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Temasek’s Expected Earnings To Be Added To Government Revenue

With spending expected to be racked up on several fronts, including in healthcare and public transport, Finance Minister Tharman Shanmugaratnam said the Government must take steps now to strengthen future revenue, with one of the first moves being to include the projected earnings of Temasek Holdings in the Net Investment Returns (NIR) framework.

The inclusion of Temasek’s total expected returns — including realised and unrealised capital gains, and not only actual dividends paid to the Government — in its spending budget will “bolster our fiscal resources at a time when we have to fund long-term critical infrastructure and develop the human talent and capabilities to secure our future”, said Mr Tharman.

While the Government will seek to control costs, spending will “inevitably rise”.

“We project overall spending to reach about 19 per cent to 19.5 per cent of gross domestic product on average over the next five years. This is about 1 per cent of GDP higher than the revenues we have today,” added Mr Tharman. “It is, therefore, necessary that we take steps now to strengthen future revenues, to put Singapore on a firm fiscal footing for the rest of this decade.”

Economists say the change will give a significant boost to government coffers — to the tune of at least S$3 billion per year — although at least one said it might lead to Temasek altering its investment approach to a more conservative one.

Before this change, the Government was allowed to spend up to half of the expected long-term real returns on net assets managed by the investment entities of the Monetary Authority of Singapore (MAS) and GIC.

The inclusion of Temasek’s expected returns in the NIR framework was deferred in 2008 because there were no established methodologies for projecting the sum, given its investment approach of taking concentrated stakes and making direct investments. Temasek’s investment strategy was also still evolving then — it began to invest in more geographies and sectors since 2002, said Mr Tharman.

But he said yesterday that the Government is now ready to do so, despite the volatility of Temasek’s equity-only portfolio. He added that it has developed an approach to project its expected long-term returns.

The change to the NIR framework, in addition to the raising of personal income taxes he also announced yesterday, will yield additional revenue equal to about 1 per cent of GDP annually for the Budget over the next five years, said Mr Tharman. Of that, changes to personal income tax rates are expected to raise S$400 million a year.

He added that the higher government spending over the coming years is in three main areas: Expanding healthcare infrastructure and subsidies for MediShield Life premiums; improving public transport (another S$26 billion has been committed over the next five years); and the development of Changi Airport Terminal 5.

On top of these expenditures, there will be other essential spending, such as on enhanced domestic security and the rejuvenation of neighbourhoods, said Mr Tharman.

Commenting on the move, Barclays economist Leong Wai Ho estimated that the inclusion of Temasek’s expected returns would yield at least S$3 billion, in addition to the roughly S$8 billion of investment income the Government is currently netting from the MAS and GIC per year.

DBS economist Irvin Seah said the change will increase the Government’s fiscal sustainability, “especially when social spending is set to rise as the population ages”. But he felt the long-term projection of Temasek’s earnings will not be easy, given the entity’s portfolio, which could encourage it to take a more conservative investment approach in return for greater stability.

Mr Leong noted that Temasek’s average returns over the past five years have been 11 per cent, falling to 9 per cent over the past 10 years and 6 per cent over the past 20. Its portfolio value, he observed, has risen to S$223 billion as of March last year, compared with S$133 billion 10 years ago.

“It is probably not as volatile as people think, because of its diversified basket of investments, both geographically and sectorally,” he said.

Source: www.todayonline.com

February 24, 2015
Singapore Budget 2015: 7 Reasons Why Robin Hood Budget Matters

I tried frantically to keep up with noting down the giveaways as Finance Minister Tharman Shanmugaratnam reeled them off as he announced the Budget 2015.

A new SkillsFuture Credit account for all Singaporean workers aged 25 and above. Top ups to the accounts of children, secondary school students and post-secondary school students. Higher GST vouchers across the board, with a special bonus for seniors.

There were too many to list. I gave up and just listened.

And minutes after Mr Tharman finished the Budget 2015 statement, the first SMS came, from a former colleague.

A Robin Hood Budget, she said.

Here are seven noteworthy things about this year’s Budget.

1. Robin Hood qualities

It takes from the very rich to give to those who are poorer. Without little fanfare but every determination, the Government raised the top marginal tax rate for personal income taxes from 20 to 22 per cent. It will raise $400 million in extra revenue when it kicks in the Year of Assesssment 2017.

It gives a lot to the poor, especially seniors from lower-income jobs in the past, under a new Silver Support bonus that aims to give up to about $750 a quarter a person to the elderly.

2. The 1 per cent gap

Mr Tharman flagged this gap. No, I’m not talking about the much-touted gap between the top 1 per cent earners and the rest, which has gotten so much flak worldwide for fostering inequality.

