Tharman Shanmugaratnam
Singapore
“EDB conducts regular reviews to GIP to ensure its effectiveness in attracting only top-tier business leaders who are interested to drive the growth of their businesses and investments from Singapore.”
“MAS may vary the size of the additional capital requirement imposed on the bank and take other regulatory actions depending on the outcome of ongoing reviews. MAS requires all retail banks in Singapore to ensure that their mission critical systems supporting digital banking are resilient.”
“This question will be answered in the reply to Dr Tan Wu Meng's Parliamentary Question filed for tomorrow's Sitting. [Please refer to "Probe into Recent Disruptions of DBS' Digital Bank and Physical ATM Services and Preventive Measures Implemented", Official Report, 5 July 2023, Vol 95, Issue 107, Written Answers to Questions for Oral Ans…”
“Borrowing from the banks is one of the ways in which MAS carries out MMOs to soak up such excess liquidity. Like other central banks, MAS does this daily through an auction system, enabling MAS to withdraw liquidity through the Primary Dealers that submit the most competitive prices.”
“To mitigate consumer over-indebtedness, the Monetary Authority of Singapore (MAS) requires financial institutions (FIs) to implement a range of safeguards when extending mortgage loans and unsecured credit.”
“The Monetary Authority of Singapore imposes on external asset managers the same stringent regulatory standards for anti-money laundering and countering the financing of terrorism that it imposes on banks.”
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“Further, the GST increase was essential for putting in place a stronger revenue structure to fund the increased expenditures that we decided we have to undertake in the next five years and beyond. These include substantially increased healthcare expenditures and investments in continuing education and training. But it was not just our social expenditures that we were expanding, and which are being primarily funded by our GST, but much beyond that: (i) Infrastructural investments – the next eight years of spending in this area will be three times more than the past five years; (ii) R&D; (iii) Housing rejuvenation; (iv) Refreshing our downtown; and (v) And further reductions in income taxes to stay competitive, should they become necessary. Our GST increase, together with the planned revisions in the rules for drawing on Net Investment Income, will provide the revenues for us to make these investments in our future. Second, for 2007 itself, the GST increase was revenue neutral and had no impact on our surplus position. Total collection from the additional 2% GST amounted to around $1.4 billion. This was in fact equal to the GST offsets plus the WIS which we paid out in FY2007 alone (this is not counting future years of GST offsets and WIS). Third, by introducing the GST increase at a time when economic growth is healthy and our revenue position still strong, we were able to fully offset its impact on the cost of living for most Singaporeans. In fact, lower and middle income Singaporeans have received significant net benefits as a result of the GST increase last year. This is because they pay only a small portion of the GST, but receive the bulk of the GST offsets. The bottom 20% of resident households paid only 5% of the total GST collected.”
“Ms Sylvia Lim cited Citigroup’s comments about the mistakes we had made in budgetary estimates last year. But Citigroup’s own projections of GDP growth at the time of the Budget last year were in fact the same as ours – 5.6%, which was midway between the Government’s forecast of 4.5% to 6.5%. Some private forecasters did expect more rapid growth for last year, while others were more conservative. However, the difference between Government and private forecasting of the economy is that we have to set out our plans for the whole country on the basis of our forecasts. This is why we have to try to use the most realistic assumptions when we set out our plans, rather than use the most optimistic assumptions, in the hope that they will come true. I am sure most Members would agree that this is the prudent and sensible thing to do. Should we have raised the GST? Many of you including Mr Inderjit Singh, Mr Low Thia Khiang, Mr Gautam Banerjee, Ms Eunice Olsen and Ms Sylvia Lim concluded from last year’s large surplus that we made a mistake in raising GST. Ms Sylvia Lim in particular said that we raised GST without compelling reasons, and that we could instead have relied on other revenues to fund our expenditures. Let me explain why this would have been the wrong approach. First, GST was not a revenue raising measure for 2007. GST was raised so that we could introduce the Workfare Income Supplement (WIS), a permanent scheme, not just one-off, to help lower income Singaporeans. The GST increase also enabled us to reduce the Corporate Income Tax rate significantly – by 2% points to 18%.”
“Even then we were wrong; stamp duties significantly exceeded expectations, especially because of the surge in transaction volumes. But should we have based the Budget last year on optimism that was unsubstantiated at the time? And should we now for this year’s Budget be optimistically assuming the same volume of transactions as last year? I think it would be quite imprudent for us to do so. I agree fully with all the Members who urged us to improve our budget marksmanship. I can assure Members that we do not set 'soft targets' for ourselves, just so we can exceed them. In fact, over the past 10 years (FY1998 to FY2007), we have over-projected revenues for six years and under-projected revenues for four years. Last year, we under-projected. But we are not inveterate conservatives in fiscal forecasting. However, forecasting will remain inherently imprecise, especially because we are a city economy that is fully exposed to the swings in global economy and the vagaries of our own asset markets. So, as Dr Loo Choon Yong cautioned, we cannot expect too much prescience in the budget planning process. Hong Kong too faces this challenge. It now expects to run a fiscal surplus exceeding HK$116 billion (S$21 billion) for last year, compared to an originally projected surplus of HK$25.4 billion. Just to put this in perspective, they started the year expecting a surplus of 1.6% of GDP and they ended with a revised figure of 7.2% – in other words, they exceeded their original estimate by 5.6% of GDP. This is just like in our case, where the final budget outturn exceeded the original estimate by 3% of GDP. I should add that the Government is not alone in finding economic forecasting a challenge.”
“This is what we did last year, when we estimated at the start of the year that GDP growth for 2007 would be 4.5% to 6.5%. This was also in line with private sector forecasts. Likewise, for the property market which accounted for over $3.5 billion extra revenues beyond what we had projected. I will go into some detail on stamp duties because several Members had raised the issue of why our stamp duties turned out to be grossly underestimated and also because it was the largest swing factor in last year’s Budget. [Chart 1*] Mr Gautam Banerjee asked why we had expected stamp duty collections in 2007 to be lower than 2006. At the time of the Budget in February last year, we had estimated 2006 stamp duties to total $1.5 billion. On the basis of information we had, we projected the same level of stamp duties in 2007. This was because 2006 was itself already an exceptional year. In fact, the subsequent data for Fiscal Year 2006 based on actual collections for January to March (the data comes out after our Budget), which increased sharply, took the total stamp duty collections to $2 billion, more than the $1.5 billion estimated at the time of Budget. While we had assumed further price increases in 2007 for the property market, just as the private forecasters did, no one anticipated the surge in volumes of transactions that took place. *Cols. 1103-1104. There was also considerable uncertainty at the time of last year’s Budget as to the extent to which the pick up that was taking place at the luxury end of the market would spread to the rest of the property market. Our stamp duties projections for 2007 were nevertheless significantly above historical collections – more than double that of 2005.”
“If we did this, it would mean running a larger deficit, in other words an expansionary budget at a time when the economy is not in recession, when unemployment is very low and where costs are still rising. Doing so would only over-stimulate the economy, precisely what some Members have accused the Government of doing. A balance has to be struck. This is how the Budget has been shaped – to strike the best balance between competing needs, and doing what is best for Singapore, not just for one or two years, but for many years. We have put something aside for the future. Or as Dr Ong Seh Hong said, “putting aside grain for times of scarcity”. Overall, therefore, this Budget aims to provide the right balance for an economy which continues to enjoy good growth, but is exposed to significant global uncertainty in the year ahead. While inflation is causing immediate concerns, because it erodes spending power, this is not a crisis. People have jobs. Our surplus sharing must be seen in this context. We are not in a crisis. Nevertheless, the global economic outlook is less certain this year. The financial markets in US and Europe have been affected by the problem of sub-prime loans, now in fact a broader credit crunch, and there are worries of a recession in the US. We have retained the flexibility of being able to respond if the economy takes a significant turn for the worse, which we do not presently expect. I will now address the key questions that have been brought up in the debate. Is the Government taking too much? Reasons for the surplus Many MPs have questioned the exceptionally large underestimate of last year’s revenues. Were we too conservative? Our basic approach in the Budget is to use the best information available at the time.”
