under a New Tech Access Initiative from September.
A*STAR will also help 400 firms over the next four years to identify the technologies needed to better innovate and compete.
A new International Partnership Fund promises up to S$600 million in Government capital, to co-invest with Singapore-based firms to help them scale-up and internationalise.
The existing SME working capital loan – where the Government co-shares 50 per cent of default risk for loans of up to S$300,000 per SME – will continue for the next two years. “There has been good take-up for this scheme,” said Mr Heng. “Since its launch in June 2016, the scheme has catalysed more than S$700 million of loans.”
To help firms with rising wages, over S$600 million will be paid out in March 2017 under the ongoing Wage Credit Scheme, while over S$300 million will be paid out in FY2017 to benefit 370,000 workers under the Special Employment Credit (SEC).
Additional SEC will also be extended till Dec 31 to provide wage offsets of up to 3 per cent, to help older workers stay employed. The extension will benefit about 120,000 workers and 55,000 employers, at a cost of about S$160 million.
Taken together with the SEC, employers will receive support of up to 11 per cent for the wages of their eligible older workers, said Mr Heng.
He added that the re-employment age will be raised from 65 to 67, with effect from Jul 1.
“These additional near term support measures, along with the existing Wage Credit Scheme and SEC, will give businesses support of over S$1.4 billion over the next year.”
BOOSTING INDUSTRY-WIDE COMPETITIVENESS
In the face of shorter-term industry-specific challenges, Mr Heng announced the deferment of Foreign Worker Levy increases for the marine and process sectors by one more year.
S$700 million worth of public sector infrastructure projects has also been brought forward to start in FY2017 and FY2018. “Our construction firms will be able to bid for and participate in these projects, which include the upgrading of community clubs and sports facilities,” said Mr Heng.
With an eye to the future economy, the Finance Minister also said that Industry Transformation Maps (ITMs) will be established in 23 sectors – covering 80 per cent of the economy – to increase competitiveness. Six are already in place with the remaining 17 due to be launched within the financial year.
There will also be a Public Sector Construction Productivity Fund of up to S$150 million, to procure innovative and productive construction solutions for public sector projects.
The National Research Fund and National Productivity Fund will be topped up by S$500 million and S$1 billion respectively.
A SKILLED, ADAPTABLE WORKFORCE
With the aim of deepening capabilities in Singaporeans, jobseekers will be given more wage and training support under the Career Support Programme, Professional Conversion Programme, Work Trial Programme and a new “Attach and Train” ‘initiative for industry partners to send participants for attachments. Mr Heng said this would increase the chances of these workers to find a job in the sector later.
“An additional sum of up to S$26 million a year will be committed from the Lifelong Learning Endowment Fund and the Skills Development Fund to support these initiatives,” he added.
To enable better job matching for professionals, the National Jobs Bank will be made more useful for both jobseekers and employers, and the Government will work with private placement firms.
To achieve an adaptable workforce capable of operating overseas, Budget 2017 will support the Global Innovation Alliance mooted by the CFE.
And to deepen the requisite skillsets to remain in jobs, the SkillsFuture Leadership Development Initiative will aim to foster 800 potential leaders over the next three years.
Over S$100 million will be set aside for the Global Innovation Alliance and Leadership Development Initiative, said Mr Heng.
“All in, we are putting aside S$2.4 billion over the next four years to implement the CFE strategies. This will be over and above the S$4.5 billion set aside last year for the Industry Transformation Programme.”
MINDING THE ENVIRONMENT
Mr Heng unveiled a new carbon tax as part of the Government’s overall efforts at reducing greenhouse gas emissions. To be applied to power stations and other large direct emitters, it will be implemented from 2019 with price levels and scheduling to be decided after consultations beginning in March.
“We are looking at a tax rate of between S$10 and S$20 per tonne of greenhouse gas emissions,” said Mr Heng. “It will create a price signal to incentivise industries to reduce their emissions, complementing the regulatory measures which we are also introducing.”
A new Vehicular Emissions Scheme will replace the current Carbon Emissions-based Vehicle Scheme, which has been extended to run until Dec 31. The new scheme, which will run for two years starting Jan 1, 2018, takes into consideration four other pollutant – nitrogen oxides, hydrocarbons, particulate matter and carbon monoxide.
Taxes on diesel vehicles will also be restructured, with the Government introducing a volume-based duty at S$0.10 per litre on automotive diesel, industry diesel and diesel components in biodiesel.
“Taxing diesel according to usage incentivises users to reduce diesel consumption,” said Mr Heng, explaining that diesel emits highly pollutive particulate matters and nitrogen oxides.
The price of water will be increased by 30 per cent to reflect scarcity, said the Government. This will take effect on Jul 1 and occur over two phases in a year. A 10 per cent water conservation tax on NEWater tariffs will be imposed.
MORE PAYOUTS
To soften the impact of the water price hike, there will be a permanent increase in GST Voucher-U-Save payouts. Depending on the HDB flat type ranging from 1- and 2-room up to executive/multi-generation, the rebate will be upped from between S$180 and S$260 to S$220 and S$380.
“Taking into account these higher U-Save rebates, 75 per cent of all HDB households will see an average increase of less than S$12 in their monthly water expenses,” said Mr Heng. “1- and 2-room HDB households will on average have no increase in their water expenses.”
“About 880,000 households will benefit. This will cost an additional S$71 million each year.”
Minister Heng also announced a one-off GST Voucher-Cash Special Payment, with up to S$200 given to eligible recipients on top of the regular GSTV-Cash. In total, eligible Singaporeans can receive up to S$500 in cash in 2017. The Special Payment will cost about S$280 million and benefit over 1.3 million Singaporeans, said Mr Heng.