I’m talking about the 1 percentage point projected gap between long-term revenues and long-term spending. The latter is tipped to go up to 19 to 19.5 per cent of GDP from now, as Singapore opens its coffers to spend on health care, retirees, and on infrastructure and investment in education. The former hovers around 18 to 18.5 per cent of GDP.

How to make up the shortfall of about 1 per cent of GDP?

This is a structural issue that will have resonance beyond this Budget.

3. New spending rule

Mr Tharman has a way to close that 1 per cent gap: Use projected long-term returns from Temasek Holdings.

The Net Investment Return formula framework was implemented in 2009. He said: “Under the framework, the Government is allowed to spend up to 50 per cent of the expected long term real returns on its net assets managed by MAS and GIC.”

Temasek was left out as it was undergoing a major change in investment strategy. Mr Tharman said it was a good time to add Temsek to the mix.

So this Budget is important for signalling the long-term gap in revenue and spending.

It is also significant for using a new framework that allows Singapore to tap a wider pool of money from expected investment returns on its reserves into the future.

“The move will bolster our fiscal resources at a time when we have to fund long-term critical infrastructure and develop the human talent and capabilities to secure our future.”

4. More help for middle-income

Actually, I should qualify the Robin Hood bit. This Budget takes from the rich, to give a lot more to the middle-income, not just the poor.

A 50 per cent personal income tax rebate, capped at $1,000, will benefit mid-income earners most.

The concessionary maid levy is halved to $60. Exam fees are waived for most school students. Child-care subsidies will be improved. Most parents with kids will get fairly large top-ups to the child’s education account, of about $500 per child, regardless of whether the child is in preschool, secondary school or tertiary education.

5. New way of targeting subsidies

A new method to figure out who gets more subsidies and government assistance will be introduced for the Silver Support bonus for retirees. It goes beyond the traditional use of housing type. The Silver Support will still use housing type as a proxy for wealth, giving those in smaller flat types more in the Silver Support bonus. But even those in larger flats, up to five-roomers, will get it.

But it will also take into account past working income of the retiree. It will also look at their household income to gauge what level of support these retirees have.

As the Silver Support kicks in only from the first quarter of 2016 – in just over a year’s time – it isn’t clear how this new system will work out.

But it is a novel, and potentially very useful, way of targeting subsidies. It will also be automatic, using presumably income data from Iras and CPF, and household type data from HDB.

With Singapore going well-down the path of more middle-class welfare subsidies, expect this to be the start of a more refined way of figuring out who deserves what grants and subsidies.

6. Meritocracy of skills, not hierarchy of grades

Mr Tharman and other government ministers have been saying for several years now that Singapore has to go beyond a system where people are valued for their academic credentials, to one where every worker is motivated to excel at what he or she does, and rewarded accordingly.

This Budget puts substance to that dream, with a new SkillsFuture Credit account for every Singaporean aged 25 and above. The Government will give $500 into this account in 2016.

There will be a concerted push to get Singaporean workers and employers to change our culture to one which values people for skills, not their paper qualifications.

A range of new SkillsFuture Awards and Fellowships will be introduced. Think of these as the skills-equivalent of the Public Service Commission’s scholarships for academically bright students.

7. Productivity 2.0

The first round of measures yielded some good results.

Mr Tharman said: “Productivity today is 13 per cent higher than at the start of our restructuring journey in 2009. This is an average growth rate of 2.5 per cent per year. All of this gain was achieved in 2010 (11.6 per cent) and 2011 (2.3 per cent) as we recovered from the recession, and growth has been negligible in the three years since then.”

Next: consolidating measures to focus on innovation and internationalisation. More grants for innovation. Tax breaks for mergers and acquisitions go up to encourage companies to merge and consolidate. The National Research Fund gets a $1 billion boost.

All in, it can be said to be a sensible yet generous Budget, albeit at the expense of the very high-income. It may disappoint those who wanted a big SG50 Bonus to celebrate the nation’s Jubilee. But it does give out a mass hongbao to all Singaporeans, via top-ups to education funds for children and students, and via the new $500 SkillsFuture Credit for workers.

More importantly, it sets Singapore on a clear trajectory – Mr Tharman would call it the path of progressivity – but basically the writing’s on the wall: higher taxes on the rather rich, to give to the poor and the middle-income.

Chua Mui Hoong, Opinion Editor

Source: www.straitstimes.com

February 24, 2015
Singapore Budget 2015 – Winners And Losers

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

February 24, 2015
Driving Licences – Penalising Singaporeans

I had always wanted to pen this for I had worked as a driving instructor with one of the BIG 3 centres in Singapore. And yes, there are only the 3 who monopolise the industry and of course a handful of old-timers who are private instructors. No new licence is given to private instructors. Hence, after the passing of the old timers, there will never be private classes anymore which are by all means cheaper and the best option for those hard-pressed financially.

