Friday, February 11, 2011

Budget 2011 - Preivew

Feb 8, 2011

Inflation: a spectre to be slayed

This year's highly anticipated Budget will be unveiled on Feb 18. In a special 10-part series starting today, The Straits Times explores some of the key issues that are expected to be tackled in Budget 2011 and the possible measures the Government could take to address these concerns.

By Li Xueying
THE Foos, a family of four, are fretting about rising costs on various fronts.
At home, they spend more on groceries and utilities now than a year ago.
At work, Mrs Foo Moi Eng, 56, who brings home under $3,000 a month from her hair salon business, has to contend with increases in rent and workers' pay.
Her husband Franco Foo, 58, who stopped working as a cabby after a stroke five years ago, worries about rising medical costs. Meanwhile, their children, aged 27 and 31, who want to get married, are daunted by the high cost of new flats.
Says Mrs Foo: 'The Government says the economy is doing better, but we don't feel that we are better off.'
The family's concerns are a snapshot of the inflation spectre stalking Singaporeans. To help them, observers are calling for a litany of measures, ranging from Central Provident Fund (CPF) top-ups to more generous housing grants.
Topping their list is a one-off cash handout to help tackle the scourge of rising prices. Inflation hit a two-year high last December and is expected to rise further in the first quarter of this year before moderating.
Beyond the cash gift, analysts and economists expect more targeted help. For instance, the poor, who are harder hit by rising prices of food, housing and health care, will probably receive more generous Medisave top-ups.
While particular attention will be paid to the poor, the middle-income would not be forgotten too.
Speaking at a community event last month, Prime Minister Lee Hsien Loong said the Government will have the resources to help the poor cope with the pain of rising costs.
'The broader range of Singaporeans - well, we'll see how things go and what is necessary to be done,' he added. For them, transport and education costs are areas of concern.
PM Lee's assurance to Singaporeans comes amid a struggle by governments around the world to keep a lid on prices as inflation becomes a political hot potato.
Indeed, Singapore government leaders have made it clear in the past month that they are aware of the pain that rising prices are inflicting.
Mr Lee, Senior Minister Goh Chok Tong and Finance Minister Tharman Shanmugaratnam had, on at least seven occasions over the past month, signalled that inflation will be a key issue to be addressed in the Budget.
Mr Tharman said on Jan 30: 'It's uncomfortable for many people and we know that and we make sure we help families where we can.'
So, what form of help will the Government extend?
Much of the answer can be found in the measures taken in 2008, the last time Singapore was gripped by inflation worries.
These include the use of the exchange rate to moderate imported inflation, Growth Dividends of $868 million for adult Singaporeans, Edusave and Medisave top-ups, and income tax rebates.
This time round, the observers expect these - and more.
For the poor, in particular, there could be CPF top-ups, utilities rebates and pumped-up Workfare payouts.
To counter rising health-care costs, MP Halimah Yacob wants Medisave top-ups. 'Many, particularly older Singaporeans, would welcome Medisave top-ups, especially now that Medisave can be used for a number of outpatient treatments as well,' she says.
As for housing costs, Singapore Management University economist Davin Chor urged the Government to be more generous with subsidies.
'This is an issue that has far-reaching repercussions, as a high cost of housing can certainly affect when young couples decide to marry and have children.'
For middle-income families, Citigroup economists Kit Wei Zheng and Brian Tan suggest that the threshold of income tax rebates be raised to a 'more generous' 30 to 40 per cent instead of 2008's 20 per cent for individuals earning below $155,000.
The costs of childcare is another major issue that should be addressed, says Madam Halimah, who wants the monthly income ceiling for financial aid eligibility to be revised from $1,800 to $2,500.
For businesses, it would be helpful if costs, like licensing charges levied by government agencies, were waived, said the Singapore Chinese Chamber of Commerce and Industry.
Employers, the Citi economists noted, face rising wages in a tight labour market plus hikes in foreign worker levies.
Some pre-emptive strikes, however, appear to have been taken to defer future inflation. For instance, the annual public transport fare review exercise would be deferred this year.
Meanwhile, Mrs Foo has a fervent hope: 'Please don't let the electricity bills and rentals go up any further.'

