Tag: Budget 2015

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 – 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
Budget Should Look To Future, Help Middle Class

Sandwiched between raising a family and caring for their ageing parents as the costs of living rise, the middle class could receive more attention in the Budget this year, which will be delivered by Finance Minister Tharman Shanmugaratnam this afternoon.

And while there have been predictions from some quarters of an election Budget with goodies in the offing, some observers have cautioned against focusing too much on the short term, saying the Budget should be assessed on whether it delivers a convincing long-term plan for the Republic.

Employment and income insecurity, wage stagnation and inflation, as well as anxiety about their own and their children’s financial future are some of the chief concerns of middle-income earners — who are the largest stakeholders in the country, said Institute of Policy Studies sociologist Tan Ern Ser. “If Singapore aspires to be a middle-class society … then there are good reasons to address (the middle-income group’s) concerns,” he added.

Subsidies to help people look after their elderly parents or for childcare and their children’s education would go a long way for middle-income earners, because these are their heaviest burdens, said Mr Vishnu Varathan, a Singapore-based economist at Mizuho Bank. He added that more rebates could also be expected for middle-income households, with income earners taking on skills training or further education.

Earlier this month, Mr Tharman, who is also Deputy Prime Minister, indicated that this year’s Budget would focus on building Singapore’s future in terms of addressing retirement adequacy and helping Singaporeans, both those still in school and mid-career, have good careers.

Mr Tharman chairs the 25-member SkillsFuture Council, a national panel set up last September to develop a system of education, training and progression for Singaporeans. He also said the Government was putting the final touches to the Silver Support Scheme, along with other measures to help the low-income elderly.

The needs of the “sandwiched” class must be addressed as they do not qualify for schemes that help the poor, nor do they have the financial capability of upper-income earners, said Associate Professor Eugene Tan from the Singapore Management University School of Law.

“If you talk about trying to ensure Singapore is ready for the future, it becomes critical to ensure this group is well equipped and has confidence in the future of the country. If the Budget can lift this broad middle class … who occupy the heartlands of Singapore … then the future of Singapore will become secure as well,” he said.

Associate Professor Bilveer Singh from NUS’ Department of Political Science said public expectations for this year’s Budget are high, given that it is Singapore’s Golden Jubilee and that there is talk of the elections looming. The next General Election must be held by January 2017.

“Partly, the Government created these expectations for itself … People will say, ‘Okay, what is there for me after 50 years?’” he said. “Budget is when people will see the political will from the Government — can this Government really deliver? Is the Government really caring?”

In a research note published last week, Barclays economists Leong Wai Ho and Bill Diviney pointed to previous incentives that had preceded elections, such as the S$3.2 billion Grow and Share package in 2011.

Dr Tan Ern Ser noted that, increasingly, Singaporeans expect the Government to provide support not only in weathering economic storms, but also in buffering them against risks of inflation, employment and income insecurity as well as wage stagnation. “In short, harping on self-reliance and focusing on job creation and skills training alone are not sufficient,” he said.

Assoc Prof Tan said the Government would have to show that the Budget would not be about short-term measures. “I hope we measure the worth of the Budget by looking at what it actually does to strengthen our capabilities and capacity to do even more and to do well in the years ahead,” he said.

Source: www.todayonline.com

February 23, 2015
Retirement Adequacy, Healthcare And Cost Of Living Are Top Concerns For Singaporeans

Retirement adequacy, healthcare and cost of living are top concerns of Singaporeans, a pre-Budget 2015 feedback exercise by REACH showed. These topics accounted for about a third of feedback gathered the Government feedback portal said in a news release on Monday (Feb 16).

The exercise, jointly organised by REACH and the Ministry of Finance, collected feedback from online platforms, email, booths known as Listening Points, and a pre-Budget dialogue between late November last year and end-January.

RETIREMENT ADEQUACY

The exercise showed that Singaporeans are concerned about having enough funds after retirement to cope with daily expenses and rising cost of living – particularly for those who have not fully paid up their housing loans.

