Tharman on budget: Aim is for quality yet inclusive growth

Deputy Prime Minister and Finance Minister Tharman Shanmugaratnam bared Monday a government budget for the fiscal year starting April that he said aimed to ensure Singapore could achieve quality yet inclusive growth.

In a nearly two-hour speech, he detailed plans to make the tax system more progressive and further increase subsidies for lower-income and elderly workers in order to help improve social mobility.

He also disclosed measures to mitigate the country's reliance on foreign labour and to improve productivity.

Also, for fiscal year 2013, he projected that government would post a surplus of $2.4 billion equivalent to 0.7 per cent of GDP. for the current fiscal year, he estimated a surplus of $3.9 billion.

He acknowledged that society is facing widening income disparity. "We must take further steps to temper inequality," he said.

Our strategy for achieving higher quality of growth and an inclusive society are bound together, he stressed.

While fixing these problems, Singapore has to shift gears for an economy and society in transition, he pointed out.

The speech comes amid public discontent over rising living costs and strains on infrastructure which many Singaporeans have blamed on the influx of immigrants over the past several years.

Here are the main highlights:

Tax changes

Individual taxpayers below the age of 60 will get a 30 per cent tax rebate capped at $1,500 for income earned in 2012. Those aged 60 and above will get a rebate of 50 per cent but also capped at $1,500.

To help household with cost of living, government will also provide an extra one-off GST voucher this year on top of the permanent GST voucher.

To help companies cope with restructuring, there will be a corporate income tax rebate of 30 per cent of tax payable up to $30,000 for the years of assessment 2013-2015. It is expected to cost government $1.3 billion over three years.

Investment holding companies and property development firms incorporated after Monday, the day of the budget speech, will be excluded from exemption from start-up tax as they are not intended target for government's programmes to encourage entrepreneurship.

Tobacco excise duties will be raised. From $239 per kilogram, the duties for beedies, ang hoon and smokeless tobacco will be increased by 25 per cent to $299 per kilogram, while the duty for unmanufactured tobacco will go up by 1.5 per cent from $347 per kilogram to $352 per kilogram.

Housing and hotel accommodation provided to employees will be taxed based on the annual value of the property and actual cost of the hotel accommodation incurred by employers, respectively to ensure the actual benefits received by the employees are properly valued.

The property tax system will also be changed to place a bigger burden on owners of high-end residential properties, especially those for investment purposes.

A tiered structure for additional registration fees was also introduced.

A one-year road tax rebate of 30 percent for goods vehicles, buses and taxis will take effect from July 2013.

Foreign worker curbs

Ministry of Manpower will continue to tighten eligibility for employment pass holders, said Tharman.

Foreign worker levies will be raised. Specifically, levies for less-skilled work permit holders will be increased by $150 between July this year and July 2015. Also, a $300 increase will be imposed on workers hired outside a company's man-year entitlement.

Dependency ratio ceilings in the services sector will be cut. The overall DRC will come down from 45 per cent to 40 per cent, and the S Pass sub-DRC will go down from 20 per cent to 15 per cent.

The DRC for the marine sector will also be brought down in two stages, in January 2016 and January 2018.

In construction, levy rates for less skilled work permit holders will increase by $150 between Jul 2013 and Jul 2015.

Minimum S Pass qualifying monthly salary will be increased from $2,000 to $2.200 from 1 July this year.
Government will also introduce a tiered salary system based on age and qualifications of the applicant to level the playing field for local workers in the same jobs.

Social spending

Health care:

Health subsidies to be boosted. Medifund will be increased by $1 billion to $4 billion and Eldercare to go up by a quarter million to $3 billion.


Government will expand senior mobility fund to cover a much wider range of devices such as hearing aids and motorised wheelchairs.

It will also provide subsidies of up to 80 per cent of lower-income elderly's consumables.

To help older Singaporeans with their healthcare expenses, there will be a $200 top-up to the CPF Medisave Accounts of all Singaporeans aged 45 and above.


Government will more than double spending in pre-school sector to over S$3 billion over the next five years. It will expand capacity so pre-schools are closer to homes and bring more operators to the anchor operator scheme. Government will provide for 16,000 additional places in the anchor operators by 2017.

Salary grants will be given to the AOPs so that all their pre-school teachers will be graduates or diploma holders, up from 80 per cent today.

An additional $72 million will be put into Opportunity Fund for students from less advantaged backgrounds and will be extended to polytechnics. $300 million top-up to Edusave fund.


Changes to CPF. Employer contribution rate will be restored fully.

Tharman also unveiled enhancements to Workfare Income Supplement (WIS) starting from January this year. Coverage will be broadened to those earning a monthly wage of up to $1,900 per month, up from $1,700. It is expected to benefit about 480,000 Singaporeans or 30 per cent of citizen workforce.

WIS payments will be raised. For workers aged 45 years and older, the maximum payout for a low-income worker earning $1,000 will increase by $700. Those aged between 35 and 45 years will get a smaller increase.

He bared  a three-year co-funding package under a new Wage Credit Scheme. The government will co-fund 40 per cent of wage increases to Singaporeans with gross monthly wage up to S$4,000.

WCS payouts will be paid out to employers automatically and annually over three years. No application needed. The scheme will cost government $3.6bn over 3 years.


The concessionary foreign domestic worker levy will be reduced from $170 to $120 per month. This will mean that a family will save an additional $600 a year, he said.


The government can and will actively support all SMEs that are willing to upgrade. The restructuring of our economy must result in a dynamic and re-engergised SME sector, he said.

Capabilities for new growth industries will also be strengthened.

EDB will set aside $500 million for next five years to support a "Future of Manufacturing Plan", Tharman said.

Government will refine tax incentives for companies in the Maritime sector and Financial sector to ensure the continued growth of high-value activities in Singapore.

Government will introduce a land productivity grant of $60 million, which will be provided to companies that intensify land use or relocate some operations to immediate region.

Government will also link up SMEs with research institutions to look into solutions that will give the SMEs a competitive advantage.

Productivity incentives will be provided to further boost training. Government will also launch an SME talent programme.

Businesses that invest a minimum of $5,000 per year of assessment in the productivity and innovation credit (PIC) qualifying expenditure will receive a dollar-for-dollar matching cash bonus.

"We will not increase levies for skilled workers. Most companies will not need to pay higher levies if they rely on skilled workers," he said.

"If we do not do better in raising productivity... businesses and workers will be worse off.
We must help SMEs revitalise themselves," he said.

Tharman maintained government's projection that Singapore's economy would grow between 1 per cent and 3 per cent this year.

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