Singapore Budget 2017
A budget for today - and tomorrow
• Water prices to go up 30% • Carbon tax from 2019 • Income tax rebate • Fund to help firms go global
By Yasmine Yahya, Assistant Business Editor, The Straits Times, 21 Feb 2017
Against a backdrop of rapid technological change and global uncertainty, Finance Minister Heng Swee Keat delivered a Budget yesterday that addresses Singaporeans' immediate concerns while laying the groundwork for future growth.
The speech kicked off with MPs thumping their seats in a show of support for Mr Heng, who had made a remarkable recovery to speak in Parliament for the first time since suffering a stroke last May.
The Budget offered several talking points of its own. These included an increase in water prices to fund the higher costs of desalination and Newater production, the first rise in 17 years; this was offset, for some, by a permanent increase in the GST Voucher - Utilities-Save (U-Save) rebate for eligible HDB households, ranging from $40 to $120, depending on flat type.
Young home buyers received cheer in the form of generous hikes of up to $20,000 in the CPF Housing Grant for resale flats from a Budget in which expenditure is expected to touch $75.1 billion.
But underpinning it all is a message Singaporeans should find familiar - the Republic has to adapt and thrive as the world undergoes deep shifts that will create new challenges, but also open up new opportunities. It continues the theme of the report by the Committee on the Future Economy (CFE), co-chaired by Mr Heng, released earlier this month.
"It is critical that we take decisive action to re-position ourselves for the future," Mr Heng told MPs in a packed House, noting that the Budget would take a "learning and adaptive approach", trying new methods, keeping those that worked and learning from experience. "That is the Singapore way."
Mr Heng noted that while the economy grew 2 per cent last year - from 1.9 per cent in 2015 - there was an "uneven performance" across sectors. Similarly, overall unemployment remained low at 2.1 per cent, but redundancies rose.
The Budget measures, he said, aim to see Singapore through this period of transition. "We can aim for quality growth of 2 per cent to 3 per cent, if we press on in our drive for higher productivity and work hard to help everyone who wishes to work, find a place in the labour force," he said.
Workers will be offered programmes to help them retrain and find new jobs. Businesses struggling with tough times will receive immediate relief. The construction sector, for example, will benefit from $700 million worth of infrastructure projects brought forward.
Companies will get help to embrace digital technology and innovate. A new $600 million International Partnership Fund will see the Government co-investing with Singapore-based firms in opportunities to expand overseas.
In all, the Government is setting aside $2.4 billion over the next four years to implement the strategies set out in the CFE. This is on top of the $4.5 billion earmarked last year for programmes to transform industries here, he said.
There will also be a personal income tax rebate of 20 per cent of tax payable, capped at $500, for income earned in 2016.
The Government will spend an additional $160 million in the next five years on community mental health efforts. Medifund will get a $500 million top-up.
There were also measures to make Singapore more environmentally sustainable - a new carbon tax to be introduced in 2019 will levy between $10 and $20 per tonne of greenhouse gas emissions by heavy emitters - and measures to encourage a move to greener vehicles.
It was, in short, an expansionary Budget, with ministries' expenditures expected to be $3.7 billion, or 5.2 per cent, higher than last year. However, it included a permanent 2 per cent downward adjustment to ministry budget caps from this year on.
Responding last night, the Singapore Business Federation said it was disappointed with the "inadequate short-term support" to lower business costs. But it welcomed steps to boost innovation and help firms go international.
Others were more upbeat. "It creates opportunities for Singaporeans to chase their dreams and excel internationally, while also providing protection in the current uncertain climate," said Mr Low Hwee Chua, regional managing partner for tax, Deloitte Singapore and South-east Asia.
Parliament will debate the Budget and government spending plans over two weeks from next Tuesday.
Water prices in Singapore will increase by up to 30 per cent in two phases, on July 1 this year and July 1 next year
Price hike to secure future supply
First price hike in 17 years, to be implemented in two phases over two years, to reflect true costs of supply; higher rebates to soften impact
By Lin Yangchen, The Straits Times, 21 Feb 2017
Water prices in Singapore will increase by up to 30 per cent in two phases, on July 1 this year and July 1 next year, in the country's first price hike for water in 17 years.
The hikes will apply to potable water for both domestic and non-domestic users and shipping customers, as well as Newater and industrial water.
In addition, a 10 per cent water conservation tax will be imposed on Newater from July 1, to encourage conservation of Newater among industrial users.
And instead of having two separate fees - one based on volume of used water discharged and one based on the number of sanitary fittings - there will now be one fee based on the volume of water used.
