Budget 2018: A sustainable and responsible way to meet Singapore’s future needs
PUBLISHED ON 01 Mar 2018
Parliament has approved Budget 2018.

In his Budget round-up on 1 March 2018 (Thursday), Minister of Finance Heng Swee Keat focused on the three main themes - the Government's approach to revenues and taxes; the urgency of transforming the Singapore economy; and how to build a more caring and cohesive society together.

On the impending tax hike, Minister Heng assured that assistance will be provided and even enhanced for the lower and middle-income families, as well as the elderly.

"Let me assure everyone that we are mindful of the impact of tax changes on households, particularly the lower-income, and will help them to adjust while maintaining a fair and progressive system of taxes and transfers."

The permanent GST Voucher Scheme will be enhanced when the GST goes up, and those in need will receive more support from this scheme. He also added that the Government is committed to convening a Committee Against Profiteering to ensure that businesses do not take advantage of the GST hike to raise prices.

Explaining the need to raise taxes, he reiterated, "Each generation should strive to pay for its own spending through sustainable means, instead of drawing down more than is prudent from the reserves or by borrowing and passing on the cost of current spending to future generations."

Explaining why it was not advisable to use better than expected surplus, he said: "We cannot fund our plans to secure Singapore's future on the basis of episodic windfalls. If we are fortunate to have these occasional windfalls, we should do the responsible thing and save most of it for future needs."

Mr Heng also explained that the GST increase was announced early to give ample notice to businesses and citizens, and for the Government to be upfront about the needs of Singapore and its future.

On the topic of utilising reserves, Mr Heng said that it would be unwise for Singapore to amend its rules on reserves as a first resort.

"We deliberately introduced rules on land sales and the 50 per cent NIRC cap so that we do not succumb to the temptation to draw more from our reserves to fund current expenditure or eat into the principal sum...We must not give in to the temptation to chip away at our strategic national asset."

Mr Heng stressed that Singapore has to be always ready for crises, and have the humility to realise that nothing can predict what happens in our lifetime or our children's lifetimes. "Whatever we have inherited from the past, we also owe to the future. That is our moral obligation," he said.
Addressing suggestions of raising income and corporate taxes, Mr Heng said this will put Singapore in an opposite direction, as global trends show other countries are reducing these taxes.

"We will be moving in the opposite direction if we are to raise personal income taxes when all jurisdictions are competing for talent, including our Singaporean talent," he said.

Citing Hong Kong, which has announced a cut in personal income tax on Wednesday, Mr Heng noted that under the present tax structure here, about half of Singapore's workers do not pay personal income tax and the top 10 per cent pay about 80 per cent of the total personal income tax revenue.

Mr Heng also warned that other countries may consider reducing corporate income tax rates, following the footsteps of United States as it reduced its headline corporate income tax rate from 35 per cent to 21 per cent. "Singapore must remain sensitive to these global trends that impact us. It is important for us to remain as a competitive and business friendly location," he added.

Mr Heng also stressed that the increase in GST is unlikely to impact Singapore's competitiveness significantly. This is because a GST rate of 9 per cent is not high, compared with the OECD standard of 19 per cent. "In summary, we have taken a principled approach to meet the general population’s future needs through a broad-based GST increase, while ensuring that our overall system of taxes and transfers remains fair and progressive, and is supportive of growth.”

Mr Heng added that the most critical challenge facing Singapore today is its economic transformation. The strategy for Singapore is to be a global-Asia node of technology, innovation and enterprise. This can be achieved by a three-pronged approach by fostering pervasive innovation throughout the economy, building deeper capabilities in local firms and people, and forging stronger partnerships at home and abroad.

“Growing our economy is not only the best way of ensuring strong and sustainable revenues, it is also the most important way for our people to realise their aspirations," he added.

Mr Heng emphasised that the Government has introduced broad-based business support schemes that the Government in the past several years, which has led to awareness among local companies about productivity and innovation. Now, the Government is encouraging companies to deepen their capabilities.

Mr Heng also took issue with the Workers’ Party and its counter-arguments in his wrap up speech to Budget 2018. The Workers’ Party’s MPs and NMPs present in Parliament voted against the budget, which is intended to secure Singapore’s future.