By Kerrie Chang and Toh Shu Hui*
Today-Feb 19
In the days leading to Budget 2018, the message from the Singapore Government was clear – it was not a matter of if but when taxes will go up to support increased social and security spending. With much debate on how the Government can raise revenue through Goods and Services Tax rate hikes and new avenues like an e-commerce tax regime, Singaporeans have been mentally prepared for impending tax increases in this year’s Budget.
But the announcement of immediate tax hikes did not happen and businesses and individuals can breathe a sigh of relief.
The delay of the 2 per cent increase in GST rate till after 2021 is in line with past Government announcements that a GST rate hike will not be implemented before 2020.
Overall, Budget 2018 is laudable for its objective of placing Singapore in a competitive and pro-growth position in addition to fostering a caring and cohesive society. To achieve these, the Budget has outlined grants and initiatives for education, an aging population and volunteerism.
A cornerstone of Singapore’s future lies in its people.
To ensure that all Singaporeans continue to have access to quality education, the government will increase its annual Edusave contributions – from S$200 to S$230 for each primary school student and from S$240 to S$290 for each secondary school student starting Jan 2019 – and update income eligibility criteria for various bursary schemes.
Ultimately this upfront investment will be recovered with the entry of a well-educated cohort into the workforce.
A key emphasis of Budget 2018 is the need to plan for the future and be fiscally responsible.
To ensure this mentality is passed on to future generations, the Government has pledged to pilot a new financial education curriculum for tertiary students, and enhance existing programs designed to help individuals make better informed financial decisions such as purchasing a home and retirement.
The tools for future generations to support themselves adequately throughout their lives are now made available to them; it is now up to Singaporeans to gain and apply this knowledge effectively.
In the same vein, the working population is not forgotten in the Budget, which contains measures to ensure that training Singaporeans in digital skills and building deep capabilities will continue apace.
The Tech Skills Accelerator (TeSA) initiative introduced in 2016 has been successful in training individuals in digital skills. TeSA will be further expanded to manufacturing and professional service sectors where digital technologies are increasingly important.
It will also support more people to learn emerging digital skills such as in data analytics, artificial intelligence, the Internet of Things and cybersecurity, said Finance Minister Heng Swee Keat, as he announced that the government will set aside an additional S$145 million for the scheme.
This will be a strong catalyst in helping Singaporeans embrace digitalization as a way of life.
Another focal point of Budget 2018 is Singapore’s ageing population.
Following the success of the Community Network for Seniors program, the consolidation of health- and social-related services for seniors under the Ministry of Health will streamline the identification of needs and delivery of services.
This should allow any action to be taken quickly and efficiently by the Agency for Integrated Care, now designated as the main implementation agency for such services for seniors.
Core to supporting an ageing population is the family nucleus.
To this end, enhancing the Proximity Housing Grant for families and singles buying a resale flat to live with or near their parents or children, and simplifying the criteria of what constitutes a flat that is “near”, will help to create greater support for the silver generation.
A community spirit undergirds our social fabric, and the Government continues to encourage this through both individual incentives and corporate incentives.
The extension of the 250 per cent tax deduction for donations to Institutions of Public Character for a further three years is welcome news and will go a long way in building a giving society. Furthermore, the extension of the Business and Institutions of a Public Character Partnership Scheme and SHARE As One schemes by another three years will spur companies to get more employees to volunteer and donate.
Giving everyone a breather in Budget 2018 is a delayed GST rate hike. That said, for most of us, it will still be a bitter pill to swallow as it will eventually add to our day-to-day spending.
To cushion the impact, the government will enhance the permanent GST Voucher scheme and implement an offset package, with Mr Heng making clear that the lower- and middle-income households will receive more support.
As Mr Heng said that the GST rate hike will be implemented in a “progressive manner” – one can only assume that the GST rate increase might be staggered – first 8 per cent, then 9 per cent.
Budget 2018 is about preparing Singapore for the future, particularly when the nation’s human resources become more constrained as the population ages. At its core, it is about fostering a caring society and galvanizing the people.
Only when we come together as one, can we keep our compass in check and move together as a dynamic and inclusive nation, ensuring that no one is left behind in this age of constant disruption.
*Kerrie Chang and Toh Shu Hui are respectively Partner, People Advisory Services – Mobility (Tax) and Director, Tax Services at Ernst & Young Solutions. These are their own views.
(First published in Today – https://www.todayonline.com/commentary/budget-2018-transforming-singapores-future-economy-human-touch)
