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BUDGET HIGHLIGHTS
Financial Year 2009
Keeping Jobs,
Building for the Future
Misc. 2 of 2009
_________________
Presented to Parliament by Command of
The President of the Republic of Singapore
Ordered by Parliament to lie upon the Table:
22nd January 2009
__________________
EXPLANATORY NOTES
The revenue estimates in the Budget Highlights for
FY2009 document include tax changes announced
in the 2009 Budget Statement. These estimates,
where they are affected by tax changes, supercede
the estimates in the Revenue and Expenditure
Estimates for the FY2009 document presented
earlier to Parliament on 19th January 2009 as Paper
Cmd No. 1 of 2009.
Similarly, the expenditure estimates in the Budget
Highlights for FY2009 document include Special
Transfers announced in the 2009 Budget Statement,
which the expenditure estimates in the Revenue
and Expenditure Estimates for FY2009 document
do not.
CONTENTS
[I] BUDGET HIGHLIGHTS
1
1
FISCAL UPDATE ON FINANCIAL YEAR 2008
3
1.1
Economic Performance in 2008
3
1.2
Expected Budget Outturn for FY2008
3
1.3
Operating Revenue
3
1.4
Total Expenditure
5
1.5
Special Transfers
5
1.6
Net Investment Income Contribution
6
2
FISCAL OUTLOOK FOR FINANCIAL YEAR 2009
7
2.1
Budget for FY2009
7
2.2
Operating Revenue
Box 2.1: Medium Term Revenue and Expenditure Trends
7
9
2.3
Total Expenditure
11
2.4
Key Changes in Taxes, Fees and Charges
11
2.5
Special Transfers
12
2.6
Budget Position
Box 2.2: Macroeconomic Impact of Recent Fiscal Policy
13
14
[II] FEATURE ARTICLES
15
3
DISCRETIONARY FISCAL POLICY IN ECONOMIC DOWNTURNS 17
3.1
Smoothing Effect of Automatic Stabilisers
17
3.2
Discretionary Fiscal Policy in a Sharp Downturn
17
3.3
Limitations of Discretionary Fiscal Policy
18
3.4
Discretionary Fiscal Policy’s Role in Severe and Prolonged Downturns
Box 3.1: Conducting Fiscal Policy in a Downturn
18
19
3.5
Effectiveness of Discretionary Fiscal Policy in Singapore
19
3.6
Expansionary Budget 2009
20
3.7
Conclusion
Box 3.2: Fiscal Multipliers in Singapore
21
22
i
CONTENTS
4
MAXIMISING VALUE IN PUBLIC SECTOR PROJECTS THROUGH
SMART PROCUREMENT
23
4.1
Procurement Policy – Cost Effectiveness and Value for Money
23
4.2
Smart Procurement
23
4.3
Achieving Greater Efficiency at the Whole-of-Government (WOG) Level
Box 4.1: What is SOEasy?
