Key Highlights from Singapore’s 2018 Budget
Singapore’s Budget for 2018 has been presented, and Singapore’s Finance Minister Heng Swee Keat notes that there are some “goodies for everyone” in the coming 2018 financial year.
According to Mr Heng, this year’s budget is wide-ranging to competently address Singapore’s long-term challenges and encompasses a multi-year agenda for the country. Tax increases and the taxing of property, consumption and online services is expected to generate more revenue. Singapore is facing a tight fiscal situation over the longer run, and Mr Heng says it is time to act prudently as the Singaporean economy matures and its population ages, and thus all Singaporeans should plan for the substantial healthcare expenses in the future.
Singaporeans have been spending more on healthcare since the start of this decade, with expenses almost doubling to SGD$10.2 billion in 2018 alone. Over the next decade, this number is expected to rise approximately 3% of the GDP, so the healthcare of Singapore’s aging population remains a priority.
Here is what the Singapore Budget 2018 brings forth:
- Raised excise duty for tobacco by 10% in an effort to curb the consumption of tobacco products (effective immediate from the 19th of February).
- 8 billion allocated for the country’s defense sector
- 7 billion allocated for the transport sector
- 8 billion allocated to education
- 2 billion allocated for healthcare
- 1 billion allocated for special transfers
- An expected rise of SGD$20 billion expected for infrastructure
- Goods and Services Tax raised by 2%, pushing it from 7% previously to now 8% (This is expected to be implemented some time from 2021 to 2025)
- An increase in Buyer’s Stamp Duty rates for residential properties
- Digital imported services would be taxed with GST from the 1st of January 2020, covering services such as Netflix and Spotify, apps, listing fees on electronic marketplaces, software and online subscription fees from overseas suppliers even when they are not physically present in Singapore
- The permanent GST voucher scheme would be topped up by SGD$2 billion
- An increase in foreign domestic worker levy to be implemented from the 1st of April, 2019 for those employed without a levy concession
- Incentivizing innovation
- New Productivity Solutions Grant
- Initiatives to meet climate change commitments
- Enhancements to the Proximity Housing Grant
- Tax deduction for commercial use of intellectual property, an extension of Wage Credit Scheme
The increase in taxes is certainly expected to create some buzz. However, the delayed taxes will give enough room for Singaporeans to digest them and come up with plans to cope with the new increases. According to Mr Heng, the timing of the raised GST will depend on the state of the economy, how much expenditures grow and how buoyant existing taxes are, and he cautioned that the government would need to do so earlier rather than later.
Mr Heng says the decision to raise the GST tax was a difficult one, but it is the most appropriate option to help Singapore raise revenues at this stage. He also says that the government has thoroughly explored all the possible tax and non-tax alternatives to increase in GST rate, as increasing corporate tax when other countries are reducing it could be seen as sending a negative message to business owners and spur unpredictable consequences.
Now, for some good news. There is a surplus of SGD$9.6 billion from the year ending Budget 2017, and Mr Heng has announced a one-time pay out where Singaporeans over the age of 21 will get to share in the budget surplus. Depending on the individual income, the 2.7 million Singaporeans are set to receive SGD$100, SGD$200 or SGD$300 in end-2018, a move that is going to cost the government SGD$700 million.