“2 billion – to build up longer term capabilities and help Singaporeans with future financial security (comprising the PSEA top-ups, CPF Bonuses, Medisave top-ups and tax incentives for businesses[1]). [1] This includes the Fixtures and Fittings Allowance, the R&D tax allowance, further tax deduction for R&D and R&D Incentive for Start-up Enterprises (RISE). On top of this, we are putting aside $2.4 billion in the endowment funds and the National Research Fund to cater to longer term needs. This is the balance we have struck between meeting short term needs and keeping our eye focused on the much larger challenges that we face over the longer term – sustaining our economic competitiveness and our social compact. The third consideration is, what is the right balance between benefits to households and businesses? In this Budget, we have provided more significant benefits to households. We know they are facing a challenge in the near term with the rising cost of living. By providing direct assistance now, we are preventing a spiral of wages and prices from developing, which will affect competitiveness and growth. It is in the interests of businesses that we do so. But we are also providing further incentives for businesses on top of last year’s major moves. We made significant permanent cuts in corporate taxes for businesses last year, which they will start benefiting from this year in terms of significantly lower tax bills. Large companies and small. It is not possible to do more for both the short term and the long term, and to give more to both households and businesses.”
“If we exclude the Net Investment Income Contribution and our transfers to the endowment funds, which are items that have no immediate effect on the domestic economy, the expected budgetary balance is close to zero. This is an appropriate fiscal stance because we expect Singapore to see healthy economic growth of 4% to 6% this year. Singapore and Asia’s fundamentals remain strong. Positive trends on the domestic front, such as a strong pipeline of manufacturing investments and construction projects will also keep the economy going. Our unemployment is at record low, and many jobs go unfilled. If we had an overheated economy, we should be going for a significant Government surplus this year. However the economy is not overheated, although specific segments of the economy, especially in the office space market, have been facing shortages and rapidly rising rentals. If we were headed for a recession this year, we should be going for a larger deficit. On current indications, this is unlikely to be the case. The second consideration is – what should be the balance between measures aimed at short-term relief for rising costs and long-term competitiveness? The Budget goes for a balance between providing short-term benefits to Singaporeans and building up capabilities for longer term competitiveness and social resilience. This year, Singaporeans will receive $2 billion worth of short-term benefits (comprising Growth Dividends, Personal Income Tax rebates and the GST offsets that were announced last year but continue to run this year). But we will also provide a roughly equal amount – $2.”
“Mr Speaker, Sir, I would like to thank all Members who have spoken and supported the Budget. I will address the main issues of the Budget Debate in this round up speech. Members had also raised many specific questions related to the programmes of the various Ministries which will be addressed at the Committee of Supply sessions. This Budget is about our future. It will develop our people and our enterprises - the key drivers of Singapore's long term competitiveness. It will create sustainable advantages for Singapore, through advanced education and training of our people and by spreading the practice of innovation across our economy. Ultimately, as Members have pointed out, growth must translate into a better life for Singaporeans. This Budget therefore is also about creating a stronger and more resilient community, one where every Singaporean has the best opportunity to move ahead, and where we help those most in need to keep up with the rest. It is about ensuring that as we grow, we will leave no one behind. The debate has thrown up issues that can be summarised in three broad questions: (a) Is the Government taking too much and giving back too little? (b) Are we doing the right things to sustain competitiveness? (c) Are we doing the right things to help Singaporeans in need? Finding the right balance – basic considerations behind the Budget Before I address these questions, I would like to explain the three key considerations that have shaped this year's Budget: First, what should our overall balance be this year? Should our fiscal stance be expansionary, contractionary or neutral? We have gone for a small overall deficit this year. It is in fact a neutral position in terms of the impact of the Budget on the economy.”
“Miscellaneous Tax Changes Last year, I announced that we would progressively move towards taxing liquors on the basis of alcoholic content, rather than on the basis of volume. We are now already taxing many liquors, including beer and stout, on the basis of their alcoholic strength. However, other liquors like wine, whisky and brandy are still taxed based on volume. With effect from today, all alcoholic beverages will be taxed on the basis of their alcoholic content. Most liquors will see a slight reduction in duty rates. The rationalisation of the duty rates will be broadly revenue neutral. Having covered liquor, I now move to driving. The Government has already announced the reductions in the Additional Registration Fee of vehicles and the 15% cut in road taxes that will accompany the expansion of the Electronic Road Pricing system. We will also introduce changes to the tax levied on private diesel cars. The current special tax on private diesel cars is too punitive, and explains why we only have one such car on the road today. I am informed that there are another two on Pulau Ubin, but they do not pay special tax on Pulau Ubin. The changes will narrow the difference in the cost of fuel consumption that a motorist faces, between a Euro-IV car and a petrol car. Details of the special tax and liquor duties are at Annex B-5*. With the Speaker's permission, I will continue later with the changes we will make to build a resilient community. *Cols. 437-498.”
“It is an efficient tax, set at a low rate in relation to the full value of the property, especially for owner-occupied homes. You cannot tax-plan it away. It also does not affect our middle and upper-middle-income estates disproportionately compared to wealthier ones. This is why most countries have some form of tax on property – including even Hong Kong, which like us does not have capital gains tax and has already done away with Estate Duty. Only Ireland does not have a tax on residential property, but the Irish have capital gains tax, inheritance tax and gift tax. Details on Estate Duty are at Annex B-4*. Personal Income Tax For most taxpayers, Singapore's personal income tax regime is already one of the most competitive in the world, because our marginal tax rate schedule is highly progressive. We will not be making any further move on personal income tax rates this year. But we will continue to watch this and ensure that we are always able to attract and keep talent in Singapore, including those at the top end. After we amend the Constitution to revise the framework for drawing investment income from our reserves, we will reassess our options on corporate and personal income tax and lower rates further should it become necessary. As the Government had a strong surplus last year, however, we will give something back to taxpayers this year. I will give an income tax rebate of 20% for all resident taxpayers for Year of Assessment 2008. The rebate will be capped at $2,000. Having this cap allows us to target the rebate at those below the top income brackets. The income tax rebates will cost the Government $380 million.”
“Ordinary Singaporeans have also argued that having worked, paid taxes on their income and property, and built up their savings, they want to be able to pass it on to their families. Some are in fact liable for Estate Duty when their estates receive large life insurance payouts. The current low exemption limit for non-residential assets, set at $600,000, compared to the higher limit of $9 million for residential properties in fact tends to affect our middle and upper-middle-income estates disproportionately compared to wealthier ones. We have considered raising the $600,000 limit for non-residential assets so as to correct for this. However, this would further shrink what is already a narrow tax base and render the tax less effective. I have therefore decided to remove Estate Duty from our tax regime, with effect from deaths from today. It is not just a practical or expedient measure, but one that on balance will be in our collective interest. If we make Singapore an attractive place for wealth to be invested and built up, whether by Singaporeans or foreigners who bring their assets here, it will benefit our whole economy and society, not just the individuals who build up their wealth. It is not a zero sum game. I would however encourage individuals who have accumulated wealth to think of how they can use it to make a contribution to society, and make full use of the enhanced incentives we introduced last year to promote philanthropy. This will benefit our schools, universities and hospitals, and the growing range of charitable causes in Singapore. With the removal of Estate Duty, our remaining tax on wealth would be the tax on property. We should retain this tax.”
