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Singapore Budget 2018: Increase in GST by 2% in the period from the year 2021 to 2025

6 min read

” Government Service Tax (GST) to increase again!”

TL;DR: The Budget 2018

The NOs:

  • GST to increase from 7% to 9% (the year 2021 to 2025). Tio first price!
  • GST to be implemented on digital goods (yes! Your apps download is going to be more ex)
  • Carbon emissions tax on HOUSEHOLD. (breathing also wrong meh? Just kidding!)
  • Increase Property buyer stamp duty
  • Tobacco Tax to up by 10% (time to quit guys, time to quit)

The YES:

  • One time SG Bonus ($100 to $300 depending on your wage). Ang Bao time!
  • Donation and volunteering subsidies (good people get good karma)
  • Personal upgrading subsidies (cause knowledge is power)

Further Reading: Everything else

In the year 2017, Singapore enjoyed:

  • Healthy productivity growth.
  • Singapore economy picked up in the later part of last year.

Coming 2018, here’s what the global economy Singapore is competing in looks like:

  • The rise of ASIA! Woohoo!
  • Ageing population in Singapore
  • The increasing need to embrace technology

4 main objectives of The Budget 2018

The 4 main objectives of The Budget 2018 will be:

  • Building a strong position in technology and creating an innovative economy.
  • Build a smart, green and livable city.
  • Caring and cohesive society
  • Ways to sustain for the future

Building a strong position in technology and creating an innovative economy

Here are some initiatives to help companies stay competitive:

  • Wage Credit Scheme extended for 3 more years. This helps companies to fund 20% of wage increases in 2018, 15% in 2019, and 10% in 2020.
  • Enhance Corporate Tax (CIT) rebate in YA2018: CIT rebate raised to 40% of tax payable (max rebate of $15,000). Extend the CIT rebate to YA2019, at 20% (capped at $10,000).
  • The increment for Foreign Worker Levy for Marine Shipyard and Process sectors will be pushed back for another year. (long them stocks maybe?)

Here are some initiatives to help workers stay competitive:

  • Lower and middle-income worker to receive more support when it comes to employment. Easier for workers to acquire the necessary skills for a career switch with the use of Career Trial scheme.

Here are some initiatives to help our economy stay competitive:

  • To encourage firms to be at the edge of innovation:
    Streamline existing grants for adoption of pre-scoped, off-the-shelf technologies into one Productivity Solutions Grant
    Increased tax deductions on licensing payments for the commercial use of IP to 200% (capped at $100,000) yearly.
  • To encourage firms to innovate:
    IP registration fees from 100% to 200%
    Qualifying expenses incurred on R&D in Singapore, from 150% to 250%
  • National Research Foundation (NRF) and Temasek Holdings will launch new investment venture to help start-ups.

To embrace digital technology, automation and robotics:

  • Aviation and Maritime Transformation Programmes to be launched
  • National Robotics Programme to expand.

To help Singaporeans embrace digital technology, automation and robotics:

  • Government to expand Tech Skills Accelerator into additional sectors like manufacturing and professional services
  • Programme to help businessmen in Singapore better understand Southeast Asian markets and encourage them to chart growth plans and build network regionally.
  • Capability Transfer Programme supports skills transfers from overseas trainers to Singaporeans. Close gaps in skillsets that Singaporeans lack.
  • Expect more collaboration in the region, through ASEAN Innovation Network. Infrastructure Office to be set up to bring local and international firms together.

Build a smart, green and livable city

 

 

Starting from the year 2019, to address climate change: Singapore is vulnerable to rising sea levels. Global Warming is real people!

  • To combat climate change, a carbon tax will be implemented on firms producing 25,000 tonnes or more greenhouse gas emission. The first payment of this tax will be in by the year 2020.
  • Funds to be set aside starting from 2019. This fund will be used to help companies improve energy efficiency.
  • There will be NO addition tax for petrol and diesel (subjected to changes down the road should there be a need).

For households:

  • Impact of the carbon tax on households will be small. To help households adjust to the carbon tax, the annual U-Save rebates will be increased by $20 per household for 3 years from 2019 to 2021.
  • Increased annual Edusave contributions from Jan 2019 to $230 for each primary school student; to $290 to each secondary school student.
  • Income eligibility criteria for the Edusave Merit Bursary, and the Independent School Bursary, to benefit more students from lower-to-middle income families.
  • Enhancing MOE Financial Assistance Scheme for pre-university students from $750 to $900
  • More meals for secondary school students under School Meals Programme.

This scheme will cost $200 million per year.

To help Singaporeans better prepare for their financial needs at key stages of their lives:

  • Financial Education curriculum at our Polytechnics and Institute of Technical Education.
  • Enhance existing services to Singaporeans when they buy a flat and when they retire
  • ElderShield to be reviewed. To ensure that the enhanced scheme remains affordable, there will be premium subsidies for lower and middle-income Singaporeans.

An update will be provided later in the year.

We are one big family

  • Married couples:
    Enhanced Proximity Housing Grant (PHG) for families buying a resale flat to live with their parents or children to $30,000.
    Those buying a resale flat to live near their parents or children: receive PHG of $20,000.
  • Singles (all the single ladies, all the single ladies – Beyonce):
    Singles who buy a resale flat to live with their parents will receive an enhanced PHG of $15,000.
    Those buying resale flat to live near their parents: receive a 
    PHG of $10,000.