The sanitary appliance fee for potable water supplies will be combined with the waterborne fee based on the volume of used water discharged.
Finance Minister Heng Swee Keat, in announcing the hike yesterday, said: "Water sufficiency is a matter of national survival.
"We need to update our water prices to reflect the latest costs of water supply."
He spoke of the importance of investing in costlier methods of water production like desalination and Newater plants to supplement reservoir sources that depend heavily on the weather, to ensure the availability of water supply in the light of increasing demand.
But he also noted that the cost of infrastructure had increased, for instance, because of the need to lay deeper pipes through an increasingly urbanised environment.
The water price increase is one of the various measures the Government is taking to protect the environment and keep the country in good shape for future generations, he added. "It is the right thing to do, even though some of these measures will lead to increases in household costs," he said, adding that the Government will help families, especially low-income households.
To soften the impact of the increase, families in one- and two-room HDB flats will receive $380 in the Government's Utilities-Save rebate annually compared to $260 currently, while families in three- and four-room flats will receive $340 and $300, up from $240 and $220 respectively.
After the rebates, 75 per cent of all households will see their monthly water bills go up by less than $18, while the same proportion of HDB households will see their bills increase by less than $12, he said.
Those in one-room and two-room flats will see a fall of $1, on average, from $26 to $25.
The average bill for a four-room HDB household now is $42, and with the additional U-Save rebates, it will go up to $47 after the hike - assuming water use stays the same.
Professor Asit Biswas of the National University of Singapore's Lee Kuan Yew School of Public Policy said that given the water security challenges Singapore faces, the price should have been increased by 50 per cent for domestic users and doubled for industrial users.
"Even after this price increase, their water bills will constitute only about 0.5 per cent of the average household income," he said.
Singapore's average monthly household income last year was more than $10,000, according to the Department of Statistics Singapore.
Civil servant Ong Chun Yeow, 40, practises water-saving habits at home and sees the price hike as a move which recognises the preciousness of water.
Singaporeans will save water if they feel the pinch, he said.
At home, Mr Ong waters his plants using water that has been left over from washing vegetables. He has also improvised a filter from pebbles, sand and cloth to clear up dirty water for flushing the toilet.
Ms Olivia Choong, co-founder and president of environment group Green Drinks Singapore, said the price increase was bigger than what she expected. But she understood the reasons for it.
The resident of a landed property in Sennett Estate already uses low-flow shower heads and places bottles of water in the toilet cistern to reduce its flushing capacity.
"It is really a luxury to have clean water," said Ms Choong, adding that it was an opportunity to get that message across .
But senior promotions executive Khor Si Hui, 25, who lives in a four-room flat with her mother and elder sister, was surprised by the 30 per cent increase. Their monthly water bill is about $30.
"It would have been less of a shock if it was a 10 per cent jump. And it would have been better if the increase was spread over a longer timeframe than two years," she said. "Still, we can't not pay, so I will try to take shorter showers."
Additional reporting by Audrey Tan and Rachel Au-Yong
Carbon tax on greenhouse gas emissions from 2019
By Chong Zi Liang, The Straits Times, 21 Feb 2017
Singapore plans to introduce a carbon tax on the emission of greenhouse gases from 2019, in a move to maintain a high-quality living environment and do its part in fighting climate change.
The Government is looking at a tax rate of between $10 and $20 per tonne of greenhouse gas emissions, a range that is within that adopted by other countries.
"The impact of the carbon tax on most businesses and households should be modest," Finance Minister Heng Swee Keat said when making the announcement.
The reason: The tax will generally be applied to power stations and other large direct emitters of greenhouse gases, not electricity users.
For businesses, the tax rate will be equivalent to a 6.4 per cent to 12.7 per cent rise in current crude oil prices, said the National Climate Change Secretariat (NCCS).
During oil price fluctuations from 2011 to last year, the prices rose by as much as 35 per cent.
As for households, there will be a 2.1 per cent to 4.3 per cent increase from current electricity tariffs, which means an extra $1.70 to $3.30 for an average family in a four-room flat with a $72 electricity bill, the NCCS said. Electricity prices have fluctuated up to 10 per cent between 2010 and last year.
But the final tax rate and exact implementation schedule will be decided after consultations with stakeholders and further studies.
Consultation with industries has started, while public consultation will begin next month, Mr Heng said.
The Government has studied the option of a carbon tax for several years and believe it is "the most economically efficient and fair way to reduce greenhouse gas emissions".
The tax will create an incentive for industries to cut their emissions, spur the growth of the clean energy sector and generate revenue to fund other measures to reduce greenhouse gas emissions.