“Overseas Talent Recruitment Scheme and Not-Ordinarily-Resident Scheme To help businesses continue to attract talent from around the world, I will extend the Further Tax Deduction scheme, which allows for further tax deduction for relocation and recruitment expenses for another five years till 2013. I will also refine the Not-Ordinarily-Resident scheme, which is relevant to individuals with regional work responsibilities, so that it covers not only salary but also benefits in kind. Details on these tax changes are at Annex B-3*. Individual Taxes Estate Duty I mentioned last year that we would review Estate Duty, and we have done so. We collect about $75 million per year on average from estate duty. We inherited estate duty from the British. The rates we originally had were high - until 1984, the top rate was 60%. (Today’s inheritance tax in the UK is in fact still 40%.) Our current rates are much lower; 5% for the first $12 million of dutiable assets and 10% thereafter. Estate duty is a means to rebalance opportunities with each new generation and prevent wealth from being concentrated in fewer and fewer hands over time. It was especially relevant at the time when the bulk of wealth comprised land that was passed down through the family. Today, however, wealth is being created in many more ways and by a wider group of entrepreneurs, many of whom start off with little. Wealth is also being managed today on a global basis. Proponents of removing estate duty have therefore argued that removing it would encourage wealthy individuals from all over Asia to bring their assets into Singapore, thus supporting the growth of the wealth management industry.”
“I will also extend the tax exemption currently granted to non-residents and resident individuals on income from Qualifying Debt Securities to all investors of qualifying sukuks (Islamic bonds), including resident non-individual investors. To strengthen Singapore as a wealth management hub, I will introduce a tax incentive scheme for family-owned investment holding companies. The scheme will allow these companies to enjoy the same scope of exemptions that individuals currently enjoy on Singapore and foreign-sourced investment income. To further develop Singapore as a premier insurance centre, I will introduce a tax incentive scheme for licensed insurance and reinsurance brokers. They will be taxed at a concessionary rate of 10% on the income they derive from offering insurance broking and advisory services to offshore clients. I will also enhance other financial sector tax incentives comprising those related to project finance, Qualifying Debt Securities and asset securitisation transactions, as well as extend the Financial Sector Incentive scheme for another five years. Developing the Maritime Hub To deepen our maritime financing capabilities and to tap on new business opportunities created by the buoyant shipping market, I have decided to provide a concessionary tax rate of 5% or 10% on income from leasing of containers under the Maritime Finance Incentive. I will also allow partners to enjoy the incentive. Tax Credit for Foreign-Sourced Income We will also make other specific tax changes. To eliminate the possibility of double taxation for our companies that venture abroad, I will extend unilateral tax credit to all foreign-sourced income that they earn in countries with which Singapore does not yet have an Avoidance of Double Taxation Agreement.”
“Typically, if the fixture or furniture is movable, it qualifies; if it is not movable or does not look movable, it does not qualify. For example, if a restaurant wants its bar counter to qualify for capital allowances, the surest way is to put it on wheels. I have decided to introduce a new incentive to help businesses, and especially SMEs, keep their costs down. Businesses will be granted a special allowance for the costs of fixtures, fittings and installations incurred, to be written down over three years. The allowance will be limited to expenses of $150,000 every three years. This new allowance will be particularly helpful for SMEs in the services industries. Whether it is a fashion or F&B outlet, the upgrading they make to the interior design of their premises is integral to the experience they offer to their customers. So we should allow this to be deducted. Overall, this measure will save our businesses about $130 million a year in tax. The cap at $150,000 of expenses is essential because, if we allowed all businesses to deduct all expenses involved in renovating their premises, we would face significant revenue loss. Promoting New Financial Activities Singapore's financial centre has seen good growth and has significant new opportunities ahead, particularly in Asian markets. Islamic finance is a promising area and we will ensure that Singapore's financial markets are conducive for its growth. To encourage more Shariah-compliant financial activities to be done out of Singapore, I will introduce a 5% concessionary tax rate for income derived from qualifying Shariah-compliant activities, specifically in the areas of lending, fund management, insurance and reinsurance.”
“I will therefore allow the tax exemption for start-ups as long as there is at least one individual shareholder with at least a 10% shareholding. Equity Remuneration Incentive Scheme Many companies are seeking to use equity-based remuneration to attract and retain talent. Several years after the dotcom bubble, equity in the form of stock options or share awards remains a relevant tool for young and fast-growing companies. There are currently two tiers of tax incentives for equity-based remuneration - one for employees of SMEs and another for those in larger companies. Some of our larger companies would like to use equity remuneration for key employees to encourage them to take risks and grow the company. However, they are currently restricted from doing so as the existing incentive requires them to offer share awards or stock options to at least 50% of their employees. So it has not been very practical for companies, especially our large companies. I have decided to adjust this condition so that they are only required to issue stock options or shares awards to at least 25% of the company's employees. I will also introduce a new and more attractive tier for start-up companies besides the two current tiers targeted at SMEs and larger companies. As the risks involved in start-ups are naturally higher, it is reasonable to grant their employees a larger exemption from personal income tax on the gains they make on their stock options or share awards. Fixtures and Fittings Incentive A regular bugbear concerns the expenses that companies incur on fixtures, fittings and installations in their premises. Some renovation expenses are currently not eligible for capital allowances.”
“Companies are already relocating to some of these sites, and to our new regional centres. Further, the Government has decided to relocate several agencies out of the Central Area. We will now free up 20,000 sqm or more by first quarter 2009 for use by the private sector. This is equivalent to twenty floors or more of an Office Tower Block in Suntec City. Construction costs are another short term problem. The combination of higher raw material prices and work on major new projects such as the two integrated resorts and petrochemical complexes has caused costs to spike up. To ease the pressure, the Government has earlier announced the deferment of some $2 billion worth of Government projects. We have now decided to defer another close to $1 billion of projects. This deferment will only affect projects which are less urgent. Key investments such as the expressways, the Downtown Line and the NUS University Town will not be affected. Tax Competitiveness We will continue to keep our taxes competitive so as to provide every incentive for work and enterprise, and generate economic growth for the future. With our 18% Corporate Tax rate - we brought it down last year by 2% - and the enhancements we have made to our Partial Tax Exemption scheme last year, our corporate tax regime is competitive. The R&D incentives I have announced will provide further reductions in effective tax rates for companies over time. I will make additional refinements this year to give a further boost to entrepreneurial companies and SMEs. Start-Up Tax Exemption Scheme First, I will liberalise our start-up tax exemption scheme. Currently, all shareholders must be individuals before the company is eligible for the scheme. This is too restrictive.”
“SmartSense has been adopted by Tan Tock Seng Hospital, and is now being trialled in hospitals in Thailand and Taiwan. We are stepping up our focus on R&D and innovation on all fronts, through our universities and public sector institutions, by incentivising R&D in our enterprises including SMEs and start-ups, and through closer interaction between the public sector and private enterprises. We cannot expect quick results from the investments we are making today and the incentives we are providing. We may have to do more in future years. But what we do now to make innovation more pervasive in the economy, and to grow new enterprises that are driven by R&D, will eventually pay off. Enhancing Business Competitiveness We have to keep our business costs competitive, and not let them run ahead of the cities we are competing with. Office Space Constraints In the short term, we face tightness in office space capacity, caused by the surge in business growth, especially in the business and financial sector. Office rentals have risen sharply. Although office space still costs 30% to 50% less in Singapore on average, compared to Hong Kong and Tokyo, the pace of cost increases has been rapid and unsettling for businesses. The tightness in office space should ease over the medium term, with the completion of major projects currently under construction, such as Phases 1 and 2 of the Marina Bay Financial Centre, the Marina View sites and South Beach. By 2012, we will have an additional 1.4 million sq m of office space. But we are addressing the short term problem. The Government has released 15 transitional office sites and vacant state properties, which will yield 150,000 sq m of additional office space.”
