A budget focused on building Singapore's future, was how Deputy Prime Minister and Finance Minister Tharman Shanmugaratnam summed up his close to two-and-a-half-hour long speech in Parliament on Monday.
"We must reach our next frontier as an economy, with firms driven by innovation and higher incomes coming from deep skills and expertise in every job. We must ensure a society that is fair and just, where everyone has a chance to move up and do well regardless of where they start. And we must complement a culture of personal effort and responsibility with stronger collective responsibility, especially for our elderly," he said.
Here are the key initiatives Mr Tharman announced, under four major areas of change:
1. Continued economic restructuring, and promoting the innovation and internationalisation of businesses
a) Slower pace of foreign worker tightening: This year's round of announced levy hikes for S-pass and work permit holders in every sector will be deferred. Further adjustments will be made to levies on foreign workers hired by the manufacturing and construction sectors.
b) Helping businesses adjust to rising costs
- Transition Support Package (Wage Credit Scheme, corporate income tax rebate and PIC Bonus) will be phased out gradually to give businesses time to adjust to rising costs.
- Temporary Employment Credit, which offsets employers' CPF contributions, will be enhanced and extended.
c) More support for innovation and R&D
- Simplified application process for the Capability Development Grant below S$30,000 and extend enhanced support of 70 per cent to all projects, for three years.
- National Research Fund to be topped-up by S$1 billion
d) Help promising startups and companies get funding
- More resources for Business Angels Scheme and higher co-investment cap for this and the Startup Enterprise Development Scheme
- Government will share risk with financial institutions for loans to high-growth companies with minimal collateral, under a pilot Venture Debt Risk-Sharing Programme.
- Higher support of 70 per cent for SMEs for all activities under IE Singapore's grant schemes for 3 years
- Extend double tax deduction for internationalisation scheme, to cover salaries for Singaporeans starting new overseas entities
- International growth scheme: 10 per cent concessionary tax rate for income from internationalisation activities.
2. Investing in "skills of the future" and empowering every individual to learn and develop throughout life. "We must become a meritocracy of skills, not a hierarchy of grades earned early in life", said Mr Tharman.
a) SkillsFuture Credit account for Singaporeans to tap on for work-skills related courses. This will have an initial credit of S$500, for all Singaporeans those aged 25 and above, with regular top-ups expected in future.
b) SkillsFuture Earn and Learn Programme to match polytechnic and ITE graduates with employers for on-the-job training and mentorship, and provide funding support for both trainees and employers.
c) For mid-career Singaporeans, higher education and training subsidies of at least 90 per cent for MOE and WDA courses, for those aged 40 and above.
d) Deepening skills and encouraging mastery with SkillsFuture Study Awards, SkillsFuture Fellowships and the SkillsFuture Leadership Development Initiative.
e) Stronger industry collaboration that will involve training institutions, unions, trade associations and employers. Government will develop sectoral manpower plans with the industry and form a pool of SkillsFuture Mentors to boost SMEs training capabilities.
3. Strengthen retirement assurance, and support for middle-income families
a) Enhanced CPF savings
- CPF salary ceiling raised to S$6,000 from 2016
- Supplementary Retirement Scheme contribution cap raised
- Additional 1 per cent interest on first S$30,000 of CPF balances, on top of existing 1 per cent extra interest on first S$60,000 of balances
b) Higher special employment credit for workers aged 65 and above, to support re-employment beyond 65.
- Income supplement for bottom 20-30 per cent of Singaporeans, depending on lifetime wages, household support and flat type
- Cash supplement of S$300-S$750 every three months
- Will be implemented around Q1 2016, support will be offered through the GST Voucher - Seniors' Bonus in the meantime
d) More help for households
- One-off rebate for service and conservancy charges
- GST Voucher: S$50 increase across the board
- Child Development Accounts, Edusave Accounts and Post-Secondary Education Accounts for young Singaporeans will get top-ups
- National exam fees for full-time Singaporean students in government-funded schools will be fully waived
- More support will be extended to needy students
- New partner operator scheme to improve teacher quality and reduce fees at participating childcare centres
4. Investing in economic and social infrastructure for the future, to create new competitive strengths, a liveable city and quality healthcare.
- Development of Changi Airport Terminal 5
- Public transport system improvements
- Increase acute and community hospital beds and nursing homes capacity
There were also additional tax changes:
a) Personal Income Tax
- Top marginal tax rate will be raised from 20 per cent to 22 per cent for chargeable income above S$320,000. Marginal tax rates for chargeable incomes above S$160,000 to S$320,000 by 1-2 per cent.
- One-off personal income tax rebate for YA2015 of 50 per cent, capped at S$1,000.
b) Vehicle-related Taxes
- Petrol duty rates will rise by S$0.15/S$0.20 per litre from Feb 23, 2015 onwards
- One-year road tax rebate, to offset higher petrol duties
- Carbon emissions-based vehicle scheme will be extended for two years to encourage shift to greener vehicles
To fund the various investments, Mr Tharman stressed that it would be necessary to take steps now to strengthen future revenues, to bolster Singapore's fiscal resources.
On top of the increase in top marginal personal income tax rates, the government will also be including the expected returns of Temasek Holdings into the government's net investment framework (which is already applied to GIC and the Monetary Authority of Singapore) with effect from 2016.