It will also help Singapore achieve its commitments, under the Paris climate change pact, to curb its emissions "efficiently and at as low a cost to the economy as possible", he added.
The carbon tax is among measures announced in the Budget to protect the environment, including higher water prices and changes to schemes that encourage the use of cleaner vehicles.
Professor Euston Quah, head of the economics department at Nanyang Technological University, said a carbon tax is a good mechanism for controlling greenhouse gas emissions as it is straightforward and easy to understand.
"The more pollutants one produces, the more one pays. Most people can understand this," he said.
Another option would have been to set up an emissions trading scheme where companies can buy permits to emit greenhouse gases. But Singapore's market is too small to support that, he said.
Setting the right tax rate is key to the effectiveness of the tax.
He added: "The cost of reducing emissions should be lower than the tax a company has to pay. Otherwise, firms may simply conclude they are better off paying the tax."
Shell Singapore said it has long supported carbon pricing as it is essential to tackling climate change.
But policies must address the need for strong economic growth and must not undermine the competitiveness of Singapore companies, said its spokesman.
"It must ensure companies can compete effectively with others in the region which are not subject to the same levels of carbon costs," the spokesman added.
HDB households to get extra help
Additional $850m for measures including utility bill rebates and one-off cash payment
By Nur Asyiqin Mohamad Salleh, The Straits Times, 21 Feb 2017
About 880,000 eligible Singaporean households will get extra rebates on utilities to help them cope with the upcoming hike in water prices.
It was one of a number of measures aimed at supporting households amid rising costs and a slowing economy.
The Government will provide more than $850 million in additional funds this year to lend households a hand. These will go into measures ranging from rebates on utility bills and personal income tax, to a one-off cash payment set to benefit more than 1.3 million Singaporeans.
The key announcement was the permanent $40 to $120 increase in the GST Voucher - Utilities-Save (U-Save) rebate, depending on the type of Housing Board flat that the recipient lives in. The benefit announced yesterday means that 75 per cent of all HDB households will face a rise in their monthly water bills of less than $12 on average - if their water use is unchanged.
Families in one- and two-room flats - who are set to receive $380 worth of rebates each year, up from $260 now - will have no increase in water expenses on average.
In total, the changes will cost an additional $71 million a year.
Finance Minister Heng Swee Keat said: "The U-Save rebate will soften the impact of the water price increase. Even as we provide this assistance, we should not lose sight of the scarcity of water, and thus should conserve it."
The rebate is one of three components under the annual GST Voucher scheme introduced in Budget 2012 to help lower- and middle-income households with their expenses.
The other two parts are a cash payment and Medisave top-ups.
One-off, additional payments are occasionally given. This year, Singaporeans will get a "cash special payment" for the second year running.
More than 1.3 million people are set to receive a one-off GST Voucher of up to $200.
This means that eligible recipients - Singaporeans aged 21 and above, who earned $28,000 or less in the Year of Assessment 2016 - could get up to $500 in cash this year.
The special payment will cost about $280 million.
The third measure to support households involves the service and conservancy charges rebate.
This was introduced in Budget 2016 as a one-off rebate, but it will be extended this year and increased.
About 880,000 HDB households will now get 1.5 to 3.5 months of rebates for financial year 2017 - up from one to three months previously. The measure will cost the Government $120 million. Last year, $86 million in rebates went to about 840,000 households.
There will also be a 20 per cent rebate on tax payable for income earned in 2016, capped at $500.
The Government will also top up several funds.
The permanent increase in U-Save rebates and other future GST Voucher payments will be supported by an additional $1.5 billion going into the GST Voucher Fund.
There will also be a $500 million top-up to Medifund, which helps the needy pay healthcare bills, bringing its total to $4.5 billion.
This will support rising Medifund utilisation, which has increased by an average of 9 per cent per year from financial year 2013 - when the last top-up of $1 billion was made - to financial year 2015.
Finally, an additional $200 million will go to the Community Care Endowment Fund, set up in 2005 to fund assistance programmes for low-income Singaporeans.
Resale flats: First-time buyers get higher subsidies
By Rachel Au-Yong, The Straits Times, 21 Feb 2017
First-time buyers looking for a resale HDB flat cheered when they found out they would get higher subsidies for their purchase.
The CPF Housing Grant has been raised to $50,000 for couples who purchase two- to four-room flats from the resale market, and $40,000 for couples who purchase five-room or bigger flats. The grant was previously capped at $30,000.
Finance Minister Heng Swee Keat said the move was part of a package to "keep Singapore a great place for families".
In his Budget statement yesterday, he noted that while most couples apply for highly subsidised Build-To-Order (BTO) flats, some have to turn to the resale market where flats are typically pricier.