23
23
4.4
Optimising Value on a Whole Life Cycle Basis
Box 4.2: Public Private Partnership for Ulu Pandan NEWater Plant
24
25
4.5
Building Capacity for the Future
Box 4.3: Mitigating the Effects of Cost Hikes and Supporting Capacity
Building in the Construction Sector
25
Promoting Innovation and Enterprise
Box 4.4: Adopting Smart Procurement Practices to Enable Private-Public
Collaborations
27
27
4.7
Conclusion
28
5
COMPETITIVE TAX REGIME
29
5.1
Pro-business Tax Regime
Box 5.1: International Corporate Tax Rates
29
29
5.2
Starting a Business
30
5.3
Growing a Business
Box 5.2: Top Individual Income Tax Rates
30
32
5.4
Expanding and Internationalising a Business
32
5.5
Consolidating and Restructuring a Business
33
5.6
Low Effective Tax Rate (ETR)
33
5.7
Conclusion
Box 5.3: MOF / Ernst & Young Study
33
33
4.6
26
[III] STATISTICAL ANNEX
37
Table 6.1: Overall Fiscal Position for FY2000 to FY2009
39
Table 6.2: Revenue Collections for FY2000 to FY2009
40
Table 6.3: Operating Expenditure by Sector for FY2000 to FY2009
41
Table 6.4: Development Expenditure by Sector for FY2000 to FY2009
42
Table 6.5: Total Expenditure by Sector for FY2000 to FY2009
43
Table 6.6: Total Expenditure by Expenditure Type for FY2000 to FY2009
45
Table 6.7: Headcount by Ministry for FY2000 to FY2009
46
ii
CONTENTS
[IV] GLOSSARY
47
6
49
GLOSSARY OF TERMS
iii
[I] BUDGET HIGHLIGHTS
♦
♦
FISCAL UPDATE ON FY2008
FISCAL OUTLOOK FOR FY2009
FISCAL UPDATE FOR FINANCIAL YEAR 2008
1 Fiscal Update on Financial Year 2008
1.1
Economic Performance in 2008
The Singapore economy is expected to register real Gross Domestic Product (GDP)
growth of 1.2%1 in 2008. This is lower than the 4.0% to 6.0% growth projected at the
beginning of 2008, largely due to the rapid deterioration of global economic
conditions beginning in the second half of the year. Sharp declines in global demand,
trade and investments had hit our exports, tourism and the broader economy,
especially in the fourth quarter. Inflation in 2008 was 6.5%, higher than initially
projected owing to spiralling oil and commodity prices.
Compared to 2007, the manufacturing sector declined by 4.1% in 2008, mainly due
to the persistent weakness in global demand for electronics, chemicals and
biomedical products. The services sector registered modest growth of 5.0% in 2008,
dampened by the demand slowdown in the second half of the year. The construction
sector however continued to post strong growth of 17.9% in 2008.
The economy continued to create jobs. Employment increased by 200,400 in the first
three quarters of 2008, primarily because of strong gains in the first half of the year.
The pace of job creation slowed in the third quarter, with fewer jobs created
compared to the same period in 2007. The overall unemployment in 2008 remained
steady at 2.2%2, while the resident rate rose to 3.3%2 in the third quarter of 2008.
1.2
Expected Budget Outturn for FY2008
After taking into account Special Transfers before Top-Ups to Endowment and Trust
Funds and before Net Investment Income Contribution (NIIC), the revised FY2008
position is a Basic Deficit of $2.8 billion (or 1.1% of GDP). This is an increase from
the $11 million estimated at Budget 2008. After factoring in NIIC of $3.7 billion and
Special Transfers of $7.4 billion, the Overall Budget Deficit for FY2008 is $2.2 billion
(or 0.8% of GDP). The revised FY2008 revenue and expenditure estimates are
summarised in Table 1.1.
1.3
Operating Revenue
FY2008 Operating Revenue has been revised upwards by $0.7 billion (or 1.7%
higher) to $40.5 billion. While the recent economic downturn has dampened
collections from Stamp Duty, Vehicle Quota Premiums, Other Taxes, and various
Fees and Charges, these have been more than offset by higher collections from
Corporate Income Tax and Personal Income Tax due to higher than expected profits
and income in 2007.
1
2
st
Based on preliminary GDP and Sectoral Performance from MTI, released on 21 January 2009.
th
Third quarter 2008 Labour Market Report from MOM, released on 15 December 2008.
