Singapore’s Budget 2015 'not quite a typical election budget'

[UPDATED 10:25am on 24 February 2015: Analyst comments added]

The budget unveiled by the Singapore government on Monday is a crowd-pleaser that packed some surprises, said analysts.
 
Selena Ling, head for treasury research and strategy at OCBC Bank, said that the budget was “not quite a typical election budget in terms of cash handouts for all, but definitely one that keeps an eye on the future”.
 
Deputy Prime Minister and Finance Minister Tharman Shanmugaratnam tabled in Parliament on Monday the budget for the fiscal year starting on 1 April, and it may be the last budget before general elections are announced no later than January 2017.
 
He bared enhancements to the Central Provident Fund scheme and details of the Silver Support scheme that would help low-income elderly cope with living costs. He also introduced the SkillsFuture programme that would make it easier for Singaporeans to upgrade their skills.
 
Cash grants, tax rebates, top-ups to various public assistance schemes, help for small and medium enterprises, and funds for the further development of Changi Airport were also among the measures announced.

Terence Wong, head of research at DMG & Partners Securities, noted that the previous two "election" budgets were "sweet" coming in the form of the $2.6 billion Progress Package in 2006 and the $1.5 bilion in Growth Dividends in 2011, which saw cash handouts to every adult Singaporean.

"This year, there was nothing quite as direct, but there is just something for everybody except the rich, who have to contend with income tax hikes," he noted.

Tharman announced higher personal income tax rates for the top 5 per cent of earners.

Also, given the higher spending, the government has budgeted a deficit of $6.67 billion for the next fiscal year.

“The substantial surprise was the tweaking of the net investment returns (NIR) framework to allow spending based on expected long-term returns, including both realised and unrealised capital gains,” said Ling.
 
Tharman said that state investor Temasek Holdings would be included in the NIR framework to boost the fiscal coffers.
 
While the policy change would provide room for the government to spend more, Ling said “some clarity and maybe considered conservatism on the methodology of estimating unrealised capital gains may be wise”.

Tharman has estimated that the NIR framework change, together with the hike in personal income tax rates for the top earners, would provide additional revenues of 1 per cent of gross domestic product for the next five years.

Girish Vikas Naik, director for global mobility at PwC International Assignment Services (Singapore), said, “The 2 per cent marginal tax rate increase for top earners did come as a "surprise", but consistent with Minister's continued focus on a more progressive tax system. However, will it be perceived to negatively impact our ‘competitiveness’?”
 
All in all, for DBS senior economist Irvin Seah, the budget for 2015 shows that government’s priorities have “expanded beyond addressing immediate social concerns and the restructuring of the economy to include tackling the challenges of an ageing population and the shaping of Singapore’s future”.

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