Key highlights of the 2018 budget
On 19 February 2018, Finance Minister Heng Swee Keat delivered the Budget Statement of Singapore for 2018. The budget which was presented under the heading “A Better Future” was revolutionary, as it was aimed at sparking the next waves of the technology revolution. Introducing a new crowdsourcing platform, funding research, and development, opening ports to test new technologies and funding a new robotics program highlighted the commitment of the government toward this paradigm shift.
With many Asian consumers at the frontier of technology adoption, it was observed that there would be growth in tech-savvy consumers who can be served and Singapore should be in the forefront to serve them. It was observed that Singapore is digitally connected with the world with speed of over 500 terabits per second of potential capacity. And that it will continue to enhance its connectivity by investing in digital infrastructure, as well as land links such as the proposed KL-Singapore High-Speed Rail.
The ASEAN Leadership Programme, Enterprise Development Grant and the double tax deduction for internationalisation (DTDi) aim to support companies in enhancing their capabilities for internationalisation. At the same time, to foster pervasive innovation, the enhanced tax deductions announced for in-licensing, registration and research and development activities for intellectual properties (IP) will incentivise enterprises to buy and use new solutions as well as build their own or co-create solutions.
Up to 70% funding support would be offered for businesses innovating and adopting pre-scoped - off the shelf technologies. Businesses engaging infrastructure development with international firms to improve efficiency will also be qualified for grants. Funding is proposed under four grants, namely the Productivity Solutions Grant (PSG), Enterprise Development Grant (EDG), PACT and the Infrastructure Office Grant.
Another key highlight was the 250% tax deduction scheme for donations made on or before 31 December 2021. Donations made to qualifying list of charities would be considered under the scheme, in order to uplift social standards of the needy.
Comparison with 2017
Noteworthy comparisons from the 2017 budget - headed “Moving forward together” were related to business restructuring. The Corporate Income Tax (CIT) rebate which was 20% in 2017, was increased to 40% for Year of Assessment (YA) 2018, with a cap of USD 15,000. The government co-funded 20% wage increases, given to each Singaporean employee, proposed in 2017 will continue through 2020. Career trial schemes changed their theme and scope from “adopt and grow” in 2017, to “Upgrade career”. It was said that “securing better jobs and higher wages will not be just about how well we did in school, but how Singapore will continue to learn, relearn, adapt and grow throughout their lives”.
Future benefits to the country
It was envisaged that globalization fuelled by technology advancement will disrupt existing businesses by creating new competitors, remodeling supply chains and lowering price points. However, it was also noted that the disruption would bring opportunities; and Singapore will be ready to embrace these challenges and seize these opportunities.
Over the next decade, it is expected that recurring government expenditure will continue to increase, especially in the areas of social development (i.e., education and healthcare) and security. This will be funded by an increase in taxes - stamp duty rate from 3% to 4% on the value of residential property in excess of USD 1 million CY2020 onwards, GST increase from 7% to 9% and carbon taxes from USD 5 per tonne to USD 10-15 per tonne of carbon emission.
Other key highlights
Like other developed economies - Singapore is facing an aging population. By 2030, 28% of its population will be above 65 years old. The budget addressed this challenge by enhancing the ElderShield insurance scheme and strengthening the role and capabilities of social service offices.
Singapore is also placed on making it a smart green liveable city. Singapore has planted thousands of trees and toiled to transform it into a Garden City and now a City in a Garden. It was highlighted that Singapore may be highly urbanized but would not be a concrete jungle.
Singapore is also committed to investing in sustainability research. Besides building a Smart Nation, Singapore is also collaborating with academics and corporates in research and innovation, to take its sustainable development story to the next level. One of the strategic domains in research, Innovation and Enterprise 2020 plan is Urban Solutions and Sustainability.
Emphasis was also placed on reducing emissions. Carbon taxis proposed to be levied on major emitters, which account for about 80% of Singapore’s emissions. The remaining 20% is contributed by many other sources of varying sizes. Singapore will study how to account for these emissions and take action where necessary.
Singapore Budgets are truly special, because of their long-term vision, and the explanation of that vision and purpose. The country’s economy expanded 3.5 percent in 2017 - more than double the initial forecast. The prudence of its fiscal policy was brought out when it was announced that the country is expecting a Budget surplus of USD 9.6 billion - 2.1% of GDP for FY 2017.
The surplus was expected to be spent on the USD 5 million rail infrastructure, USD 2 billion for premium subsidies and a Singapore bonus “Hongambo” of USD 300, USD 200 or USD 100 depending on their income.
In FY2018, the budget position will remain expansionary. Ministries’ total expenditures are expected to be $80.0 billion, or 8.3% higher than in FY2017. On the whole, we expect a slight overall budget deficit of $0.6 billion, or 0.1% of GDP.
Singapore is in a much stronger position than they have been in the past. They have a diversified and well-connected economy, a highly motivated and educated workforce, a cohesive and resilient society. Together they intend to marshal their resources and chart the course – to come together, to work together, to make aspirations today, the reality tomorrow.