“For a medium-sized company, around the 90th percentile of our taxpaying companies, its effective tax rate will come down from about 15% to 10%. The three schemes together will cost about $250 million a year. Details of these R&D initiatives are at Annex B-2*. Catalysing Innovation in Public Services The public sector itself will be more active in innovation. A new Public Service Innovation Framework will serve to promote public-private collaborations that will bring about breakthrough public services. The Government will set aside $90 million over three years as a seed fund for experimentation, test-bedding and building capabilities. Each Ministry will have a Chief Innovation Officer to drive and coordinate this process. The Public Service is always looking for solutions to problems, big and small, that innovative enterprises could participate in. Private companies with new ideas for technologies and services can offer them for joint development prior to the procurement stage. Some examples are well known, like how our companies have taken advantage of NEWater and TradeXchange to develop whole new capabilities, grow and expand overseas. There are other lesser known examples. One of them is Cadi Scientific, founded by four Singaporeans, just five years ago. They approached Singapore General Hospital with a prototype device and offered to work together with the hospital to develop a thermal sensor that could automatically transmit body temperature readings wirelessly to a central system. It freed up time for the nurses, and also meant that patients need not be disturbed from their rest. Today, their device has been developed further, into a system that measures many vital signs - blood pressure, respiratory rate and so on - known as SmartSense.”
“Secondly, I will introduce a new broad-based tax allowance which will provide a further push for innovation amongst companies in Singapore, and especially the SMEs. Companies will be granted R&D tax allowances each year, up to an amount of 50% of the first $300,000 of their chargeable income. This allowance can be used to defray incremental expenditure on R&D done in Singapore in subsequent years. This will provide additional resources for SMEs to invest in innovation, whatever their field of business. It is extra funds that they will lose if they do not use them for R&D. Thirdly, I will also introduce an incentive to help our high-tech start-ups. Turning R&D into marketable products usually takes time, during which the new company may have no taxable income. Currently, they carry forward their losses for tax purpose. The new incentive, called R&D Incentive for Start-Up Enterprises (or RISE), will allow them to convert immediately these losses into a cash grant of up to about $20,000. They will get this as long as they incur at least $150,000 during the year for doing R&D in Singapore. This scheme will be available for enterprises in their first three years of assessment. As with the other incentives I have mentioned, we will review the scheme after five years. The three schemes will provide a significant incentive for all companies, small and big, to do R&D. Start-ups which have not yet turned a profit, will benefit from reduced costs when they do R&D. A small company that is around the 80th percentile of taxpaying companies, and which spends an additional $150,000 on R&D, would find its effective tax rate being reduced from around 9% currently, to almost zero.”
“MOE has established an Innovation Fund of $10 million to help seed their ideas and products, and to bring their innovations to the point that could attract industry funding. The push to create knowledge in our universities and polytechnics and to find ways to commercialise it will over time benefit many enterprises, and in many ways. We already have several examples, including in traditional industries. Like Lee Hwa Jewellery, a company founded over 30 years ago by Mdm Tan Su Lan. Lee Hwa created something entirely new, 'purple gold' jewellery. Not many people know this, but purple gold has something to do with Singapore Polytechnic. The technology was first developed by Dr Loh Peng Chum, who was then at Singapore Polytechnic. He took it to Lee Hwa, which then spent a few million dollars to perfect the technology. Purple gold is now sold in several cities around the world, from London and Dubai, to Tokyo and Seoul. Incentivising Enterprise and Innovation We will help all our companies move up the innovation ladder. Last year's Budget enhanced our tax competitiveness for all businesses. We made Singapore one of the lowest tax locations in the world to start and grow an enterprise. In this year's Budget, we will make Singapore one of the most competitive places for companies, big and small, to do R&D. Firstly, I will increase the tax deductions allowed for R&D done in Singapore from 100% to 150%. This enhanced deduction means that for every $100,000 of local R&D spending, a company will be able to deduct $150,000 from its taxable income. I will also lift the requirement that the R&D done in Singapore must be related to a company's existing business, so as to allow it to qualify for the deduction even if it is doing research in new areas unrelated to its current activity.”
“5 billion per annum by 2010, or 3% of the GDP, with one-third of this being publicly funded research. Through the National Research Foundation (NRF), A*STAR and our academic institutions, we are developing deep capabilities in research fields which have a clear value proposition for Singapore. This year, I will top up the National Research Fund by $800 million, bringing it to a total of $1.8 billion. Top international scientists are coming here because they see Singapore as a place where high impact research can be done. But we are also attracting and nurturing young, up and coming researchers. Just two weeks ago, the NRF awarded research fellowships to 10 outstanding young researchers from eight different countries to conduct cutting edge research in Singapore. Four of them had studied in Singapore or have been teaching at our universities. One of them was Dr Yeo Yee Chia, who at age 36, has been granted some 150 patents. The NRF fellowship will allow Dr Yeo to lead research efforts on advanced transistor technology, an area that could create new advantages for Singapore’s semiconductor industry. Pushing for Commercialisation of Research Having the facilities and talent for top-class research is not enough, however. As our research entities develop our R&D capabilities, we will also do more to create value out of R&D so that we benefit our enterprises and our economy over the long term. We will facilitate incubation of early-stage ideas that are developed in our universities and research institutions, and partner with venture capital funds to help the institutions spin off companies. Polytechnics and ITEs too will be encouraged to commercialise their innovations.”
“The wider base will allow us to reduce the levy rate from 1% currently to 0.25%. This will be broadly neutral in terms of levy collections, but will reduce the overall burden on smaller companies and employers of lower-wage workers. The change will take effect from 1st October 2008. We will also help Singaporeans who take the initiative to upgrade themselves, by extending subsidies beyond vocational CET. Currently, we do not subsidise part-time degree programmes. We will now provide subsidies for part-time degree programmes at the three publicly-funded universities and UniSIM for those who have not previously benefited from a government-subsidised undergraduate education. Singapore citizens will be able to pay subsidised fees, with the Government meeting 40% of the cost of these programmes. We will also make further refinements to the existing tax relief for course fees to help individuals claim the relief more easily when they take up academic, professional or vocational courses. Details on this are at Annex B-1*. Making Innovation Pervasive We must make innovation pervasive in our economy. Singapore is already host to a good share of global companies, the HPs, Novartises and Mitsuis of the world. They are moving their activities up the value chain and increasingly investing in R&D in Singapore. We now also have a few home grown companies like Venture Corp, which has some six hundred R&D engineers worldwide, and about half of them in Singapore. Our strategy is to spread innovation across the corporate sector, enhance incentives for enterprises small and big to do R&D and push for greater commercialisation of research generated in our institutions of higher learning. Investing in World Class R&D Capabilities We will increase our overall research spending to $7.”