Feb 9, 2011

Higher hopes for lower taxes

This is the second of a special 10-part series in which The Straits Times will explore some of the key issues expected to be tackled in the Budget on Feb 18

By Jonathan Kwok
LOWER corporate and personal income taxes are always on the Budget wish list of individuals and companies, but hopes are higher this year given the looming election.
Cuts to corporate and income taxes here have been part and parcel of moves to make Singapore a more business-friendly environment that can attract and keep global talent. The goods and services tax (GST) has been increased to make up the revenue shortfall.
But many people will say that taxes can still be cut more.
Ask Mr Benjamin Koh, who owns Addicon Logistics Management, a logistics firm that specialises in transporting clothes.
'While it is good to look at the lower income bracket, the Government should look at reducing the tax burden on higher earners as well,' he said.
'There are already a lot of taxes we are paying. Besides personal tax, there is company tax, for instance.'
Corporate tax has fallen steadily from 22 per cent in 2004 to the current 17 per cent. Companies get partial exemptions for the first $300,000 of income.
Income tax kicks in when individuals earn above $20,000 in a year. The top-tier tax rate was cut one percentage point to 20 per cent in 2006 and applies to income exceeding $320,000.
The GST has been going the opposite way, increasing in stages from 3 per cent in 2002 to 7 per cent in July 2007.
Corporate taxes remain the largest single source of revenue, comprising 32 per cent of the $29.9 billion collected by the Inland Revenue Authority of Singapore (Iras) for the year ended March 31 last year. About 20 per cent of the haul came from income tax, and 23 per cent from GST.
'In positioning Singapore as a global Asian hub, attracting top talent, companies and funds must be a key priority,' said Mr Tay Hong Beng, head of tax at KPMG in Singapore.
In particular, Singapore's rivalry with Hong Kong means that any differences in taxes between them are watched closely.
At 20 per cent, Singapore's top personal income tax rate is one of the lowest in the region, although perceived as less attractive compared to Hong Kong. Top personal tax rates in Hong Kong have been at 15 per cent since 2008.
Mr Russell Aubrey, head of tax at Ernst & Young, said: 'To put Singapore on a more competitive footing with Hong Kong, and help to draw more top-notch talent, there is room to align our top personal and corporate income tax rates at 17 per cent.'
Singapore's 17 per cent corporate tax rate is also higher than Hong Kong's 16.5 per cent.
Mr Ajit Prabhu, partner and head of tax services at Deloitte Singapore & South-east Asia, hopes for at least a half-point cut to match Hong Kong.
Recent history gives hope to businesses and high-income earners. In the past three pre-election Budgets - 2006, 2001 and 1996 - there have been cuts to either income taxes or corporate taxes, or both.
But observers say these cuts could have been coincidental. Many believe that this Budget could cater more to the masses, such as the 65 per cent of Singaporeans who earn too little to pay income tax.
Mr Richard Lim, director of interior finishings company EDL, thinks the likelihood of a corporate tax cut is low as the economy is doing well.
Mr William Wong, founder of property agency RealStar Premier Property Consultant, said it will be a bonus if the income tax rate comes down, but added that he did not think this was likely.
Lower income earners could get some help if the Government follows the suggestion of PricewaterhouseCoopers Singapore tax partner David Sandison.
Mr Sandison suggested the 3.5 per cent to 5.5 per cent income tax brackets for people earning $20,000 to $40,000 be removed. In other words, people earning up to $40,000 would not have to pay tax.
He said the loss in revenue would be balanced by the reduction in administrative costs.
Logistics executive Claire Ban, 26, would welcome such a move.
'A lot of people in my batch need to pay off school loans, and we struggle with the rising costs of living. Many of us are also looking to buy new homes as we get married, and we also need to support our parents.
'We are somewhat of a sandwich generation, so tax cuts will definitely help,' he said.