3
BUDGET HIGHLIGHTS
Table 1.1: Fiscal Position in FY2007 and FY2008
Actual
FY2007
Estimated
FY2008*
Revised
FY2008
$billion
40.37
9.25
5.69
1.68
2.58
1.99
6.17
2.19
0.67
1.71
3.68
1.70
2.96
0.11
$billion
39.84
9.19
5.94
1.99
2.49
2.01
6.19
2.00
0.89
1.80
2.40
1.78
3.02
0.13
$billion
40.50
10.10
6.22
2.14
2.84
1.99
6.57
2.05
0.38
1.81
1.45
2.80
2.02
0.13
32.98
25.95
7.03
37.45
29.00
8.45
38.90
29.25
9.65
7.39
2.38
1.60
2.14
5.40
7.40
1.34
2.39
4.39
0.00
0.53
0.11
0.30
0.15
0.06
0.00
0.00
0.19
0.00
0.00
0.87
0.45
0.10
0.13
0.06
0.22
0.50
0.01
0.05
1.13
1.06
0.92
0.25
0.03
0.20
0.06
0.23
0.49
0.01
0.02
6.05
(0.01)
(2.80)
0.80
0.20
0.10
0.50
-
3.01
0.20
0.20
0.40
0.80
0.80
0.35
0.26
3.01
0.20
0.20
0.40
0.80
0.80
0.35
0.26
Add:
NET INVESTMENT INCOME CONTRIBUTION
2.40
2.22
3.65
OVERALL BUDGET SURPLUS/(DEFICIT)
7.66
(0.80)
(2.15)
OPERATING REVENUE
Corporate Income Tax
Personal Income Tax
Statutory Boards’ Contributions
Assets Taxes
Customs and Excise Tax
Goods and Services Tax
Motor Vehicle Related Taxes
Vehicle Quota Premiums
Betting Tax
Stamp Duty
Other Taxes
Other Fees and Charges
Others
Less:
TOTAL EXPENDITURE
Operating Expenditure
Development Expenditure
PRIMARY SURPLUS/(DEFICIT)*
Revised FY2008
Compared to
Actual
Estimated
FY2007
FY2008
% change % change
0.3
1.7
9.2
9.9
9.4
4.7
27.3
7.9
9.9
13.9
0.1
(0.9)
6.6
6.2
(6.5)
2.2
(43.8)
(57.4)
5.6
0.6
(60.6)
(39.6)
65.1
57.1
(31.7)
(33.2)
12.2
(0.9)
17.9
12.7
37.3
3.9
0.8
14.2
245.7
37.1
51.9
64.4
Less:
¶
SPECIAL TRANSFERS
Special Transfers Excluding Top-Ups to Endowment and
Trust Funds
@
Jobs Credit scheme
Growth Dividends
GST Credits
Senior Citizens’ Bonus
Workfare Bonus and Workfare Income Supplement Scheme
Workfare Income Supplement Scheme Special Payment
U-Save Scheme
S&CC and Rental Rebate
40th Anniversary NS Bonus
Top-Up to CPF Medisave Accounts
Top-Up to Post-Secondary Education Account
Other measures for Elderly and Lower Income#
Assistance to Small and Medium Enterprises (SMEs)
BASIC SURPLUS/(DEFICIT)^
Top-Ups to Endowment and Trust Funds
Top-Up to ComCare Fund
Top-Up to Medifund
Top-Up to ElderCare Fund
Top-Up to Lifelong Learning Fund
National Research Fund
CPF Deferment and Voluntary Deferment Bonus
LIFElong Income (LIFE) Bonus
Note: Due to rounding, figures may not add up.
*
Surplus/(Deficit) before Special Transfers and Net Investment Income Contribution (NIIC).
Special Transfers include Top-Ups to Endowment Funds and Trust Funds.
@
New programme introduced as part of Budget 2009 and to be implemented in Q1CY2009 (or Q4FY2008).
#
Consist of Senior Pensioners Grant Scheme, public transport vouchers and assistance through Citizens’ Consultative
Committees, Self-Help Groups and Voluntary Welfare Organisations.
^ Surplus/(Deficit) before Top-Ups to Endowment and Trust Funds and Net Investment Income Contribution.
¶
4
FISCAL UPDATE FOR FINANCIAL YEAR 2008
Corporate Income Tax (CIT)
CIT collections are estimated at $10.1 billion or 9.9% higher than the budgeted
FY2008 estimates. This is driven by higher profits booked by companies due to both
strong economic growth in 2007 and higher than expected profit margins in recent
years.