“Including what was announced previously, this means that secondary school students would have up to $1,400 in their accounts by March next year to use for their post-secondary education. The additional top-up this year will cost us $300 million. Table 1 - Structure of New PSEA Top-ups Age of Child in 2008 Annual Value of Home less than or equal to $10,000 Annual Value of Home more than $10,000 7 to 12 $300 $150 13 to 20 $600 $300 Details on financial assistance schemes for post-secondary education are at Annex A*. Continuing Education and Training (CET) From kindergarten up to universities, we are investing more and enhancing financial support for students. However, a key focus going forward will now be continuous education for adults. This is going to be absolutely essential for us to retain the competitiveness of our workforce, in a world where we are competing on skills, quality and productivity, and not on costs alone. Two weeks ago, PM launched the National CET Masterplan, which sets out our strategy to invest in our people over the next 10 years. We expect to spend, on recurrent expenditure alone, $400 million per year on CET by 2010. To support this long term engagement, I will top-up the Lifelong Learning Endowment Fund (LLEF) by $800 million this year, bringing it to $3.0 billion. As the Government ramps up its spending on CET, employers will remain key players in the training of workers. Currently, they contribute a Skills Development Levy (SDL) on workers earning $2,000 and below. As we move to provide CET to workers across all levels, we should broaden the base for the SDL. Employers will now contribute the SDL on all workers they employ, up to the first $4,500 of gross remuneration.”
“Further, we will extend the bursaries to students above the 50th percentile but within the lower two-thirds of households by income, who will receive a lower amount of $800. To provide greater access to credit for students in middle-income households, the Study Loan Scheme will be extended to students up to the 80th percentile of households. Polytechnic Bursaries We will similarly increase the bursary quantums for polytechnic students. For the CDC/CCC-Polytechnic Bursary Scheme, we will increase it from $1,000 to $1,200 per annum. We will also be introducing a new MOE Bursary Scheme for polytechnic students from the bottom 50% of households, as we have done at the universities. The new bursary will be set at $800 per annum. We will also extend the MOE and CDC bursaries to students enrolled in MOE-funded diploma programmes in the arts institutions – LaSalle and Nanyang Academy of Fine Arts. Similar to the study loans for university students, the Study Loan Scheme for diploma students will be extended to students up to the 80th percentile of households. All new and existing students can take advantage of these schemes starting from this coming academic year. Last year we introduced Post-Secondary Education Accounts (PSEAs) for all students. I announced a top-up of $100 to $400 for each of 2008 and 2009. I had also said that we would top up students’ accounts from time to time when our surpluses allow. Given the good surplus that we had last year, I will now make a further top-up later this year. We will provide the majority of students, which includes those from all HDB homes, $300 for those still in primary school and $600 for those in secondary schools.”
“Our universities must be able to charge realistic and sustainable fees, so that they can recruit good faculty, improve their faculty-student ratios over time and provide a top quality education. This is the only way we can build a world-class university system for Singaporeans. The Government provides very significant subsidies for university education, at 75% of costs. Students also have easy access to loans to fund a large part of their fees. This system is fair, since university graduates can expect to earn a significant premium in the employment market and can afford to pay back their loans gradually after they start work. However, taking into account the higher costs of university education today, with the improvements in quality that we are making, we have decided to significantly enhance the bursaries given to students from the lower-income group. We will also provide more assistance to those in the middle-income brackets. This will ensure that no student needs to face an excessive burden of loans at the start of his working life. Further, through a combination of bursaries and loans, students within the bottom two-thirds of the population will not need to expend cash for either their fees or living expenses during their university years. University Bursaries First, for students in the lowest 20% of households who enter our universities, we will increase the CDC/CCC-University Bursary Scheme for students, from $1,000 to $1,600 per annum. The universities will themselves also provide further bursaries to low-income students in need. Second, for the middle-income group, the MOE Bursary Scheme for students up to the 50th percentile of households will be increased from $800 to $1,200 per annum.”
“We will grow the number of subsidised university places from 25% to 30% of each cohort by 2015, with four publicly-funded universities. Government spending on the universities will increase by one quarter, or by $500 million annually. Besides the four universities, we will have a range of other programmes that will enable students to earn degrees in specialised fields, like early childhood education and naval architecture. We will stand out, even among developed countries, in the way we provide a top quality range of publicly-subsidised university options to a sizeable proportion of Singaporeans to aspire toward and take advantage of. Our young Singaporeans are taking advantage of this and they keep surprising the world with what they are capable of. Last year, a team of first-year students from the NUS won an award given to the top 10 teams in the Mondialogo Engineering Competition - the largest competition for young engineers with ideas that can change the world, organised by Daimler-Chrysler and UNESCO. They were up against 800 teams, including many with PhD students. Their project focused on how solar processing can be used to help farmers preserve fruit so as to raise their incomes. These were first-year students from NUS - three Singaporeans and two Malaysians who had done JC education in Singapore. They made up for the fact that they were only in their first year, by doing their own research, and teamed up with two senior undergraduate students from the Mumbai University Institute of Chemical Technology - using the connections between faculty of the two universities. We will also provide enhanced assistance to needy students to make sure that financial status remains no obstacle to pursuing studies at our publicly-funded universities.”
“These large investments will position Singapore for its next phase of development as a global city, open up many new opportunities for growth, and help transform the quality of life for all Singaporeans. However, our infrastructure is only the enabler. The key to our success will be our people and our enterprises. Whether we make the most of our opportunities, whether we grow, and whether we hold our place in the top league will ultimately depend on whether our people and enterprises are top quality, in every job and business they do. Nurturing Every Skill and Talent At all levels of our education system, we are investing more and moving up in quality. We will commit more resources to achieve higher standards in the pre-school sector, which will especially benefit children from lower-income backgrounds. We will also enhance our financial assistance schemes, KiFAS and CFAC, to help more families with their children’s fees in kindergartens and childcare centres. More details of these initiatives will be announced by MOE and MCYS later. We will continue to invest in higher quality education in every school. We are paying our teachers competitively to ensure that we keep good and dedicated people, and have improved the pupil-teacher ratio in every school to enhance the learning experience for all our pupils. Indoor sports halls will be coming to all our schools. We are also putting more resources into overseas immersion for a broad base of students and new boarding school programmes that will enhance opportunities for bonding and a rigorous all-round education. Tertiary Education Our university sector is entering a new phase. NUS, NTU and SMU are stepping up to a new level of excellence that will put them decisively ahead.”
“Kyoto has one of the highest concentrations of high-tech start-ups in Japan. It also hosts top-notch academic institutions like Kyoto University, which has produced five of Japan's nine Nobel prizes in science; and an assortment of incubator facilities. And all this happening in a city endowed with centuries-old traditions, beautiful temples and gardens. We have what it takes to compete in the top league. We already have a first-class infrastructure and one of the most attractive living environments in Asia. But we will invest in a total upgrade of our business, transport and IT infrastructure to enable new growth in the decades to come. The development of Marina Bay will eventually double the size of our financial district. Minister Raymond Lim has set out our plans to ensure that our roads are free-flowing, and to make a quantum leap in our public transport infrastructure. We will double our rail network by 2020. Our expenditure on Land Transport alone from now till 2020 will add up to $50 billion or about $4 billion a year, which is about two-and-a-half times what we have spent on all transport infrastructure - land, air and sea - over the last 20 years. We have also embarked on a transformation of our HDB heartlands that will take place over the next 20 to 30 years, beginning with the rejuvenation of our older estates and the building of new generation public housing in estates like Punggol and Dawson. Together with the ongoing upgrading programmes in all our estates, and the green corridors and waterways that we are now developing all over the island, we will provide a vibrant and distinctive living environment for our people.”