Service and Conservancy Charges (S&CC) rebates will be extended by 1.5 to 3.5 months, again depending on HDB flat type. This will cost the Government S$120 million, the Finance Minister said.
There will also be a personal income tax rebate of 20 per cent of tax payable for tax residents, capped at S$500, which will cost the Government S$385 million.
The ComCare, Medifund and GST Voucher funds will be topped up by S$200 million, S$500 million and S$1.5 billion respecitively.
HELP WITH STARTING A FAMILY
CPF Housing Grants will be increased to make HDB resale flats more affordable for first-time applicants. For 4-room or smaller flats, the grant will be enhanced from S$30,000 to S$50,000, while 5-room or bigger apartments will see a rise from S$30,000 to S$40,000.
“Together with the additional CPF Housing Grant and Proximity Housing Grant, a couple can now receive a total of up to S$110,000 in housing grants when buying a resale flat,” said Mr Heng. “This measure will cost an additional S$110 million per year.”
The capacity of centre-based infant care will increase to over 8,000 places by 2020, to meet growing demand.
Annual post-secondary education institutions (PSEI) bursaries will be boosted by S$400 for undergraduates, S$350 for diploma students and S$200 for ITE students. A revised income eligibility criteria is also expected to benefit about 12,000 more Singaporean students, bringing the total number of beneficiaries to 71,000.
“PSEI bursaries will increase from about S$100 million to S$150 million per year,” said Mr Heng.
“In total, we will provide additional support of over S$850 million this year to help households with their expenses.”
COMMUNITY WELL-BEING
Enhanced support for vulnerable groups will see an additional S$160 million devoted to mental health programmes over the next five years. VWOs will be assisted in setting up more community-based teams, to improve their delivery of care within communities, increase the number of dementia-friendly communities and integrate persons with mental health issues at workplaces and society.
A third iteration of the Enabling Masterplan will seek to better integrate persons with disabilities into the workforce by extending training programmes to Special Education students. A Disability Caregiver Support Centre will provide training and peer support.
“Including existing initiatives, we expect to spend around S$400 million per year on initiatives supporting persons with disabilities,” said Mr Heng.
Over S$50 million will be set aside for the community-driven Sports-In-Precinct Programme, and to scale up the SportCares initiative for disadvantaged youths.
An additional S$100 million will be channeled to high-performance sports – with S$50 million in direct grants over five years, and up to another S$50 million for one-to-one matching of sports donations.
Self-help groups will receive another S$6 million grant over the next two years. The VWOs-Charities Capability Fund will get additional funding of up to S$100 million over the next five years. And the Cultural Matching Fund will be topped up by S$150 million to continue one-to-one matching for donations to cultural institutions.
MANAGING NATIONAL EXPENDITURE
Calling Budget 2017 an investment in economic transformation and social resilience, Mr Heng noted that in coming years, expenditure needs are expected to rise more rapidly, particularly in the areas of healthcare and infrastructure.
But the Government will continue to spend judiciously, emphasising value-for money and driving innovation, he said. “We can do better – and more – with less.”
Hence, a permanent 2 per cent downward adjustment to the budget caps of all Ministries and Organs of State will take effect from FY2017. Four ministries serving security needs or significantly expanding their services – namely Home Affairs, Defence, Health and Transport – will see phased adjustment over two financial years.
“We need to strengthen our revenue base in a pro-growth and progressive manner,” said Mr Heng. “Like all Finance Ministers before me, it is my duty to take the long view. Our domestic needs will grow over time, and the global environment will shift. We must study the implications and prepare our options early.”
In support of the worldwide Base Erosion and Profit Shifting (BEPS) project, which ensures companies are taxed where substantive economic activities are performed, Singapore will refine its schemes and implement the relevant standards.
Domestically, the Government will have to raise revenues through new taxes or raise tax rates, to ensure future generations can remain on sustainable fiscal footing, said Mr Heng.
But there will be tax measures to help businesses – for instance, some existing tax incentive schemes will be extended and strengthened to enhance competitiveness in financial and global trading sectors.
More expensive motorcycles – those with value similar to those of small cars – will have two more tiers of additional registration fees. As a complementary measure, the contribution of motorcycle COE quota to the open category COE quota will cease. “This will help address the gradual decline in motorcycle population, as very few open category COEs have been used to address motorcycles,” said Mr Heng.
AN “EXPANSIONARY” BUDGET
For FY2016, the Government expects a budget surplus of S$5.2 billion – higher than the surplus of S$3.4 billion estimated a year back. But the Finance Minister said that excluding top-ups to funds and Net Investment Returns Contribution from past reserves, a basic deficit of S$5.6 billion is to be expected – hence making FY2016 an expansionary budget.
Mr Heng said FY2017 would be status quo, with Ministries’ expenditures expected to be S$3.7 billion and higher than in FY2016. A smaller budget surplus of S$1.9 billion is expected in FY2017. “As we expect expenditures to continue rising in the long term, this budget position is prudent,” he noted.
“Budget 2017 outlines how we can thrive in an uncertain and rapidly changing world,” said Mr Heng. “It is a call for us to pull together – the Government firms, unions, community organisations and individuals, with everyone doing his part. Our bonds will help us develop greater resilience in the face of unexpected shifts and improve our ability to adapt.”
“We will do all this while maintaining fiscal discipline. This will lay a sustainable foundation for future generations to thrive,” he concluded. “Let us go forward together.”
