http://www.todayonline.com/singapore/budget-2013-live-updates
"We now expect a higher surplus of S$3.9b or 1.1 per cent of GDP."
The additional surplus, said Mr Tharman was due entirely to higher revenues from stamp duties and vehicle-related taxes.
CREATING A BETTER SINGAPORE: QUALITY GROWTH, INCLUSIVE SOCIETY
When it comes to creating a better Singapore with quality growth and an inclusive society, Mr Tharman addressed the immediate challenges of housing and transport.
The DPM said the Government wants to reduce the cost of housing, relative to the income of young Singaporeans.
In the area of transport, Mr Tharman said: "We have to make many improvements in public transport. Congestion and waiting times are a daily problem for Singaporeans."
But while the Government fixes the immediate problems, it also has to press on with priorities to help Singaporeans have a better quality of life over the medium to long term, noted Mr Tharman. "We are no longer a developing economy, but we have not achieved the level of productivity and income of an advanced economy."
"We must make every effort to achieve quality growth."
He noted that the strategies for achieving quality growth and an inclusive society are inextricably tied together.
TRANSFORMING THE ECONOMY
"We need to intensify this economic restructuring and skills upgrading so as to achieve quality growth," said Mr Tharman.
To make this economic transition, Mr Tharman urged jobs to be designed to suit older Singaporeans and other potential employees who are unable to work regular, full time schedules. Flexible work practices must be more common, so workers have time for family and personal development, he said.
BUILDING A FAIR AND INCLUSIVE SOCIETY
Mr Tharman said the Government is taking steps to ensure a fair and more inclusive society. This includes sustaining social mobility and mitigating inequality.
To address the latter, the Government is making the fiscal system more progressive by tilting taxes and benefits in favour of the lower- and middle-income groups, said Mr Tharman.
The Budget will also make significant investments to nurture sports and the arts. Over the next five years, the Government will invest 30 per cent more in sports programmes, and more than double investment to develop sports facilities.
FIRST MAJOR THRUST OF BUDGET: GROWING THROUGH PRODUCTIVITY
Mr Tharman spoke of the need to go through a new phase of transformation. This includes, catching up from a decade of slow productivity growth, and with the global leaders in each sector.
On foreign workforce growth, Mr Tharman said more of the increase came from two sectors: Construction and Process industries and the Services sector. Overall, the total number of employment pass holders declined last year, in part due to the tightening of the Ministry of Manpower's eligibility criteria.
Foreign workers now comprise 33 per cent of the Republic's total workforce. "The proportion of foreign workers to the total workforce should not increase indefinitely," said Mr Tharman.
FOREIGN WORKER STRATEGIES
To continue moderating the growth of the foreign workforce, the Government will make selective further Dependency Ratio Ceiling (DRC) cuts for sectors with continued significant growth in foreign worker numbers, and where productivity levels are still well behind international productivity leaders.
The Government will also increase levies for all sectors to ensure businesses reduce dependence on foreign manpower and improve productivity. The levy will be sharper for firms that are most dependent on foreign workers.
Thirdly, the Government will encourage companies to pro-actively develop and reward talents and skills of the Singaporean workforce, outlined Mr Tharman.
The tightening of policies is aimed at reducing reliance on manpower, not merely replacing foreigners with locals, added Mr Tharman. He noted it is the only way to significantly improve productivity and avoid an indefinite increase in the ratio of foreigners in the workforce.
As part of the restructuring process, the structure of some industries will have to change, he added.
QUALITY GROWTH PROGRAMME
Mr Tharman announced a new Quality Growth Programme, aimed at helping businesses to upgrade, create better jobs and raise wages.
The four pillars of the programme are:
- tightening foreign worker policies
- a 3-year Transition Support Package that includes a new Wage Credit Scheme
- strengthening of productivity incentives and
- developing capabilities for new growth industries.
