Singapore's Generous Budget Cuts Corporate And Income Tax

Mary Swire, Tax-news.com, Hong Kong

27 February 2001

Singapore's finance minister, Richard Hu, unveiled a generous budget at the end of last week, characterised in particular by tax breaks worth around $2bn. The finance minister said the 2001 budget had "the most generous provisions to date" for Singapore's citizens, adding that the budget was the government's way of sharing last year's strong economic performance with them.

Reductions in taxation are the centrepiece of the budget, with both individual and corporate tax being cut. Individuals are to get a personal income tax rebate of 10 per cent, whilst corporate tax is to be reduced by one per cent to 24.5 per cent for the year to March 2002. Dr Hu also offered those living in public housing a series of rebates, while reducing property taxes. And he offered a range of other incentives to promote entrepreneurial and high-tech businesses.

There has been the suggestion that the attractive budget might have been an "election budget", given that a general election is due in the summer. But the finance minister has denied any such claims, saying goodies would have been handed out anyway and if there is an election this year, then it's just "good timing".

At an engagement over the weekend, Dr Hu said: 'We had a very good year last year. So whether there is an election or not, we would have done something good in the Budget anyway'. He added that public reaction to the budget had been very positive.

Health Minister and Second Minister for Finance, Lim Hng Kiang, has also denied that the bumper budget was part of a deliberate strategy to win votes. He commented: 'We want to make sure the Budget serves a long-term purpose. If we give everything away just because there's an election, then we're not looking at the long term. Whenever we have surpluses, we always share it among the people.' Mr Lim explained that the generous budget could not be a knee-jerk reaction to elections because the consequences of personal and corporate tax cuts would not be immediately evident, but would show up in three to five years' time.

The tax bonanza proffered in Friday's budget may well be something to savour. Economic growth is forecast to slow in 2001 to an estimated 5 to 7 per cent, down from 9.9 per cent last year, as the US economy slows down. Dr Hu said that Singapore should be prepared for slower growth and keep a close watch on the "dark clouds looming on the horizon".

Whilst the vast majority of Singapore's citizens have welcomed this year's budget, there are some commentators who feel that the government should have teamed its gift-giving with some more cautious measures. Yap Chuin Wei, columnist for Singapore newspaper The Straits Times, said Dr Hu would have been better balancing the generous budget with a rise in the goods and services tax. He said: 'At a time of looming uncertainties, though these are not quite knocking on the door, the government may have missed a window of opportunity to slip some tough love into its bag of goodies.'

.

Recommended

Write a comment