Personal Income Tax (PIT)
PIT collections are estimated at $6.2 billion or 4.7% higher than the budgeted
FY2008 estimates, in line with the stronger wage growth boosted by higher than
expected GDP growth in 20073.
Assets Taxes
Assets Taxes collections are estimated at $2.8 billion or 13.9% higher than the
budgeted FY2008 estimates. This is attributed to the revision of Annual Values to
reflect the rise in residential and commercial rents.
Goods and Services Tax (GST)
GST collections are estimated at $6.6 billion or 6.2% higher than the budgeted
FY2008 estimates. Although GST collections are expected to have been adversely
affected by weak spending in the second half of FY2008, they would be more than
offset by higher than expected consumption growth in the first half of FY2008.
Motor Vehicle Related Revenues
Motor Vehicle Related Taxes estimates are revised slightly higher by $44 million (or
2.2%) to $2.0 billion. Vehicle Quota Premiums, i.e. receipts from Certificate of
Entitlement (COE) premiums, are on the other hand expected to be significantly
lower than budgeted by $0.5 billion (or 57.4%). This is primarily because of lower
COE premiums on account of weaker demand for cars.
Stamp Duty
Stamp Duty collections are estimated at $1.45 billion or 39.6% lower than the
budgeted FY2008 estimates. This is due to the significant decline in residential
private house sales and fall in average transaction price as a result of a quieter
property market.
1.4
Total Expenditure
Total Expenditure for FY2008 is expected to be $38.9 billion (or 15.3% of GDP). This
is 3.9% higher than budgeted. The increase in Total Expenditure is mainly attributed
to an increase of $1.2 billion in Development Expenditure to fund the higher
construction costs for infrastructure projects. Operating Expenditure rose only
marginally (0.8%) to $29.2 billion.
1.5
Special Transfers
A total of $7.4 billion in Special Transfers is expected to be disbursed in FY2008,
including $2.4 billion in Top-Ups to Endowment Funds and Trust Funds. This is $2.0
billion higher than the $5.4 billion initially budgeted.
3
CY2007 GDP grew by 7.7%, higher than the 4.5% to 6.5% growth projected as at Budget 2008.
5
BUDGET HIGHLIGHTS
Of the $2.0 billion increase in Special Transfers, $1.7 billion is due to front-loading of
the Resilience Package in FY2008. $1.1 billion is for the Jobs Credit scheme
announced in Budget 2009, for which the President has given in-principle approval to
fund from the past reserves4. Another $0.6 billion is for the additional GST Credits,
Senior Citizens’ Bonus and other assistance measures.
The rest of the increase in Special Transfers is primarily due to the extra tranche of
Growth Dividends and enhancement of the U-Save rebates by 50% announced in
August 2008, which will cost the Government $0.3 billion.
1.6
Net Investment Income Contribution
Net Investment Income Contribution (NIIC) for FY2008 is expected to be $3.7 billion,
or $1.4 billion above the budgeted FY2008 estimate. This is on account of higher
interest and dividend income from the investment of the Government’s financial
reserves.
4
Actual approval for the draw on reserves would only be granted when the Supplementary Supply Bill for FY2008
has been passed by Parliament and assented to by the President.
6
FISCAL OUTLOOK FOR FINANCIAL YEAR 2009
2 Fiscal Outlook for Financial Year 2009
2.1
Budget for FY2009
The FY2009 Budget is summarised in Table 2.1.
2.2
Operating Revenue
GDP growth is expected to range between -2.0% and -5.0% in 2009, with inflation
expected to be between 0% and -1.0%. Based on these forecasts, Operating
Revenue for FY2009 is projected at $33.4 billion, a significant decrease of $7.1 billion
(or 17.5% lower) over the revised FY2008 estimates. FY2009 Operating Revenue is
expected to be 13.4% of GDP, down from 16.0% of GDP in FY2008.