TIGHTENING FOREIGN WORKER POLICIES
To moderate demand for foreign workers, the Government will raise Foreign Worker Levies across the board in July 2014 and July 2015.
Specifically in the Construction and Process sectors, the Government will mandate the use of more manpower efficient designs and technologies in building projects, through increases in the minimum Buildability scores. The Government will also increase levies for less skilled Work Permit holders by S$150 between July 2013 and July 2015. Steeper levy increases of S$300 will be imposed on workers hired outside a company's Man-Year Entitlement.
In the services sector, the Government will reduce the DRC by 5 percentage points. The overall DRC will come down from 45 per cent to 40 per cent, and the S Pass Sub-DRC from 20 per cent to 15 per cent. Mr Tharman said the DRC reductions will particularly affect services industries such as F&B, but other sectors such as cleaning will not be significantly affected.
The Government will also tighten qualification criteria for all S Passes.
From July, the minimum S Pass qualifying monthly salary will be S$2,200, up from S$2,000. The Government will introduce a tiered salary system based on age and qualifications, such that older and more experienced S Pass applicants will need to qualify at higher salaries. This will help level the playing field for local workers, said Mr Tharman.
For Employment Passes (EPs), the MOM will continue to tighten eligibility requirements for the EP workforce, especially for Q1 pass holders.The MOM will put in place a framework to ensure firms give fair consideration to Singaporeans in their hiring practices.
3-YEAR TRANSITION SUPPORT PACKAGE
Under the 3-year Transition Support Package, there will be three components - the Wage Credit Scheme (WCS), Productivity and Innovation Credit (PIC) bonus and Corporate Income Tax (CIT) rebate.
Under the WCS, the Government will co-fund 40 per cent of wage increases for Singaporean employees over the next three years. This co-funding will apply to wage increases for Singaporean employees earning up to a gross monthly wage of S$4,000. There is no need to apply for WCS, the Wage Credits will be automatically paid out to employers annually.
To encourage as many business to tap on the PIC, the Government will introduce a PIC Bonus. Businesses that invest a minimum of S$5,000 per year of assessment in PIC qualifying expenditure will receive dollar-for-dollar matching cash bonus, up to S$15,000 over three years of assessment.
To help companies cope during the transition, the Government will also provide a special CIT rebate of 30 per cent of tax payable up to S$30,000 per year of assessment. This is expected to cost S$1.3 billion over three years.
Meanwhile, the Government also introduced two specific measures to help owners of commercial vehicles. Owners who choose to renew their COEs for five years in the first instance will be allowed to extend their COEs for another five years. There will also be a one-year 30% road tax rebate for goods vehicles, buses and taxis, which takes effect in July.
STRENGTHENING PRODUCTIVITY INCENTIVES
Under the third pillar of the Quality Growth Programme, the Government will enhance productivity incentives. The enhancements will cost the Government S$500 million over three years, and will be at three levels of the economy.
Firstly, the Government will support initiatives for industry-wide collaboration. There will then be a set of initiatives introduced to help individual firms, including a Land Productivity Grant (S$60 million).
Thirdly, to support training for Singaporeans at all levels of the workforce, the Government will enhance the Workfare Training Support scheme for low-wage Singaporeans. It will also launch an SME Talent Programme. The Government will also top up the LIfelong Learning Endowment Fund by S$500 million.
NEW GROWTH OPPORTUNITIES
Mr Tharman noted that restructuring the economy includes looking ahead for new growth opportunities.
As the global manufacturing landscape is being redefined by disruptive technologies, the Economic Development Board will set aside S$500 million over the next five years to support a Future of Manufacturing plan. This has the potential to create a range of new jobs for Singaporeans in the future, such as high-skilled robot operators, said Mr Tharman.
In the services sector, Mr Tharman said data analytics is one industry cluster the Government is developing and it aims to develop 2,500 analytics professionals over the next five years.