“CREATING A TOP QUALITY ECONOMY We are competing in a league of both established leaders and newly-emerging cities with an edge in knowledge-based industries. They are not standing still, even in the developed world. Munich in Germany, previously dependent on the automobile industry, is now a high-tech, knowledge-based city. Today, Munich is home to not only leading biotechnology research centres like the Max Planck Institute of Biochemistry and corporate giants such as BMW and Siemens, but also vibrant SMEs with world-beating technologies. Last year, Munich was also cited in the International Herald Tribune as the most liveable city in the world. In the US, the city of Austin in Texas is fast establishing itself as a centre of innovation for clean technology. It was recently named by Moody’s as the best place for business in the US. Austin has the third-highest number of patents among US cities in 2005, and over 44% of the population hold a college degree. Asian cities, including even lower-cost cities, are joining in the high-value game. Hyderabad, now dubbed the second Silicon Valley in India after Bangalore, has invested heavily in education, research and digital infrastructure. It is home to Satyam, a leading IT company, and has attracted large global investors such as Microsoft, IBM and Novartis. In China, besides Beijing and Shanghai, second- and third-tier cities like Hangzhou, Qingdao and Yantai are emerging as centres for highly competitive clusters of innovative enterprises. Kyoto in Japan has also emerged over the last decade as a major hub for innovation, home not only to leading global companies that started out there like Murata, Kyocera and Nintendo but also a large number of small, dynamic firms often with world-leading technologies.”
“We have the resources and the capacity not just to deal with our immediate problems, but to look ahead and position ourselves to deliver more years of good growth and quality jobs for our people. TOP QUALITY ECONOMY, RESILIENT COMMUNITY This Budget is about how we are looking ahead to create new advantages and fresh opportunities for Singapore in a competitive world. The way we will do it is to be a top quality economy. This means top quality people and top quality enterprises. The Budget is also about keeping all our people together as we grow and ensuring that no one is left behind. Budget 2008 Key Thrusts The Budget this year is centred on four key thrusts: (a) We will provide a full range of education and training opportunities for people to find and stretch their potential, in school and in their post-secondary education, as well as throughout their working years. We will enhance assistance for needy students to ensure that a top-rate tertiary education is affordable to all. (b) We will spur the growth of innovative enterprises. We will significantly enhance the incentives for enterprises big and small to create new ideas and products. (c) We will also adjust our tax policies so that we stay competitive, support the growth of our SMEs, encourage risk-taking as well as strengthen our role as a financial and business hub. (d) We will continue to build a resilient community. We will strengthen financial security for retirement and help the less well-off members in our society. We will also share surpluses with Singaporeans, with particular focus on the lower and middle-income groups who are more affected by rising prices.”
“Even four-room and five-room households will receive significant benefits this year as a result of what was announced last year, which will offset at least a good part of the increase in costs of living they experience this year. Later in the speech, I will lay out additional benefits to Singaporeans that this year's Budget will provide as part of our sharing of last year's Budget surplus. The fifth plank of the Government’s strategy is the most fundamental to how we cope with rising global inflation. Our strategy is to keep our economy competitive and build up our capabilities so that we can enjoy good economic growth. This is the best offset to global inflation, which will be with us not just for a few months but possibly a few years - to educate and train up our people, attract new investments, create jobs, and sustain good growth of incomes for our whole population. This is indeed why most Singaporeans experienced good growth in real incomes last year, even as inflation went up. Even lower-income households - if we look at the non-retiree households, ie, those that do not solely comprise retirees - those in the bottom 20%, they saw significant real growth of 5% in their total incomes (7.1% in nominal terms). The main reason was that more members of these households obtained jobs. If global inflation stays high, all countries will be affected by it and we will not be able to totally insulate ourselves. But there is no reason why we cannot keep growing, and keep outperforming. And because our economy has done well and we have healthy surpluses, we now stand from a position of strength.”
“For those who are truly unable to work, for example because of disability, we have the Public Assistance (PA) Scheme. We will continue to complement these institutionalised schemes, by providing discretionary assistance to those in need. This is why we have boosted the ComCare Fund, which now stands at $600 million, and Medifund which has reached $1.4 billion. Further, where we make good surpluses on the budget, we have redistributed benefits back to Singaporeans, with more going towards the elderly and the needy. For example, the GST Offset Package last year provides benefits spread out over four years. For a lower-income household, what they will receive this year alone from the GST Offset Package, together with the WIS, will be substantial. HDB two-room households will this year receive, on average, continuing benefits from the GST Offset Package and the WIS that will in fact be equal to 12% of their annual incomes. Even if we exclude the benefits that they cannot use to meet their immediate expenses – in other words exclude the Post-Secondary Education Account top-ups for their children who are still in school, and the CPF component of WIS - the benefits add up to an average of 8% of their incomes. 8% exceeds any increase in their overall cost of living that might be expected this year[3], and this is before counting any additional benefits that this year's Budget will provide them, and any growth in wages that they may get in 2008. [3] No significant difference is expected in the rate of increase of the cost of living for lower-income households compared to middle- and higher-income households in 2008. Although the lower-income group will be more affected by rising food prices, they will be less affected by the higher cost of fuel.”
“Even lower-income Singaporeans therefore have substantial equity in their homes which rises over time and is generally protected against inflation. We have become used to this in Singapore. But it in fact insulates Singaporeans, especially our retirees, from increases in rental costs which are a significant long-term concern in other countries. In the US for example, about a fifth of older Americans rent their homes. The rental costs make up close to one-third of their expenditures each month. Fourth, the Government provides assistance directly to Singaporeans who face problems coping with the cost of living. This approach of helping those in need directly is better, and more sustainable than taking reflex actions such as imposing price controls on essential goods. Everything we see in the countries that have tried price controls, even today, tells us that these are not real solutions, and will only lead to hoarding, black markets, and even more problems for ordinary people over time. Our fundamental approach to helping Singaporeans in need is to help them to get a good income for themselves. The best way to do so has been and remains to help needy Singaporeans get a job, and to encourage them to stay at it, upgrade themselves, and support their family members. Last year we introduced the Workfare Income Supplement (WIS) scheme, to add to the income and savings of Singaporeans at the lower end of the wage ladder. It is a significant incentive to work. For a worker above 45 and earning a wage of $1,000 or below, the scheme will supplement his wages by 10% to 20% each year. 287,000 workers have received their first payouts in January this year, receiving a total of $150 million from the Government.”
“Had the MAS not allowed the Singapore dollar to appreciate over the last two years, our CPI inflation in the last quarter would have averaged 6.5%, instead of the 4.1% that was actually recorded (MAS estimates). However, there is a limit to how fast the Singapore dollar can appreciate without hurting our economic performance and growth, and eventually causing wages to fall. An overly strong Singapore dollar can bring inflation down, but at the cost of lower growth and higher unemployment. This is why, while we can mitigate imported inflation through MAS’s exchange rate policy, we cannot insulate ourselves completely from the effects of global inflation passing through to the Singapore economy. Second, we are stepping up diversification of food sources so as to minimise spikes in the prices of foods we import which would otherwise happen when there is a disruption in supply from any one country. The Agri-Food and Veterinary Authority of Singapore (AVA) is facilitating private importers buying from new sources overseas, where the foodstuffs meet our standards. For food products that are already imported from well-diversified sources, the Government will continue to work with retailers to increase public awareness of cheaper food choices and substitutes. These policies of mitigating imported inflation, through exchange rate policy and source diversification, have helped to lower food inflation in Singapore. The third way in which Government policies help Singaporeans cope with inflation has been our support of home ownership as a key pillar of society, and especially the heavy subsidies that we provide for lower-income Singaporeans to own a home.”