Now, if you are a foreigner, it’s a walk in the park. Let’s say you come from India with an Indian licence. All you need to do is to pass your Basic Theory – and lo and behold – you have the much coveted prize – a Singapore Licence. Our licence is much respected the world over. For example, we are the only country from Asia which is recognised for conversion without taking a test in Australia. So they too know how tough it is to get a driving licence in Singapore. And for example countries like India, getting a licence is like going to a coffee shop. The more you are willing to give kopi money, the faster you can get your licence. (This is from the horse’s mouth for I have spoken to them before.)

When I was an instructor, there were different types of learners who sought to get a licence. Among them were those who used them to “cari makan” [Ed: seek a living]. They had to go through rigorous training spending thousands of dollars while their counterparts from overseas didn’t need to do that. So why the discrepancy? Why must we make it so hard for Singaporeans to get a licence when it’s so easy for the rest?

And all of those who had gone through testing in Singapore would know how you are treated by the testers. They are the kings. I have personally seen the trauma, the anguish, the emotional pain and suffering first hand among those who learn to take a licence. I have seen grown man cry because they failed the test. Why must we allow this to happen? Furthermore, what about those who had driven army vehicles during their NS? Are they given a full conversion? No, unless you clock a certain mileage. Isn’t this discriminating against Singaporeans when you allow foreigners to have it easy?

My point is, we are always talking about PMET’s. But we always forget about the average Joe. To be honest, the average Joe doesn’t have a voice for they are working hard to earn a living. But one thing smart about them is they, for one, have for the longest time voted for opposition unlike our PMET’s who had been retrenched. In good times it’s the man in white and in bad times they pick and choose their colour, unlike the Joe’s.

So can the opposition parties please make this a case for Singaporeans!!!!

Majullah Singapura!

Uncle Santosh

* Submitted by TRE reader.

Source: www.tremeritus.com

February 23, 2015
Martyn See Tong Min Urges Lam Pin Min To Apologise And Retract Statements On Thaipusam

OPEN LETTER TO MP DR LAM PIN MIN

A happy new year to you Dr Lam,

My name is See Tong Ming, Martyn. I am a citizen of Singapore. I hereby inform you that I will be filing a police complaint against you on the 26th of February 2015 for offences committed under the Sedition Act and Contempt of Court unless you remove and apologize for the following remark you made.

On the 5th of February 2015 at 1836 hours, you shared a link on your facebook page to an article by ‘Lovely Singapore’ entitled “What really happened at the Thaipusam scuffle?” You had captioned the report in your own words :

“An example of how alcohol intoxication can cause rowdiness and public nuisance.”

The original statement by the Singapore Police Force, posted on the 5th February two hours earlier, had stated:

“All three men were believed to have been drinking earlier as they smelt strongly of alcohol.”

As such, you have deliberately distorted an allegation by the SPF into a statement of fact. I put it to you that you have :

1. Incited enmity towards the Hindu community by stating as fact that devotees were intoxicated while participating in the holy festival of Thaipusam. May I inform you that devotees are required to undergo a strict regiment of fasting and abstinence from meat and alcohol. Members of the families of kavadi carriers are also required to undergo such a regiment, albeit for a shorter period.

2. Caused ill-will and hostility between different races and communities. The responses on your facebook page show overwhelming hostility to your remark. Yet, you have allowed your offensive post to remain online, while you continue to publicly tout Christian teachings on your personal facebook wall. As a Member of Parliament, your lopsided attitude towards the religious sensitivities of Singaporeans, particularly against the Hindu community, is vexatious.

3. Committed sub judice contempt of court by risking prejudice which may affect the final determination of the ongoing case against Ramachandra Chandramohan, Jaya Kumar Krishnasamy and Gunasegaran Rajendran, who are due to undergo trial for disorderly behaviour. The three men were charged in court on February 7th. Your facebook posting has remained online to this day. It has since been reproduced in online forums and blogs. A google search of “Thaipusam alcohol”, “Thaipusam intoxication”, ‘Thaipusam rowdiness” and ‘Thaipusam public nuisance” show up your statement as the top search result.

This will not be the first time I have filed a police complaint against an elected person holding political office. In 2013, I filed a police complaint against Abdul Ghani Othman, the then Johor Menteri Besar, for canvassing for votes in Singapore ahead of the Malaysian elections.

As this is the Chinese New Year season, I wish to offer you a grace period of 3 days to correct your facebook post and make a public apology to the Hindu community. Failing which, a police complaint will be filed by 12 noon on the 26th of February 2015.

If you are so hung up in equating alcohol consumption with public nuisance, I suggest you speak up against the police’s approval of the St. Patrick’s Day street parade on Boat Quay slated for March 13 and 15. In Dublin, such celebrations have been marked by incidences of teenage drinking and street violence.

See Tong Ming, Martyn

Source: Martyn See

February 23, 2015