FURTHER TAX MEASURES
Mr Tharman highlighted several tax-related changes. This includes excluding investment holding companies or property development companies incorporated after Feb 25 from the start-up tax exemption.
The Government will also harmonise the tax rates between cigarette and non-cigarette tobacco products. The excise duties for Beedies, Ang Hoon and smokeless tobacco will be raised by 25 per cent from S$239 per kg to S$299 per kg. Excise duties for unmanufactured tobacco will be raised by 1.5 per cent, from S$346 per kg to S$352 per kg.
SECOND THRUST OF BUDGET: BUILDING A MORE INCLUSIVE SOCIETY
Mr Tharman noted two key concerns when it came to building a more inclusive society: Income inequality and the risk that it poses to social cohesion, and the need to do more for retirees.
There is a disproportionate number of middle- and high-paying jobs taken up by younger Singaporeans, while older Singaporeans make up more than 40 per cent of workers in the bottom fifth of the income ladder, he said.
PRE-SCHOOLS
The Government will more than double its spending on the pre-school sector over the next five years to over S$3 billion. To ensure quality and affordable pre-schools, the Government will bring in more operators onto the Anchor Operator (AOP) scheme, with 16,000 more places by 2017.
The Government will also increase salary grants to the AOPs so that all their pre-school teachers will be graduates or diploma holders, up from 80 per cent today.
A new autonomous agency, the Early Childhood Development Agency, will be formed to drive improvements across the pre-school sector.
SUPPORTING DISADVANTAGED STUDENTS AT SCHOOLS
At the school level, the Government will extend the learning support programme beyond the early primary school years. The programme will require about 600 additional teachers to be specially trained.
The Government will also significantly expand the number of school-based student care centres, and the Ministry of Education will develop online resources to enhance learning.
The Government will place another S$72 million into the Opportunity Fund - schools with a larger number of students from less advantaged backgrounds will receive up to S$275,000 for a secondary school and S$150,000 for a primary school. This is 40 per cent more than what schools receive today. The Fund will further be extended to polytechnics for the first time.
In addition, the Edusave Endowment Fund will receive a S$300 million top up.
ENHANCING WORKFARE INCOME SUPPLEMENT
As part of measures to make the fiscal system more progressive, the Government will enhance Workfare Income Supplement (WIS) starting from work done from January.
The coverage of WIS will be expanded to workers earning a monthly wage of up to S$1,900 a month, up from the current S$1,700 cap. This will benefit about 480,000 Singaporeans, or 30 per cent of the citizen workforce.
WIS payouts will be increased significantly, between 25 per cent to 50 per cent in maximum payouts. For workers 45 and older, the maximum payout for a low-income worker earning S$1,000 will increase by S$700. Those aged between 35 and 45, will receive a smaller increase.
The proportion of cash in the WIS payout will also be increased, and workers will receive 40 per cent of WIS in cash and 60 per cent in CPF. Previously, workers received 29 per cent of WIS in cash.
To ensure the WIS is more targeted, Mr Tharman said the WIS criteria will be tightened to ensure they are focused on the low-income. Additional criteria will be implemented to exclude those with a spouse earning more than S$70,000, and individuals or couples owning a second property.
On CPF, Mr Tharman announced that CPF employer contribution rates for low-wage workers will be restored to the same level as higher-income workers of the same age, from Jan 2014. The employee contribution rates for most of these workers will also be brought to normal levels.
MORE PROGRESSIVE TAX STRUCTURE
On the tax measures, Mr Tharman said property tax rates for high-end properties will be increased, with the largest increases being for investment properties, or those not owner-occupied.
For owner-occupied residential properties, Mr Tharman said: "I will increase property tax rates for the high-end of owner-occupied residential properties, while lowering tax rates on the majority of owner-occupied residential properties. This is fair."
Mr Tharman said he would widen the 0 per cent property tax band, which now applies to the first S$6,000 of Annual Value, to S$8,000. In addition to the current 4 per cent and 6 per cent tax bands, there will be new property tax bands of 8 per cent to 16 per cent.