“We must start by recognising that the key problem we face going forward is that of imported inflation caused by high global prices, especially of food and oil. Some of our inflation does reflect domestic factors. I have just mentioned the GST increase, which has been compensated for, and the Annual Values of homes, which have no material impact on Singaporeans. The rapid growth of our economy has also pushed up wages and rental costs. However, our CPI inflation is not due to domestic inflationary expectations, causing wages to go up to compensate not only for inflation experienced, but even for future inflation expected, resulting in higher costs for businesses, higher prices for consumers, and an upward spiral of wages and prices. We must not let domestic inflationary expectations set in, because it will entrench inflation in Singapore even after external inflationary pressures have subsided. Our strategies will ensure that Singapore continues to have lower inflation than the rest of the world over the medium term. We have achieved that for many years now, and will keep it that way in future. The Government is also helping lower-income Singaporeans and those in need directly with the immediate problems they face. Our strategies to help Singaporeans cope with inflation essentially comprise five planks. First, we seek to moderate imported inflation through our Singapore dollar exchange rate policy. This has been MAS’s consistent policy objective. For several years, MAS’s policy has been a modest and gradual appreciation of the Singapore dollar. In October last year, MAS increased slightly the slope of the currency band, meaning that it allowed a slightly faster appreciation of the Singapore dollar. Our exchange rate policy has helped to keep inflation down.”
“The relatively high ‘headline’ Consumer Price Index (CPI) numbers that we are now seeing, like in December, are partly due to the GST increase in July last year. The CPI inflation figure continues to show the impact of the GST change, because it is comparing prices this month with prices twelve months ago, ie, before the GST increase in July 2007. But if we compare prices today with prices, say, in September last year, there has been little further increase due to the GST change. The GST change has caused only a one-off increase in prices, and not continuing price inflation. Singaporeans have also not been materially affected by the GST increase, because the Government has provided the majority of citizens with substantial offsets, which more than make up for the increased spending on GST by most families. Lower-income families are in fact receiving offsets which are several times larger than their higher GST payments. There is also a technical reason, due to the rising values of homes, that is leading to high headline CPI numbers. The increase in the assessed Annual Values of homes will contribute significantly to inflation this year [more than 1.0% of the expected 4.5% to 5.5% inflation]. However, here too, most Singaporeans are not materially affected, as 95% of citizens own their own homes and do not pay rentals. Nevertheless, even if we exclude this technical factor due to home values, and the one-off effect of the GST increase, inflation today is higher than what we have been used to in Singapore for many years. Our Strategies The rising cost of living that Singaporeans face is a major concern for the Government. Prices of certain essential items like cooking oil, bread, milk and other dairy products have gone up significantly over the past year.”
“Raw food prices at the end of January 2008 had risen by 55% globally, compared to a year ago. Commodity prices in general have risen by 31%.[2] All these increases in raw material prices have cascaded down into higher transport costs, more expensive manufactured goods, and costlier consumer foods. [2] The Economist commodity-price index, February 5th, 2008. The basic factors which have led to these price increases are not expected to go away soon. The demand for food especially has continued to rise globally, especially with the rapid growth of the middle classes in China and India. This is part and parcel of expanding global prosperity, but it is happening at a time when food supply is constrained because of bad weather, and more agricultural land is converted from producing food crops to producing bio-fuels. We therefore have to brace ourselves for a period of relatively higher inflation globally, which will affect the prices of the goods we import. We cannot say how long it will last, but we have to expect that it will remain high, in the first half of this year especially. For example, China’s worst winter in 50 years will likely add pressure to prices of certain foods in the next six months. Inflation in Singapore Singapore has already been affected by this recent rise in global inflation. Inflation was about 2% for 2007 as a whole, but it was much higher towards the end of the year than it was at the start. Consumer price inflation reached 4.4% for December 2007. Overall, we currently expect inflation at 4.5% to 5.5% in 2008, but with inflation being higher in the first half of the year than the second.”
“China and India are expected to slow down, but still grow at 10% and 8% respectively on the back of strong domestic demand. Overall, on all current indications of global conditions, we expect growth of 4.0% to 6.0% in the Singapore economy this year. This is lower than last year, but well in line with the economy’s potential over the medium term. Our economic fundamentals remain strong. Our pipeline of manufacturing investments remains robust with EDB expecting $16 billion worth of investment commitments this year, on top of the same volume last year. Our services sector too is well-positioned for growth. While demand for services will depend on the growth of the region and the rest of Asia, we have gained significant mindshare as a global financial and business centre. However, there are major downside risks to this year’s forecast of growth. A sharper than expected decline in US growth could add to the turmoil in the financial markets, and deepen the credit crunch that is still unfolding. This will inevitably spill over to the Asian economies and markets, and our own growth will be impacted. The outcomes cannot be predicted, but we must be watchful of the risks and be ready to respond to them. DEALING WITH INFLATION Global outlook Inflation is the other major uncertainty in the global economy, and a concern for us. After a period of very low inflation over the last 10 years, it has re-emerged and is now an economic problem everywhere in the world.[1] [1] Average inflation in industrial countries was about 9% in the early 1980s, but dropped to between 2% to 3% in the early 1990s and to a low of 1.8% in the early 2000s. Oil prices have risen by 50% over the last year.”
“5%, which was also in line with market forecasts. With actual growth at 7.7%, Corporate and Personal Income Taxes came in some $1.0 billion higher than projected. GST revenues also exceeded our projection by about $1.2 billion, mostly from higher consumption. GST collection arising from the 2 percentage point hike in July is estimated at about $1.4 billion in total, which now just matches the size of the GST Offset Package and Workfare Income Supplement tranches that were distributed in FY2007. However, the largest boost to revenues came from the exceptionally buoyant property market last year. Prices of private residential units rose by over 30%, much higher than industry forecasts of around 10% to 15% at the beginning of the year. The volume of property transactions went up by over 60%. Stamp duties consequently rose to an unprecedented $3.8 billion, $2.3 billion higher than expected. Other property related revenues were around $1.1 billion above projections. These were large gains, out of the ordinary, and which we cannot expect to see very often. The overall budget surplus of $6.4 billion was therefore the result of a strong economy and property market. The surplus was also an appropriate fiscal stance to adopt, as it avoided adding further liquidity and stimulus to an already rapidly growing economy. Economic Outlook for 2008 The key factor that will shape the growth of the Singapore economy in 2008 is the global economy, especially the state of the US economy. Many private forecasters now expect the US economy to enter into a recession in the first half of the year, although it may be mild. If this happens, Asian exports will be affected. However, the IMF and other global forecasters still expect growth in Asia on the whole to remain healthy.”
“Mr Speaker, Sir, I beg to move, That Parliament approves the financial policy of the Government for the financial year 1st April 2008 to 31st March 2009. ECONOMIC PERFORMANCE AND OUTLOOK Economic performance 2007 Our economy has done well over the past year. We had real growth of 7.7% in 2007, much higher than we had expected at the start of 2007. This was exceptional growth, and more so because it came after three previous years of strong growth. The strong economy also brought unemployment down to 1.6% at the end of last year. Resident unemployment also fell sharply to 2.3%, the lowest level in a decade. We have been aided by a favourable global environment. But Singapore’s strong growth in recent years has mainly been the result of our broad-ranging efforts to restructure our economy, labour market and fiscal system. This is not a story of an old economy growing quickly, but of a new economy emerging out of the old. It is about how we are attracting new and cutting edge investments, capitalising on opportunities in new growth industries and markets abroad, upgrading our workers’ skills and competing at an advantage. Indeed this is why we have been growing much faster than other developed countries – faster than any other country with the same standard of living as us. Our policies are working well, the economy is restructuring, and we are delivering superior performance. Fiscal position in 2007 With stronger than expected economic growth in 2007, the projected Budget outturn improved significantly. We expect the Overall Budget Balance to be a surplus of $6.4 billion for Financial Year (FY) 2007, compared to the deficit of $0.7 billion that was originally projected. We started the year expecting a growth rate of 4.5% to 6.”
