Deputy Prime Minister and Finance Minister Tharman Shanmugaratnam delivered his speech on Budget 2015 on Monday, and there were few surprises.
As expected, he talked about the Silver Support scheme for the low-income elderly, the enhancements to the Central Provident Fund System, handouts in the form of GST vouchers, and more help for SMEs.
Perhaps the biggest surprise was the higher personal income tax rate for top earners.
Here’s a round-up of the key announcements based on the “winners” and “losers”:
Biggest loser: High-income earners
Singapore’s top 5 percent, those who earn at least $160,000, will pay higher personal income tax.
“I will raise the top marginal rate by two percentage points, from 20 per cent to 22 per cent, for the highest income earners, with a chargeable income above $320,000. I will also make smaller adjustments that will raise income tax for the others in the top 5 per cent,” he said.
The higher tax rates will apply starting with income earned in 2016 and on taxes to be paid in 2017. It is expected to raise additional revenue of $400 million a year when it comes into effect.
Loser: Businesses relying on Transition Support Package
Tharman announced that the Wage Credit Scheme will be extended for 2016 and 2017, but level of co-funding will be reduced. He will also extend the CIT 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 per year of assessment. He will let the Productivity and Innovation Credit (PIC) Bonus expire.
The three schemes make up the Transition Support Package, which is estimated to disburse $7.6 billion over three years.
Loser: Car owners
Tharman announced higher petrol duty rates effective the same day as his speech. The duty rates for premium grade petrol will be increased by $0.20 per litre and internmediate grade petrol by $0.15 per litre.
Tharman noted that petrol duty rates have remained unchanged since 2003, and that with alling oil prices, pump prices after the petrol duty changes would remain lower than the level in the last two years.
Winner: Middle-income households
To help middle-income taxpayers, Tharman announced a personal income tax rebate of 50 per cent, setting the cap at $1,000. It will apply for year of assessment of 2015 (for income earner in 2014).
1.5 million individuals are expected to benefit from the tax rebate, which will cost the government $717 million.
Also, to support middle-income families, the foreign domestic worker concessionary levy will be reduced from $120 per month to $60 per month and extended to households with children aged below 16 from below 12.
Winner: Lower-income households
The quantum for the GST Voucher will be increased by $50 in cash across the board from 2015 onwards. It is expected to benefit 1.4 million Singaporeans.
Winner: CPF members
As proposed by the NTUC and CPF Advisory panel, the government will increase the CPF salary ceiling from $5,000 to $6,000. It is expected to benefit at least 544,000 CPF members.
The contribution rates for workers aged 50 to 55 will be restored to the same level as those for younger workers. Thus, the contribution rates for these workers will go up by two percentage points in 2016 (1 percentage point each from employer and employee).
For workers aged 55 to 60, the rate will go up by 1 percentage point from employers, and for workers aged 60 to 65, it will go up by 0.5 percentage points from employers.
To make the CPF system more progressive, an additional 1 per cent extra interest will be paid on the first $30,000 of CPF balances from age of 55. The change will take effect from the start of next year.
Winner: Low-income elderly
The Silver Support Scheme will be a new feature of Singapore’s social security system, said Tharman.
“It is a permanent scheme for both today’s seniors and those in the future,” he said.
Silver Support will be paid quarterly, similar to Workfare. It will provide a supplement of $300 to $750 every quarter for eligible seniors. The average recipient will get $600 per quarter. All the seniors who qualify will receive the supplements for life, as long as they remain eligible.
The scheme is aimed to support the bottom 20 per cent of Singaporeans aged 65 and above. The assessment will be done automatically, so there will be no need for application. It is estimated to cost about $350 million in the first full year. The Ministry of Manpower is expected to implement it around the first quarter of 2016.
Aside from the scheme, Tharman also said seniors aged 55 and above will get a GST seniors’ bonus in 2015 to help with their daily expenses. It will effectively double the GSTV cash component that they usually receive.
Also, those aged 65 and above and living in HDB flats will get an additional $300 this year.
Winner: Skills upgraders
Tharman announced a SkillsFuture Credit in which each Singaporean 25 years old and above will receive an initial credit of $500 from 2016. Further top-ups will be made at regular intervals. The credits can be used for education and training.
Education and training subsidies for all Singaporeans aged 40 and above will be enhanced to a minimum of 90 per cent of training costs for courses funded by the Ministry of Education and the Workforce Development Agency.
The subsidies will be significant, Tharman pointed out. For example, for a part-time undergraduate course such as a Bachelor of Engineering, the total fees payable by a student will be reduced by 60 per cent, from about $17,000 to $6,800.
Tharman also introduced the SkilsFuture Study Awards and the SkillsFuture Fellowships to develop deep skills and mastery in the growth clusters of the future, as well as the SkillsFuture Leadership Development initiative to encourage companies to groom Singaporeans in leadership roles.
Winner: Families with children
Tharman announced the introduction of a new partner operator (POP) scheme to complement the anchor operator scheme. Parents will benefit from lower fees than these centres currenly charged, Tharman said.
He also said the government will top up the Child Development Accounts of every Singaporean child aged six and below in 2015. Those currently without CDAs can open accounts and receive the top-up. The majority of children will receive $600, he said.
Also, fees for national examinations for Singaporean students in government-funded schools will be waived, saving families and students up to $900 from primary school to pre-university.
Government will also provide a $150 top-up to the Edusave Accounts of Singaporeans students aged 7 to 16 on top of the annual contribution of up to $240. Students above the age of 16 who are still in secondary school will also get the top-up.
Tharman also said the MOE Financial Assistance Scheme will be enhanced and a transport subsidy will cover at least half of students’ transport costs.
Annual grants for school-based financial assistance will also be increased.
Post-Secondary Education Account (PSEA) of Singaporeans aged 17 to 20 will also get a top-up. The majority will receive $500.
Winner: SMEs, start-ups, businesses in expansion mode
Tharman said he would top up the National Research Fund by $1 billion this year to encourage firms to invest in research and development.
To reduce early-stage funding gaps for start-ups, the government will increase the co-investment cap for SPRING’s Startup Enterprise Development Scheme (SEEDS) and Business Angel Scheme.
The government will also pilot a venture debt risk-sharing programme with selected financial institutions to provide high growth companies with an alternative to equity financing and traditional bank loans.
It will also 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. It is expected to benefit about 700 projects.
For companies venturing overseas, Tharman said he will enhance the Double Tax Deduction for the Internationalisation scheme to cover salaries incurred for Singaporeans posted overseas.
Tharman also introduced a new tax incentive, the International Growth Scheme (IGS), to provide support to meet the needs of larger Singaporean companies in their internationalization efforts. Qualifying companies will enjoy a 10 per cent concessionary tax rate on their incremental income from qualifying activities.
The tax allowance for acquisitions costs will also be increased from 5 per cent to 25 per cent of the value of acquisition. Companies will also be able to claim M&A benefits for acquisitions resulting in at least 20 per cent shareholding in the target company, down from 50 per cent.
Source: https://sg.finance.yahoo.com
