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Budget 2019 could be generous - election or not: analysts
WITH Singapore's next general election due by April 2021, economists and political watchers see a chance that the upcoming Budget may be the final one before the polls, raising expectations of goodies such as handouts and tax rebates.
Yet, regardless of whether Budget 2019 turns out to be a pre-election one, it is expected to be expansionary, given the economic outlook and recent accumulated surpluses.
Noting this year's Bicentennial commemoration, National University of Singapore (NUS) Associate Professor Tan Ern Ser sees a "high probability" of an election this September, similar to 2015 where SG50 celebrations were followed by the National Day Rally and then the GE.
"I also think the ruling party would not want to begin a new term with a GST hike," he says, referring to the goods and services tax hike from 7 per cent to 9 per cent, due at some point between 2021 and 2025.
UOB economist Alvin Liew says an earlier election would "give a bit more runway for the preparation process" of implementing the GST hike. With expected slowing global growth and a possible recession in 2020 or 2021, it "makes some sense" to call an election before that, he adds.
With the GE coming as early as this year, Budget goodies can be expected, says Singapore Management University (SMU) Associate Professor of Law and political analyst Eugene Tan.
"Even if a GE does not take place in 2019, budget goodies in 2019 will help in getting the feel-good factor going for the PAP (People's Action Party)," adds Prof Tan, who sees this Budget as possibly the second-last or last one before the polls.
One of these goodies was announced in last year's National Day Rally, with details expected in Feb 18's Budget speech: the Merdeka Generation Package to help citizens born in the 1950s with healthcare costs. SMU's Prof Tan expects the entire cost to be funded from the Budget, similar to the Pioneer Generation Package.
In general, a pre-election budget would need to address perennial and potential hot-button issues such as the cost of living, including healthcare insurance premiums and coverage, as well as retirement financial adequacy and re-employment, says NUS' Prof Tan.
Similarly, a pre-election budget should avoid increasing income and property taxes, which would hurt the middle class, or raising GST, which would hurt both the low-income and the middle class, he adds.
Tay Hong Beng, head of tax at KPMG in Singapore, cites examples from Budget 2015, which preceded that year's GE - corporate income tax rebates, a personal income tax rebate, the SkillsFuture scheme, a Silver Support Scheme for the elderly, and enhancements to the GST Voucher scheme.
SMU's Prof Tan expects similar rebates and grants this year, as well as a possible top-up of the SkillsFuture credit, in line with the continued emphasis on lifelong learning.
Besides targeted help for the lower-income, a pre-election Budget might seek to have something for the middle-income too, says Mr Liew.
Deloitte Singapore tax partner Liew Li Mei does not expect corporate income tax cuts, but sees a personal tax rebate as possible. Similarly, Deloitte Singapore global employer services leader Sabrina Sia raises the idea of broad-based measures, such as increased earned income relief or tax relief for those who pay MediShield Life premiums for elderly parents and dependent children.
But OCBC head of treasury research and strategy Selena Ling says the chance of enhanced personal income tax relief is "uncertain", with targeted help being more feasible.
With Budget 2018 focusing on the need for medium-term fiscal sustainability, she sees "a 'hongbao' type of budget" - referring to the festive cash-filled red packet - as unlikely.
Yet, grants, rebates and even direct handouts could well be part of Budget 2019 even if the election does not happen. Noting last year's one-off SG Bonus handout, Ms Ling says it was "not inconceivable" for a similar goodie this year, since GDP growth surprised on the upside at 3.3 per cent in 2018.
Also citing the SG Bonus, Deloitte's Ms Liew notes that the government "appears to be sharing fiscal surpluses with Singaporeans, in the form of one-off payouts, rebates or GST vouchers, regardless whether it is election season or otherwise".
The current government's accumulated surpluses are one main reason experts expect Budget 2019 to be expansionary, election or not.
KPMG's Mr Tay notes that the government has accumulated surpluses of about S$15 billion from 2016 to 2018. As surpluses in one term of government cannot be carried over to the next, the government may choose to distribute the end-of-term surplus back to Singaporeans before the next election, he says.
Economic conditions and the government's broad growth strategy provide a second reason to expect an expansionary budget. Says UOB's Mr Liew: "Given the economic backdrop itself, there would be a case for a more expansionary budget."
Not only is growth expected to slow down, the economy is also in the midst of structural change, with the continued digital push. The government might thus give further help to companies, especially small and medium enterprises, he says.
As PwC Singapore tax leader Chris Woo puts it: "Pre-election or otherwise, we expect that the strategic direction of this year's budget will be little different from past years', with a focus on sustainable growth and inclusiveness." This could include help for businesses to adopt technology, and measures to promote entrepreneurship and venture capital, he says.
And even as it fits into a long-term strategy, such pro-business generosity does not hurt election chances either. SMU's Prof Tan sees fiscal expansion as important "to keep confidence and cautious optimism in the economy", adding: "Performance legitimacy, especially on the economic front, has been helpful to the PAP government's political longevity."