“Mr Speaker, Sir, I beg to move, "That Parliament doth agree with the Committee on the said resolutions." Question put, and agreed to. Resolutions accordingly agreed to.”
“Mr Speaker, Sir, I beg to report that the Committee of Supply have come to certain resolutions. First Resolution reported - "That the sum of $912,630,070 shall be supplied to the Government under the Heads of Expenditure for the public services shown in the First Supplementary Main Estimates of Expenditure for the financial year 1st April 2007 to 31st March 2008 contained in Paper Cmd. 1 of 2008". Second Resolution reported - "That the sum of $171,123,900 shall be supplied to the Government under the Heads of Expenditure for the public services shown in the First Supplementary Development Estimates of Expenditure for the financial year 1st April 2007 to 31st March 2008 contained in Paper Cmd. 1 of 2008".”
“Sir, I think the basic framework, as I mentioned, is appropriate - you have minimum regulatory requirements set out in the law which are mandatory to all companies and you have best practice standards which are from time to time refined in consultation with industry. But what matters, quite apart from the minimum regulations set out in law and best practice guidelines, is a culture of the corporate sector - to want to improve risk management practices, because they have the interest of shareholders in mind, to want to improve internal controls because it secures sustained good performance. That culture is something which is work-in-progress in Singapore as it is in other jurisdictions, and I am sure we can do better. 3.00 pm”
“The Monetary Authority of Singapore (MAS), the Singapore Exchange (SGX) and the Accounting and Corporate Regulatory Authority (ACRA) will continue to keep the legislation and best practice codes up-to-date through regular refinement, so that they stay relevant in a changing environment. But imposing additional or more detailed rules on companies will not prevent corporate mishaps. We also have to go beyond compliance with minimum regulatory standards. The boards and managements of companies should look for practical ways to improve their risk management and governance practices, especially because their companies operate in an increasingly complex environment. The Government will support industry efforts to improve corporate governance and explore practical initiatives to help companies improve their internal controls and practices. For instance, MAS, ACRA and SGX recently, in fact just a week ago, established an industry-led Audit Committee Guidance Committee. This Committee has been tasked with developing practical guidance to assist audit committees of listed companies to better understand their roles and responsibilities, and to enhance their effectiveness.”
“Mr Speaker, Sir, Mr Chiam has asked if the Government intends to introduce more rules governing internal controls in public listed companies. The Companies Act sets out the minimum standards required of all companies registered in Singapore. Section 199 of the Act specifically requires a public company, whether listed or unlisted, to maintain internal accounting controls which provide reasonable assurance that assets are safeguarded against loss resulting from unauthorised use or disposition, and that transactions are properly authorised and recorded as necessary to maintain accountability of assets. In addition to the Companies Act, the SGX Listing Manual requires listed companies in Singapore to comply with the Code of Corporate Governance, or disclose and explain any deviations. The Code places responsibility on the Board of a company to ensure that the Management maintains a sound system of internal controls to safeguard shareholders' investments and the company's assets. Further, the Code recommends that the audit committee - the majority of which, including the Chairman, should be independent - review the adequacy of the company's internal controls and that the Board comment on the adequacy of the internal controls in the company's annual reports. This approach allows a listed company and its Board the flexibility to take into account the specific circumstances of its business operations when designing its system of internal controls. Together, this combination of the Companies Act requirements and the best practice guidelines in the Code for listed companies set an appropriate framework for proper internal controls by companies in Singapore.”
“On Mr Siew's second question, these are revenues that come back into the Government Budget and are spent on everything else we are spending on, including the very substantial amount of monies being spent on Workfare, on increased healthcare needs and the other areas which Minister Vivian Balakrishnan has just talked about, other areas of targeted assistance for the poor. DATA SECURITY AND CLIENT CONFIDENTIALITY IN GOVERNMENT MINISTRIES 5. Ms Denise Phua Lay Peng asked the Minister for Finance in light of the recent massive data security breach in Britain, what specific steps is the Government taking to protect the confidentiality of client data in each Ministry.”
“Mr Siew Kum Hong is quite right that about 3% or so of Singaporeans living in one- to three-room flats did not sign up for their credits. Just to put it in perspective - in terms of the total number of people who did not sign up for their credits, which is about almost 80,000 Singaporeans, over half of them were Singaporeans living in private properties. Of those who were not living in private property, we also notice that the non-sign up rate is higher amongst those who are of higher incomes. But there was a certain number in the one to three-room flats who did not sign up. Have we tried hard to reach out to them? Yes, we have. From day one, all the way till December, we had repeated publicity as well as outreach efforts on the ground to reach out to these individuals. This has meant not just the publicity through the media, but posters on lift lobbies, customised flyers that went out to each and every household - customised to that household given their housing type and the profile of people whom we think are in the household - a repeat of the flyers in November last year and, finally, grassroots leaders walking the ground, going to each and every house where they were not signing up. Grassroots leaders tried to reach out to 30,000 individuals in the latter months of last year. So not just the regular mechanisms through the media, websites, etc, but customised posters and, finally, human outreach. We spared no efforts in reaching out to Singaporeans to encourage them to sign up. Some were not contactable, not living at the place where their address is officially recorded. But we tried out best.”
“Mr Speaker, Sir, the amount of additional GST revenue collected from July to December 2007 resulting from the increase in GST rate from 5% to 7% was about $990 million, of which roughly $540 million can be attributed to expenditure by local consumers. The remainder was attributable to spending by foreigners. The additional GST revenue was higher than expected, as consumer spending itself exceeded expectations. The Government paid out about $630 million to Singaporeans in GST credits over the same period, including the bonus credits that were given to senior citizens. These figures do not include the various other components of the GST offset package. Overall, besides the overall GST credits, the Government has budgeted to hand out $1.17 billion in total over FY2007 to assist Singaporeans in adjusting to the GST increase.”
“The Government's annual recurrent spending on foreign students over the last three years is estimated at about $154 million in the three publicly-funded universities and about $69 million in the five polytechnics. This is about one fifth and one tenth of the total annual recurrent grants disbursed by MOE to the universities and the polytechnics respectively, and is based on the proportion of foreign students in the total student population. This spending goes towards meeting the operating expenditures incurred by these institutions in teaching its students. These primarily comprise manpower, equipment and other operating expenditures. Foreign students have to meet at least the same admission standards to enter the tertiary institutions as local students. They pay higher fees than local students. As announced earlier, from AY2008 onwards, fees for foreign students will be increased from 1.1 times local fees to 1.5 times. In return for the subsidies they receive, FS are bound by MOE's Tuition Grant obligation, where they have to work for Singapore-based companies for three years upon graduation. Those who do not wish to meet this obligation pay full fees with no public subsidy. PARTICIPATION RATE OF PRs IN COMMUNITY EVENTS 10. Dr Muhammad Faishal Ibrahim asked the Minister for Community Development, Youth and Sports what is the trend of the participation rate of Permanent Residents in community events over the last five years.”
“Mr Siew Kum Hong asked for an update on the proposed Constitutional amendment to revise the Net Investment Income formula. The MOF staff have been studying this issue, and discussing their proposals with the President's office and the CPA. We are finalising the details, and will present a Constitutional Amendment Bill to Parliament this year after the Budget session. We aim for Parliament to debate and pass the Bill in time for the new rules to take effect for the FY2009 Budget. EDUCATING FOREIGN STUDENTS USING PUBLIC MONIES (Tertiary level) 9. Ms Sylvia Lim asked the Minister for Education for the last three years, how much public monies were spent annually on educating foreign students at the tertiary level in our public sector education institutions, with a breakdown of the key items of expenditure.”