Eligible couples can now receive up to $110,000 in subsidies after factoring in the Additional CPF Housing Grant and Proximity Housing Grant.
Mr Zhuang Changzhong, 26, and Ms Valencia Soh, 24, welcomed the news. The trainee lawyers will wed in December and are looking for a four-room flat that costs around $600,000 in Bishan, which is near the home of Mr Zhuang's parents, the church the couple go to and their workplaces.
"The added $20,000 is very significant - it could help to offset the 5 per cent down payment if we find the right flat," Mr Zhuang said.
In a Facebook post, National Development Minister Lawrence Wong said the higher subsidies will help those who wish to move into their own home quickly to start a family, or those wanting to live near their parents in mature estates with fewer BTO flats.
In a statement yesterday, the Ministry of National Development and the HDB said singles will enjoy a similar grant increase. They will receive half the quantum couples get.
The measure will cost the Government an additional $110 million a year. It applies to eligible resale flat applications received from 3.30pm onwards yesterday.
Industry watchers said the increased grant would make resale flats more affordable and attractive to first-timers. Last year, about 6,600 households benefited from the CPF Housing Grant.
The increased grant is timely as more resale flats are coming onto the market, said Ms Christine Li, research director at Cushman & Wakefield Singapore. Some 18,000 BTO units reached their minimum occupation period last year - 80 per cent higher than in 2015.
"The grant can help to soak up additional resale supply, particularly for those who need to dispose of flats after they take possession of new BTOs, executive condominiums and private properties."
R'ST Research director Ong Kah Seng expects the grant to boost flat prices by about 0.4 per cent in mature estates, and have little impact on prices in non-mature estates. He said it is unlikely to affect demand for BTO flats. "Most young couples will be prudent. Also, BTO flats are generally seen as fresher and more comprehensively planned."
Pre-school teacher Kristi Ng, 28, who is looking for a five-room flat around Bukit Timah with her husband, said: "The grant won't offset that much for us, but all help is welcome. It would help with the renovation budget and conveyancing fees."
Some buyers who submitted their resale flat applications recently and before the 3.30pm cut-off time took to Facebook to complain.
The HDB told The Straits Times that it will not implement the grant retroactively, but added that those with ongoing transactions can ask for assistance.
One-off tax rebate capped at $500
By Lorna Tan, Invest Editor/Senior Correspondent, The Straits Times, 21 Feb 2017
Taxpayers will get a one-off rebate of 20 per cent of tax payable for the 2017 Year of Assessment but the handout will be capped at $500.
The rebate, which applies to income earned in the 12 months to Dec 31 last year, will cost the Government $385 million.
Taxpayers with a chargeable income of $67,856 - with tax payable of $2,500 - will get the maximum rebate of $500. Anyone with assessable incomes above $67,856 will be restricted to the same amount.
Mr Panneer Selvam, partner with the people advisory services at Ernst & Young Solutions, said the rebate will benefit those earning more than $42,500, who comprise about 70 per cent of all taxpayers.
He worked out this income level based on certain assumptions, such as a taxpayer with two dependent children and a non-working wife.
"The tax rebate of 20 per cent, capped at $500, will benefit a taxpayer who earns more than $42,500 (that is, monthly income of $3,270, including a 13th month annual wage supplement)," he said. This is because the chargeable income after deducting personal reliefs is likely to be $20,000, which attracts zero tax.
Ms Sabrina Sia, tax partner at Deloitte Singapore, said: "Due to the cap, the rebate is expected to benefit the lower and middle-income groups more than the higher- income earners. This is in line with the Government's position that more should be done to help the lower-income earners rather than those who can better afford to pay taxes."
KPMG Singapore's head of personal tax and global mobility services BJ Ooi noted that the $500 cap is lower than in past budgets, when the limits have ranged from $1,000 to $2,000.
"I was hoping the Government would give more. Still, it is welcome news for many," he said.
Tax rates move up progressively. Those with a chargeable income above $320,000 pay 22 per cent.
More bursary support for post-sec education
By Calvin Yang, The Straits Times, 21 Feb 2017
In the pursuit of post-secondary education, less well-off students will not be left behind.
The Government will be raising the annual bursary amounts for students attending post-secondary education institutions, such as the universities, polytechnics and the Institute of Technical Education (ITE), Finance Minister Heng Swee Keat said yesterday.
"The amount of increase will be up to $400 for undergraduate students, up to $350 for diploma students and up to $200 for ITE students," he said.
"For ITE students, existing bursaries already more than cover their course fees."
The bursaries will also be extended to more families, after a revision in the income eligibility criteria.