There was “anticipation” among some Singaporeans that the Silver Support Scheme would help them, REACH said. “Nevertheless, there were also views that individuals need to take responsibility by not overextending themselves when buying their homes, and preparing for their retirement,” REACH added.

Notably, the feedback had been collected before the recommendations of a Central Provident Fund (CPF) Advisory Panel were announced earlier this month, and respondents in the feedback exercise had asked for greater withdrawal flexibility from their CPF accounts upon retirement, which the panel had recommended.

Some were worried that the CPF Minimum Sum “might be increasingly be out of reach for lower-income and vulnerable Singaporeans”, REACH said.

Regarding the CPF Minimum Sum Topping-Up Scheme, some contributors suggested the Government match top-ups dollar-for-dollar to encourage more to contribute to the retirement accounts of their family members. However, some said this might only benefit the well-to-do who are cash-rich.

HEALTHCARE

Several were concerned that medical and hospitalisation costs may become increasingly unmanageable “especially for patients with chronic and life-threatening conditions”, REACH found. This is despite the introduction of the MediShield Life scheme which will be implemented in end-2015.

Many contributors said the Government should look into shortening waiting time for treatment at hospitals, increasing manpower and providing more hospital beds to meet rising healthcare demands.

They also recommended providing healthcare workers with more training on customer relations, and having translators in hospitals to overcome language barriers.

COST OF LIVING

The exercise saw many Singaporeans calling for more financial assistance to subsidise “everyday goods and services”. Some felt the Government should distribute cash handouts, grocery vouchers, and regulate the prices of goods to keep them affordable.

Many felt that their salaries had not kept pace with rising inflation, and there were comments that the Government should not just focus on helping the lower-income as the middle-income were also feeling the pinch, REACH said.

“Singaporeans continue to worry about rising cost of living which the Government seeks to address through various measures,” said REACH chairman and Senior Minister of State for Health, Dr Amy Khor. “But a key way to help Singaporeans cope with the cost of living must be to enable and equip them with the relevant skills so that they can have better jobs and better pay.”

Source: www.channelnewsasia.com

February 17, 2015
Tharman: Budget 2015 To Address Needs Of All Singaporeans

Singapore’s upcoming budget will likely address issues on retirement adequacy and ensuring good careers for the young and middle-aged, according to Deputy Prime Minister and Finance Minister Tharman Shanmugaratnam, as he provided a rare glimpse of Budget 2015.

Speaking on the sidelines of NUS’ anniversary celebrations in Taman Jurong on Sunday (Feb 1), Mr Tharman said the budget will provide greater assurance particularly for the lower-income seniors.

He said the Government is in the final stages of shaping the Silver Support scheme. The new initiative, which was announced at last year’s National Day Rally, will see the Government pay an annual bonus to low-income elderly Singaporeans from age 65 to help them cope with their living expenses.

“Providing assurances in retirement for our seniors is a very important priority – not just for today’s generation of seniors but those in future as well. It is a strengthening of our social security system,” said Mr Tharman.

Besides retirement adequacy, Mr Tharman said what is equally important is ensuring that young and middle-aged Singaporeans have fulfilling careers: “We have always got to look to the future – anticipate the challenges, prepare our people and equip them with the capabilities and the expertise that they need to do well, individually as well as collectively as Singapore.

“When we talk about good careers, it is not just about those who are today in school or in our tertiary institutions and about to start their careers. It is also about our mid-career Singaporeans.”

The finance minister emphasised that the budget initiatives will not stand on its own. He said it is a continuation of what the government has been doing in the past, especially the last five years.

Mr Tharman said steps have been taken that are significantly transforming Singapore’s social and economic landscape, such as strengthening affordability in healthcare and housing for the lower and middle-income groups.

He said that this year’s budget, which comes along with Singapore’s 50th anniversary, will address both the needs of today and tomorrow. Mr Tharman will deliver Singapore’s Budget for 2015 in Parliament on Feb 23.

Source: www.channelnewsasia.com

February 2, 2015