**Changes in the criteria of “near your parents”:
To give applicants more choices when choosing a resale flat to live near their loved ones, Govt will revise the criteria for the PHG to “within 4km”
(currently defined as living in the same town or within 2km)

About 900,000 eligible HDB households will receive 1.5 to 3.5 months of rebate on their Service and Conservancy Charges (S&CC).

Singaporeans are living longer! Hence,…

Domestic helpers levy:

  • To continue supporting families who need help caring for young children, the elderly, or family members with disabilities, the Govt will retain the concessionary Foreign Domestic Worker (FDW) levy of $60.
  • Over the last 10 years, the number of foreign domestic workers in Singapore has increased by about 40%.
    To ensure that FDW demand is commensurate with need, and to avoid over-dependence on FDWs, adjustments will be made to the FDW Levy framework, with effect from 1 April 2019.

For seniors:

  • Community Networks for Seniors pilot will be expanded nationwide by 2020.
  • Agency for Integrated Care will be the central implementation agency to coordinate services for seniors and caregivers. Pioneer Generation Office renamed Silver Generation Office, will be merged with AIC.

To give our social workers the firepower they need:

  • $300 million top-up to Community Silver Trust.
  • $100 million top-up to Senior’s mobility and Enabling Fund.

Contribute back to the community

  • 250% tax deduction for donations made to Institutions of a Public Character (IPCs) will be extended for another 3 years, until 31 Dec 2021.
  • Community Development Councils (CDCs) will receive increased support – increasing the annual matching grant cap from $24m to $40m.
  • Business and IPC Partnership Scheme will be extended for 3 more years until 31 Dec 2021. SHARE as One scheme will be extended until FY2021.
  • $1 to $1 matching will be provided on donations received by the Empowering for Life Fund (ELF) under the President’s Challenge, for the next 5 years.

Revenue for our budget (Well, ultimately, someone needs to pay the bill right?)

The calm before the storm

  • For 2011 to 2020, Singapore is on a sound fiscal footing. The government has sufficient resources to meet our planned spending needs till 2020.
  • To plan ahead, there is a need to find revenue to sustain Singapore’s future.
  • With an ageing population and chronic diseases, we can anticipate an increase in burden on the younger generation.

In the next decade from 2021, spending needs will continue growing across all sectors, with some rising faster, and more than others.

By 2030, our healthcare expenditure is expected to be higher than education by the next decade.

Three key areas of expenditure growth are healthcare, infrastructure, and security. To meet these growing expenditure needs and to prepare for any unforeseen ones, Singapore’s fiscal footing needs to be strengthened.

The first step? Our minister’s salary:

  • Further, moderate the pace of ministries’ budget growth – reducing the growth of ministries’ block budgets to 0.3 times of GDP growth.

  • Govt is looking at borrowing by Stat Boards & Govt-owned companies which build infrastructure.
  • This helps spread the cost of investment over a number of years.
  • For healthcare, security and another social spending, the increases in spending directly benefit current generations.

Increase in GST (LAI LIAO LOH!)

  • To support recurrent spending to benefit S’poreans, Govt plans to raise GST by 2%-points, from 7% to 9%, sometime in the period from 2021 to 2025.
    The exact timing of GST increase depends on the economy, expenditure growth & existing taxes.

 

GST increase will be implemented in a progressive manner:

  • Continue to absorb GST on publicly subsidised education & healthcare
  • Permanent GST Voucher scheme will be enhanced
  • Offset package to help Singaporeans adjust to the GST increase.

  • To ensure that Singapore’s tax system remains fair and resilient in a digital economy, GST on imported services will be introduced with effect from 1 Jan 2020.
  • For the import of goods, there will be international discussions on how GST can apply, before deciding on the measure to take.

It is more expensive to smoke now!

  • What’s new? Increase in tobacco tax by 10% with immediate effect.

The carrot after the stick

  • Singaporeans will enjoy a one-off SG Bonus Ang Bao of $300, $200 or $100, based on income.


Further Reading: Seedly’s Bet on the budget

Before the budget we did a little poll.

While each Singaporean has their own take on what the budget might be about, here are some of the points that the Seedly Personal Finance Community is expecting:

What will your bet be?

Heading into The Budget 2018, two important piece of data that will form the base of Singapore’s budget.

Sources of Singapore Government Revenue

Based on the breakdown of the government’s operating revenues in the Financial Year 2017, Singapore government’s spending account for 16% to 17% of our Gross Domestic Income (GDP).

Below are the main sources of our government’s revenue:

Source of government revenue
(Singapore)
Weightage
Corporate Income Tax19.6%
Government Service Tax
(GST)
16.2%
Personal Income Tax15.5%
Vehicle Quota Premiums
(COE)
9.4%
Assets Taxes6.3%
Fees and charges4.7%
Customs and Excise Taxes4.5%
Betting Taxes
(TOTO, 4D etc.)
3.9%
Stamp Duty3.9%
Motor Vehicle Taxes3.9%
Withholding Tax1.9%
Statutory Boards' Contribution0.4%
Other Taxes9.3%
Others0.4%

The top 3 sources of revenue (Corporate Income Tax, Personal Income Tax, GST) account for more than 50% of the revenue.

Where does the Singapore Government spend on?

Social Development takes up the largest share of the government’s expenditure with a percentage of more than 50%.

Singapore's Government areas of spendingWeightage
Social Development50.3%
Security and External Relations27.3%
Economic Development18.8%
Government Adminstration3.6%

We will be bringing more updates live and be updating this article. Stay tuned!

 

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