The widening of the 0 per cent property tax rate band will see some 950,000 owner-occupied residential properties enjoy some tax savings.
Homes with Annual Values of S$12,000, such as 5-room HDB flats, will see tax savings of S$80, or 33 per cent of their current property tax bill. The savings will result in a reduction in the Government's property tax revenue of S$44 million.
The top 1 per cent owner-occupied properties will face increased taxes, contributing an additional S$25 million to Government revenue. A landed property in the central area, with an Annual Value of S$150,000, for instance, will see property tax rise by S$5,120 per year.
For non-owner-occupied residential properties, a new marginal property tax rate of 12 per cent to 20 per cent will apply. This will result in an increase in property taxes paid for such properties with Annual Value above S$30,000. The increase will only be significant for investment properties at the high-end, said Mr Tharman. Most suburban condominiums will see an increase of only about S$100 to S$300 per year.
The revised progressive property tax structure for residential properties will be implemented in phases from January 2014. Revised rates take full effect from January 2015.
TIERED ADDITIONAL REGISTRATION FEES FOR CARS
On the vehicle tax system, Mr Tharman said the system will be made more progressive with a tiered ARF structure for passenger cars and taxis. The ARF for car models with OMVs up to S$20,000 will remain at the current 100 per cent, but two more tiers will be introduced for more expensive cars.
Beyond S$20,000, the next S$30,000 in OMV will attract ARF rate of 140 per cent. Beyond S$50,000 the ARF rate will be 180 per cent.
The tiered ARF structure will apply from the first COE bidding exercise from March, and will contribute about S$150 million in additional revenue additionally.
REINFORCING SOCIAL SAFETY NETS
Mr Tharman said the Government wants to broaden insurance coverage, and will study how to increase the role of Medisave so it can used to meet more healthcare needs.
For those who need help with medical expenses, Medifund usage will be expanded. The Government will also increase investments in health promotion and preventive care.
The Government will also expand the current Senior's Mobiilty Fund into a Senior's Mobility and Enabling Fund, which will cover a wider range of assistive devices such as hearing aids. For low-income elderly living at home, the Government will provide up to 80 per cent subsidy to defray the cost of consumables such as milk and diapers.
Medifund will also be topped up by S$1 billion, bringing the total fund size to S$4 billion, while ElderCare Fund will be topped up by S$250 million, bringing the fund size to S$3 billion.
For those unable to work, the Government will enhance Public Assistance. The monthly cash assistance to households will be raised.
To help Government pensioners who draw lower pensions, the Government will increase the Singapore Allowance and monthly pension ceiling by S$20 per month to S$280 and S$1,210 respectively. This will benefit about 10,000 pensioners.
DIRECT ASSISTANCE FOR COST OF LIVING
To help households face cost of living pressures, the Government will provide an extra GST voucher. All eligible Singaporeans therefore will get double the usual amount. This will benefit about 1.4 million Singaporeans and cost the Government an extra S$680 million.
The Government will provide 1 to 3 months of Service & Conservancy Charges rebate, depending on flat size. This will cost the Government S$77 million.
Older Singaporeans aged 45 and above will receive a S$200 top-up to their CPF Medisave Accounts. This will benefit 1.5 million Singaporeans and cost the Government S$300 million.
Those who are 60 years and above will get a larger rebate of 50 per cent on their Personal Income Tax Rebate for Year of Assessment 2013, while those below 60 will get a rebate of 30 per cent. Rebates are capped at S$1,500.
For families with dependants, such as children, elderly and family members with disabilities, the foreign domestic worker levy will be reduced to S$120 instead of the current concessionary levy of S$170.
The GST Voucher Fund will be topped up by another S$3 billion to ensure sufficient funds for the Government to make yearly GST Voucher payouts up to FY2020.
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