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Singapore Budget 2018: One for the long haul: Ensuring a sustainable fiscal future
AS budgets go, the 2018 fiscal statement delivered yesterday by Finance Minister Heng Swee Keat is quintessentially Singaporean in more ways than one.
Going by the scope of the measures he announced, and the broad-sweep socio-economic and business backdrop outlined, the statement came across more like a "State of the Union" address than a government's annual financial report card.
And, even for Budget watchers well primed for the "long-term" nature and focus of Singapore budgets, this seemed to be one for the super-long haul, crafted not with a 12-month fiscal cycle in view, but with sights set as far as 2030.
To be sure, businesses looking for short-term salve from the Budget, as they are wont to every year, might have wanted more than an extended wage credit scheme or an enhanced corporate income tax rebate.
Those that have been clamouring for the foreign manpower curbs to be relaxed, in particular, would probably be disappointed, though there's now a new pilot "capability transfer programme" to look forward to, one that will support the transfer of skills from foreign specialists to local trainers and trainees to meet skills shortages in certain fields.
But, as in budgets past, the 2018 fiscal plan goes well beyond immediate short-term challenges. As Mr Heng put it, the Budget "must be a strategic and integrated plan to position Singapore for the future", and he outlined in his two-hour speech the "early preparations" that would gear the country and economy up to both meet the challenges and "capture" the opportunities arising from three major shifts in the decade ahead: an increasingly Asia-centric global order; rise of new technologies; and an ageing society.
The preparatory moves required aren't just fiscal but cut across economy and society, with the latest Budget seeking to further strengthen and enable Singapore firms to be innovative, to build deep capabilities, including digital skills, and to find business partners here and abroad - imperatives that have been the key planks of Singapore's economic and industry transformation plans for some years.
But it's in the fiscal plans that Singapore's long-term vision is particularly noteworthy, and where, possibly unheard of in budgets anywhere else, talk of 2030 surfaces in an ostensibly 2018 revenue-and-expenditure plan. To start with, the economic circumstances are fairly fortuitous, and riding on a global upturn in the past year, Singapore's FY2017 budget is looking at a S$9.6 billion surplus - a remarkable S$7.7 billion higher than earlier projected. Probably anxious to temper expectations, the Finance Minister emphasised that it's "not a structural surplus", and not something likely to occur every year.
But he let on that Singapore is on a sound fiscal footing, not just this year but through the decade to 2020, thanks to prudent planning and changes to strengthen the revenue flows.
Given the projected increases in spending however - in healthcare, infrastructure, security - Mr Heng warned that Singapore will not have enough revenues to meet its growing needs in the next decade, betweenfrom 2021-2030, if it does not act decisively early.
Hence, in a widely anticipated move, notice was served that the Goods and Services Tax will be raised by two percentage points to 9 per cent sometime between 2021 and 2025, probably earlier than later, he indicated.
The GST hike will be necessary to help plug the revenue gap that will exist even with "prudent spending" on the government's part, as well as exploratory moves to "save and borrow" for infrastructure building. As they are developed and carried out, Singapore's plans to finance its infrastructure needs could make interesting fiscal policy case studies.
And, in outlining plans to spur companies to reduce emissions, with a S$5 per tonne carbon tax from 2019 to 2023, the Finance Minister spoke of plans to raise the rate to between S$10 and S$15 per tonne by 2030. Some might find such pronouncements, of fiscal moves 12 years hence, audacious, but clearly this is a government that speaks from and acts on its convictions.
Indeed Singapore may not be able to predict where or when the next crisis will hit. But it wants, as always, to be prepared. This budget, perhaps even more so than in budgets past, is about ensuring that Singapore remains sustainable, be it on the fiscal or even environmental front.
- Budget 2018: S$700m bonus; and some delayed pain for long-term gain
- Building a sustainable foundation
- GST up 2 points to 9% - but only from 2021-2025
- Impact of buyer's stamp duty hike to be felt most for big-ticket purchases
- 'Netflix tax' from 2020 for a new revenue stream
- Singapore's carbon tax to start at S$5 a tonne
- Reit ETFs to enjoy tax transparency
- Startups unfazed by lower tax exemptions
- Measures to bolster R&D and IP tax regime are heartening
- Innovation, R&D to get shot in the arm
- OIC will accelerate innovation and digital transformation
- Tackling challenges of next decade
- Businesses to get S$1.8b boost over next 3 years
- Working together for the collective good
- New Infrastructure Office for projects in Asia
- Calibrated approach to future-proof Singapore's plan for sustainable future
- Govt could provide guarantees on borrowings
- Big surplus, lower spending, one-off bonus for Singaporeans
- Ministries to spend S$80 billion
- Massive surplus in FY17, slight deficit for FY18
- S$550m increase in spending on health and social services
- Bigger handouts under enhanced Proximity Housing Grant
- S$190m yearly to boost philanthropy
- Maid levy to go up from April 2019