Corporate Income Tax (CIT)
CIT collections are expected to decline by 18.8% (or $1.9 billion) from the revised
FY2008 estimates to $8.2 billion in FY2009. While sustained economic growth in
2007 and 2008 bolstered our tax base in 2009, this will be more than offset by the cut
in CIT rate to 17% from YA20105 and other tax-related business assistance schemes
announced in Budget 2009.
Personal Income Tax (PIT)
PIT collections are expected to decline by 2.6% (or $164 million) from the revised
FY2008 estimates to $6.1 billion in FY2009. This is due to lower collections from selfemployed income and withholding tax.
Assets Taxes
Assets Taxes collections are projected to decline by 63.7% (or $1.8 billion) from the
revised FY2008 estimates to $1.0 billion in FY2009 due to both the weak property
market outlook and assistance schemes in the form of property tax rebate and
deferral.
Motor Vehicle Related Revenues
FY2009 collections for Motor Vehicle Related Taxes are estimated to decline by
22.1% (or $0.5 billion) from the revised FY2008 estimates to $1.6 billion in FY2009,
due to lower Additional Registration Fee collections following the planned reduction
in COE quota for 2009. Although lower COE quotas usually lead to higher COE
prices, the current poor economic outlook will likely dampen the demand for cars and
hence COE prices in general. Vehicle Quota Premium collections are hence
expected to decline by 15.8% (or $60 million) from the revised FY2008 estimates to
$319 million in FY2009.
Stamp Duty
Stamp Duty collections are projected to decrease by 31.8% (or $0.5 billion) to $1.0
billion in tandem with the expected decline in both the volume of transactions and
average property prices.
5
Part of taxes assessed under YA2010 is collected as FY2009 CIT revenue.
7
BUDGET HIGHLIGHTS
Table 2.1: Budget for FY2009
Revised
FY2008
OPERATING REVENUE
Corporate Income Tax
Personal Income Tax
Statutory Boards’ Contributions
Assets Taxes
Customs and Excise Tax
Goods and Services Tax
Motor Vehicle Related Taxes
Vehicle Quota Premiums
Betting Tax
Stamp Duty
Other Taxes
Other Fees and Charges
Others
Less:
TOTAL EXPENDITURE
Operating Expenditure
Development Expenditure
*
PRIMARY SURPLUS/(DEFICIT)
Less:
¶
SPECIAL TRANSFERS
Special Transfers Excluding Top-Ups to Endowment and Trust
Funds
Jobs Credit scheme
Special Risk-Sharing Initiative (SRI)δ
Growth Dividends
GST Credits
Senior Citizens’ Bonus
Workfare Income Supplement Scheme Special Payment
U-Save Scheme
S&CC and Rental Rebate
Top-Up to CPF Medisave Accounts
Top-Up to Post-Secondary Education Account
#
Other measures for Elderly and Lower Income
Assistance to Small and Medium Enterprises (SMEs)
R&D Incentive for Start-up Enterprises (RISE)
BASIC SURPLUS/(DEFICIT)^
Top-Ups to Endowment and Trust Funds
Top-Up to ComCare Fund
Top-Up to Medifund
Top-Up to ElderCare Fund
Top-Up to Lifelong Learning Fund
National Research Fund
Top-Up to CPF Voluntary Deferment and Deferment Bonus Trust
LIFElong Income (LIFE) Bonus
Add:
Ω
NET INVESTMENT INCOME/RETURNS CONTRIBUTION
OVERALL BUDGET SURPLUS/(DEFICIT)
Estimated
@
Change over
Revised FY2008
$billion
40.50
10.10
6.22
2.14
2.84
1.99
6.57
2.05
0.38
1.81
1.45
2.80
2.02
0.13
FY2009
$billion
33.43
8.21
6.06
0.31
1.03
2.00
6.56
1.59
0.32
1.86
0.99
2.37
2.02
0.11
$billion
(7.07)
(1.90)
(0.16)
(1.83)
(1.81)
0.01
(0.01)
(0.45)
(0.06)
0.05
(0.46)
(0.44)
0.00
(0.01)
%
(17.5)
(18.8)
(2.6)
(85.5)
(63.7)
0.7
(0.2)
(22.1)
(15.8)
2.8
(31.8)
(15.6)
0.2
(11.2)
38.90
29.25
9.65
43.62
32.16
11.46
4.72
2.91
1.81
12.1
9.9
18.8
1.60
(10.20)
7.40
6.15
(1.26)
(17.0)
4.39
1.13
1.06
0.92
0.25
0.03
0.20
0.06
0.23
0.49
4.74
3.38
0.39
0.46
0.12
0.10
0.12
0.07
0.00
0.01
0.02
-
0.03
0.02
0.05
(2.80)
(14.94)
3.01
0.20
0.20
0.40
0.80
0.80
0.35
0.26
1.41
0.10
0.10
0.10
0.40
0.45
0.26
3.65
7.67
4.02
110.0
(2.15)
(8.67)
Note: Due to rounding, figures may not add up.