[Part 3 on Traiing intentionally left out.]

Feb 11, 2011

Concerns over medical costs and 'silver tsunami'

This is the fourth of a special 10-part series in which The Straits Times will explore some of the key issues expected to be tackled in the Budget on Feb 18.

By Salma Khalik
TAXI driver David Chua, 57, is hoping that the Government will top up Medisave accounts when the Budget is announced next week.
He suffers from high blood pressure. Because he has a family history of colon and stomach cancers, he has to go for scopes every two years to get a health update. Even at subsidised rates, he has to fork out about $700 each time.
While he does contribute to his Medisave account every year - compulsory in order to renew his taxi-driving licence - the amount in it is dwindling.
Medisave can be used to pay hospital bills and up to $300 a year can be spent on some outpatient treatments.
In last year's Budget, Singaporeans received a top-up in their Medisave, the health savings portion of their Central Provident Fund accounts. The $200 to $500 top-ups went only to people earning $100,000 or less a year.
But Mr Chua worries that even if he gets a Medisave top-up, he still cannot run away from higher medical costs.
Since the last General Election in 2006, the cost of hospital care has shot up significantly, almost doubling in some cases, even for subsidised patients who have as much as 80 per cent of their hospital bills paid for by the Government.
Professor Euston Quah, who heads the Economics Division at Nanyang Technological University, said that as the economy was strong last year and is projected to do well this year, he hopes to see significant help for the lower- and middle-income groups.
'Health-care needs certainly should continue to dominate, given that the cost of treatment for all kinds of health ailments has continued to rise,' he said.
This is inevitable amid expectations from the public for the latest implants, new breakthrough drugs and a higher doctor-and-nurse to patient ratio.
In tandem, government expenditure on health care has risen over the years. In the 2009 financial year, it was more than $3 billion, up from $2.4 billion the previous year.
Health Minister Khaw Boon Wan has assured the public that hospitalisation remains affordable for the vast majority who have both MediShield insurance and Medisave to draw upon.
MediShield, the national insurance scheme, now covers 94 per cent of all working adults.
Dr Lam Pin Min, chairman of the Government Parliamentary Committee for Health, wants to see more people go for basic health screening.
'Keeping Singaporeans healthy will reap long-term benefits in terms of health-care expenditure and economic contribution,' he said.
Prof Quah expects greater attention to be paid to public health.
'I hope that some incentives could be designed to encourage people to adopt good practices in illness prevention,' he said.
He suggested 'some government subsidies may be given, such as more subsidised health checks and for purchases of established supplementary health goods'.
He sees the ministry spending more on health campaigns to raise awareness and disseminate information and education.
Dr Lam, an MP for Ang Mo Kio GRC, also wants more resources pumped into step-down care such as nursing homes and home care.
'Caregivers need be taken care of, both financially and emotionally, as looking after a dependant, especially an elderly sick relative, can be financially and emotionally draining,' he said.
He expects the Government to pump money into building more nursing homes, community hospitals and other step-down facilities to cater to the coming 'silver tsunami' as the population ages.
'More resources must be put in to develop this sector,' he said.
This will be a major focus for the ministry over the next five years, Mr Khaw said recently.
He wants to improve the level of care given at nursing homes so that more people can be rehabilitated and return home.
This means upgrading the skills of workers at such facilities or getting specialists to help patients, which might mean more funds for training.
As the population ages, this will become an even more pressing issue as the number of patients needing rehabilitation balloons.
Dr Lam also wants the Government to fork out more to keep top doctors in the public sector.
This needs to be done 'before the situation deteriorates', he said, referring to the exodus of specialists from public hospitals to the private sector.
He said: 'The public sector provides the bulk of health-care services to Singaporeans, especially those with low and middle incomes, and good quality health-care professionals need to be retained to ensure a high standard of care.'

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