Singapore Confirms Outline Of October Tax-Relief Package

by Mary Swire, Tax-News.com, Hong Kong

26 September 2001

Singapore Deputy Prime Minister Tony Tan has confirmed wide expectations that there will be another set of off-Budget measures after the report on third quarter performance is announced on October 10th. Economists are expecting the package to be more substantial than July's S$2.2bn package, in response to Singapore's worsening economic slowdown.

Recent local economic news has been universally bad. July retail sales figures showed spending in the key segments - department stores, furniture & household equipment and even telecommunications and computers - all registering dips. And tourist arrivals are slumping as a result of worldwide travel restrictions as well as fear on the part of individuals, meaning a highly uncertain outlook for Singapore's retail and hotel sectors. Non-oil exports in August plunged 30% while electronic shipments fell by 40-60% in almost all product categories, because of depressed global demand.

It is likely that the October package will include substantial tax rebates and aid for the unemployed, while Deputy Prime Minister Lee Hsien Loong said the government would also step up the improvement of infrastructure. However, analysts differ on whether there will be cuts to Central Provident Fund (CPF) contributions. The most likely outcome is a 2% reduction in contributions, but some say that the government will not implement a controversial CPF reduction with general elections on the horizon.

The government is in a good position to stimulate the economy, with tax revenues booming away. Tax collection in the first half of this year rose 8% to some S$9.6 billion. The biggest jump was in property tax revenue, which rose almost 60% to over S$1 billion. Income tax collection was up 12% to S$6.2 billion, while betting duties brought in 21% more.

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