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Singapore Budget 2018: Economists expect bumper surplus

They point to higher corporate income tax receipts and stamp duties

With Singapore's strengthening economy having boosted government coffers, economists predict a larger-than-expected budget surplus for the financial year ending March .


WITH Singapore's strengthening economy having boosted government coffers, economists predict a larger-than-expected budget surplus for the financial year ending March .

Ahead of Finance Minister Heng Swee Keat's delivery of the Budget on Feb 19, economists have been busy crunching the numbers to estimate the government's revenue and spending over the last financial year.

UOB economist Francis Tan expects an overall surplus of S$3.1 billion for FY2017, compared to the official initial estimate of S$1.91 billion.

UOB's econometric model projects that the government may see S$2 billion more in revenue than expected, due mainly to higher corporate income tax receipts and stamp duties.

This would represent a 4.1 per cent rise in operating revenue from FY2016, compared to the official estimate of 1.1 per cent.

Specifically, Mr Tan expects corporate income tax revenue to hit S$14.8 billion, higher than the official estimate of S$13.6 billion.

If so, corporate income tax would regain its place as the largest contributor to revenue, ahead of the projected S$14.11 billion net investment returns (NIR) contribution.

In FY2016, after Temasek was added to the framework, the NIR contribution overtook corporate income tax to become the top source of government revenue for the first time.

A higher-than-anticipated volume of property transactions may have also bumped up stamp duty takings.

UOB's model estimates S$5 billion from stamp duties, far above the official estimate of S$2.7 billion.

"We reckon that the government's conservative estimate during Budget 2017 was understandable as property transactions then were low and overall property prices were still on a declining trend," said Mr Tan.

But revenue from the goods and services tax (GST) and personal income taxes may not have met expectations, he said.

UOB's model predicts GST revenue of S$11.2 billion - slightly lower than the official S$11.3 billion estimate - and personal income tax revenue of S$10.70 billion, shy of the official S$10.74 billion projection.

A GST hike is widely expected to be announced in Monday's Budget speech, though it is less clear when such a change might kick in.

For the last financial year, DBS economist Irvin Seah expects an even larger overall surplus of S$5 billion or 1.2 per cent of GDP, on the back of lower-than-projected operating expenditure.

He sees total expenditure coming in at S$73.6 billion, compared to the budgeted S$75.1 billion.

This is due partly to lower development expenditure, arising from 2017's low inflation of 0.6 per cent.

"Conversely, operating revenue in the first half of FY2017 already accounts for about 55.2 per cent of the budgeted amount," he noted.

"Coupled with the much-better-than-expected growth performance, the revised revenue number could surprise on the upside."

OCBC economist Selena Ling said: "The healthy Singapore economy has lifted many boats, including benefiting tax collections."

She expects total tax revenue receipts to exceed the budgeted amount by some 5 per cent, yielding an overall surplus of S$5.41 billion.

But while economists agree that Singapore's fiscal discipline is set to continue, expectations differ on the budget surplus for the coming 2018 financial year.

UOB's Mr Tan expects the overall surplus to narrow to S$2.1 billion in FY2018, with total expenditure increasing at a faster pace than operating revenue.

OCBC has estimated three scenarios, depending on whether the anticipated GST hike comes into effect.

These range from a surplus of S$3.1 billion without a hike, to one of S$4.6 billion with a 1 percentage point cent hike, and S$4.8 billion with a 2 percentage point cent hike.

DBS' Mr Seah expects an even larger surplus of S$6.5 billion in the new financial year, with marginal rises in revenue and spending.

For more stories on Budget 2018, click here.   


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