SINGAPORE: A permanent two per cent downward adjustment to the budget caps of all Ministries and Organs of State will take effect from the financial year of 2017, announced Finance Minister Heng Swee Keat in his Budget 2017 speech on Mon (Feb 20).
This is to “emphasise the need to stay prudent and effective”, he said. “For four ministries that are serving security needs or significantly expanding their services – namely Home Affairs, Defence, Health and Transport – the two per cent adjustment will be phased in over FY2017 and FY2018.”
Calling Budget 2017 an investment in economic transformation and social resilience, Mr Heng said Singapore has been able to maintain a sustainable fiscal system due to previous generations planning ahead and saving while the economy was growing rapidly.
“We now benefit from the returns on our reserves,” he said. “At the same time, our pro-growth and progressive tax system has given us a steady revenue stream. Together, these have allowed us to fund new priorities without cutting back in essential areas.”
But in coming years, expenditure needs are expected to rise rapidly, particularly in healthcare and infrastructure, said Mr Heng.
He explained that annual healthcare spending over the past five years has more than doubled to around S$10 billion in FY2016 with enhanced subsidies and expanded services, but will continue to rise as Singapore’s population ages. The projected doubling of the MRT network is also expected to cost more than S$20 billion over the next five years, along with the new Terminal 5 at Changi Airport which will cost “tens of billions of dollars”, said Mr Heng.
“With our spending needs increasing, the Government must continue to spend judiciously, emphasise value-for-money and drive innovation in delivery,” said Mr Heng. “We can do better – and more – with less.”
PRO-GROWTH, PROGRESSIVE REVENUE BASE
Noting the need to strengthen Singapore’s revenue base in a “pro-growth and progressive manner”, Mr Heng said: "Like all Finance Ministers before me, it is my duty to take the long view. Our domestic needs will grow over time, and the global environment will shift. We must study the implications and prepare our options early."
For instance, in support of the worldwide Base Erosion and Profit Shifting (BEPS) project, which seeks to ensure companies are taxed where substantive economic activities are performed, Singapore will refine its schemes and implement the relevant standards.
Singapore is also studying how to adjust its GST system, said Mr Heng, to ensure a level playing field between local businesses which are GST-registered and foreign-based ones which are not. This comes against a backdrop of increasing digital transactions and cross-border trade.
Domestically, the Government will have to raise revenues through new taxes or raise tax rates, to ensure future generations can remain on sustainable fiscal footing, said Mr Heng.
But there will be tax measures to help businesses – for instance, some existing tax incentive schemes will be extended and strengthened to enhance competitiveness in financial and global trading sectors, he added.