About 12,000 more Singaporean students are expected to benefit, taking the total number of beneficiaries to 71,000.
In total, bursaries for students at post-secondary education institutions will increase to $150 million a year, up from about $100 million.
More details will be released soon by the Ministry of Education.
Dr Timothy Chan, director of SIM Global Education's academic division, said the change will be welcomed by less well-off families.
"This is in line with the Government's pledge that no deserving Singapore students will be denied post-secondary education in Singapore," he said.
More help for the disabled and their caregivers
A school-to-work scheme for disabled will be expanded and a caregiver centre set up
By Priscilla Goy, The Straits Times, 21 Feb 2017
More people with disabilities will receive help to be better prepared for work, and their caregivers will have more support too.
A school-to-work transition programme - now open to students with mild intellectual disabilities and autism - will be extended to those with moderate intellectual and multiple disabilities.
A centre will also be set up for caregivers of people with disabilities, to offer information, respite care, training and peer support.
These initiatives, announced by Finance Minister Heng Swee Keat in his Budget speech yesterday, are part of the Government's measures to promote inclusivity.
Together with existing schemes, the Government is likely to spend about $400 million per year to help people with disabilities, he said.
"All of us have something to offer, be it time, expertise or the extra attention, to care for each other. It takes all of us to build an inclusive society," he added.
The new initiatives are also part of the Government's response to recommendations made by a panel who drew up the third Enabling Masterplan, a road map for disability services from this year until 2021.
The first one ran from 2007 to 2011, while the second ran from 2012 to last year. The report for the latest one was released in December last year.
People in the disability sector welcomed the new initiatives.
Mr Victor Tay, president of the Association for Persons with Special Needs (APSN), said the school-to-work scheme has benefited students, but hopes more firms would join the scheme too.
"It takes two hands to clap - the students can receive training, but companies must be willing to hire them too. Giving them more incentives to do so would help," he said.
APSN runs Delta Senior School, one of five special education schools on the scheme, which was developed by the Ministry of Education, the Ministry of Social and Family Development, and disabilities support agency SG Enable.
A spokesman for SG Enable said the scheme will be expanded to eight schools by next year .
Charity Awwa's director for family and caregiver support, Mr Manmohan Singh, said he was glad to hear that the new caregiver support centre will work with welfare organisations to pilot schemes for caregivers of people who are newly diagnosed with disabilities.
"When parents find out that their child has special needs, their aspirations and schooling plans for the child have to be reviewed. They usually have lots of questions, conflicting information, and are stricken with despair or confusion. Offering support to this group is vital."
While a physical centre would help to build a support network among caregivers using the centre, there should also be online help for them, he added.
Increased aid to tackle dementia, mental health issues
By Priscilla Goy, The Straits Times, 21 Feb 2017
More towns will have residents and businesses trained to recognise and help people with symptoms of dementia.
Three dementia-friendly communities were launched last year - in Hong Kah North, MacPherson and Yishun - and more will be set up.
Voluntary welfare organisations will also receive government help to establish more community-based teams - beyond the 36 set up with help from the Health Ministry since 2012 - to support people with mental health conditions and also educate the public on these issues.
Meanwhile, the Health Ministry will provide mental healthcare services in polyclinics, and the National Council for Social Services will lead efforts to integrate people with mental health issues into the workplace and community.
Finance Minister Heng Swee Keat said people "must rally around those with mental health conditions, including dementia".
"Mental health issues may not be easy to talk about, but we can make good progress when the community comes together," he added.
The Government will spend $160 million more in the next five years on community mental health efforts.
Alzheimer's Disease Association chief executive Jason Foo said doing more to help people with mental health issues is vital, given the rising incidence of the disease.
The condition affects about 40,000 people in Singapore today, but this number is expected to double by 2030 as the population ages.
Said Mr Foo: "I'm glad the Government is putting more resources in community mental health efforts, because such efforts are resource-intensive. You need more staff and time to reach out to the wider community and train them."
1,000 additional infant-care places
By Calvin Yang, The Straits Times, 21 Feb 2017
Around 1,000 additional infant-care places will be made available by 2020 to meet growing demand.
There are around 7,000 places now, although only about 4,000, or 8 per cent, of all infants are enrolled in centre-based care.
The increase is part of government efforts to improve the accessibility of pre-school education.
Generally, childcare centres cater to children aged 18 months to six years old, while infant care is for those below 18 months old.
The number of childcare places has been expanded by over 40 per cent to about 140,000 over the past five years. "Now, there are enough places for more than half of all children between 18 months and six years of age," said Finance Minister Heng Swee Keat yesterday.