ASEAN KEY DESTINATIONS
Looking ahead to Budget 2018: What it could mean for you
SINGAPORE: With economic transformation likely to remain in focus for Budget 2018, support for the Singaporean worker to undertake the journey will be high up on the Government’s to-do list.
Market watchers are also expecting the Budget, which will be delivered by Finance Minister Heng Swee Keat on Feb 19, to provide some clarity on tax increases as the Government strikes a balance between the country’s growing spending needs and maintaining fiscal sustainability.
Amid a fast-changing labour market upended by rapid technological disruption, as well as an ageing and shrinking workforce, the Government has long been nudging Singaporeans to embark on a lifelong learning journey to be better prepared for future jobs.
A plethora of policies have been rolled out over the years, including SkillsFuture, training schemes such as the Professional Conversion Programmes under Workforce Singapore, and more recently, the set-up of the Global Innovation Alliance for Singaporeans to gain overseas experience.
Given how disruption and change remain key issues for the economy despite strengthening growth in 2017, the upcoming Budget will likely contain more support for the local workforce to acquire deeper skills that are in demand.
“Structural unemployment is an issue that the Government is concerned about,” said Nomura economist Brian Tan. Structural unemployment is caused by a mismatch in the skills of a worker and those required by an employer.
“You will find a lot of support for the ongoing re-skilling and up-skilling efforts aimed at helping people move from one industry to another, especially the PMETs (professionals, managers, executives and technicians) who have lost their jobs,” Mr Tan added.
Singaporeans who gave their views in the Pre-Budget 2018 Feedback Exercise organised by REACH and the Ministry of Finance also wanted more support for this.
“Many Singaporeans opined that there should be greater employer support for skill upgrading and highlighted the need to help the employers to recognise the value of training their employees,” the media release said.
Some also suggested the lowering of the minimum age for SkillsFuture Credit to allow “fresh graduates to bridge the skills gap before entering the workforce”.
Another area that Singaporeans are looking out for will be the possibility of higher taxes, which has dominated the chatter leading up to Budget 2018 since Prime Minister Lee Hsien Loong said last November that raising taxes will be inevitable amid rising spending on infrastructure and social needs.
Some economists and tax experts are expecting a hike in the Goods and Services Tax (GST), given how Singapore’s rates remain comparatively low against regional countries.
Maybank economist Chua Hak Bin, for one, is expecting the GST, which was last raised to 7 per cent from 5 per cent in 2007, to be increased to 9 per cent.
“A 2 percentage points GST increase could raise an additional S$3.2 billion, helping to cover the current operating fiscal deficit gap, estimated at some S$5.6 billion in FY2017,” he said.
Tax-free purchases made online may also be seeing numbered days as the Government looks to follow in the footsteps of regional countries to bring fast-growing e-commerce purchases under the local tax regime, experts said.
Mr Heng brought up the possibility of e-commerce tax in Budget 2017, while Senior Minister of State for Law and Finance Indranee Rajah said in a recent interview that the Government is still studying the best way to tax online shopping.
Meanwhile, other forms of taxes such as property, wealth taxes, as well as duties on tobacco and liquor or on the import of vehicles should not be discounted, according to DBS economist Irvin Seah.
But experts reckoned that any form of tax increases would be staggered.
Dr Chua expects GST to be raised by 1 percentage point to 8 per cent next year before being increased to 9 per cent in 2020. Describing a GST hike as “regressive”, an offset package should be introduced to “fully offset” the impact on lower-income households, he added.
Echoing similar sentiment, Mr Max Loh, Ernst & Young’s managing partner for Singapore and Asean, is also expecting tax changes to be implemented in “a phased approach” to allow people and businesses enough time to adjust.
Mr Loh added that GST rebates would also be handed out to low-income earners if a GST hike comes to pass as “it goes against the progressive nature of our tax system”.
According to REACH’s pre-Budget feedback exercise, many Singaporeans were in favour of an increase in spending, but felt that the Government should still spend within its means.
There were also concerns about taxation, with a number of Singaporeans urging the Government to consider other methods of generating revenue before considering a tax increase. If tax hikes are unavoidable, more assistance should be given to low- and middle-income families, the press release from REACH showed.
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