@
Incorporating measures announced in FY2008 Budget Statement.
Surplus/(Deficit) before Special Transfers and Net Investment Income/Returns Contribution.
¶
Special Transfers include Top-Ups to Endowment Funds and Trust Funds.
δ
This includes the new Bridging Loan Programme, Trade Credit Insurance Programme, and Loan-Insurance
Scheme-Plus.
#
Consist of Senior Pensioners Grant Scheme, public transport vouchers and assistance through Citizens’
Consultative Committees, Self-Help Groups and Voluntary Welfare Organisations.
^ Surplus/(Deficit) before Top-Ups to Endowment and Trust Funds and Net Investment Income/Returns Contribution.
Ω
st
On 1 January 2009, revisions to the Constitution - to allow the Government to spend up to 50% of the expected
long-term real returns on reserves invested by GIC and MAS - came into effect. On the remaining reserves, the
existing NII framework applies. Effective from FY2009, the NIRC will reflect the total amount of investment returns
that is taken into the Budget for spending.
*
8
FISCAL OUTLOOK FOR FINANCIAL YEAR 2009
Box 2.1: Medium Term Revenue and Expenditure Trends
Singapore’s government expenditure (annual Government Budget plus Statutory
Board spending) has averaged about 16.5% of GDP from 2001 to 2007. Compared
with that of other developed countries (refer to Chart 2.1), Singapore’s government
expenditure has been low; however it is expected to rise significantly over the next
few years, driven mainly by the following needs:
•
Investing in Capabilities and Maintaining Competitiveness
•
Making Singapore a Liveable Home
•
Building an Inclusive Society
Chart 2.1: Singapore’s government expenditure is relatively low
60%
53.7%
50%
42.6%
% of GDP
40%
33.7%
34.5%
Ireland
Australia
36.4%
38.0%
40.4%
US
Japan
Canada
30.3%
30%
18.3%
20.7%
21.2%
Singapore
Hong
Kong
Korea
20%
10%
0%
Malaysia
Source: IMF Government Finance Statistics Yearbook 2007.
UK
Denmark
6
Investing in Capabilities and Maintaining Competitiveness
To position Singapore for long-term growth, overall spending on research and
development (R&D) will increase to $7.5 billion per annum by 2010, or 3% of GDP.
Approximately one-third of this will be publicly funded R&D. Through the National
Research Foundation (NRF), A*STAR and our academic institutions, we are
developing new capabilities in research fields that will drive our future growth.
Singapore is already emerging as a key R&D player in potentially high growth areas
such as biomedical sciences, interactive and digital media, and environmental and
water technologies. We will also be providing significant incentives for companies
large and small to engage in R&D.
To maintain our competitiveness, we will have to continue investing in our most
important resources - our people - through education, training and continuous
learning. Education spending per student will be boosted to enhance the quality of
education through better pupil-teacher ratios and single session schools. Cohort
participation rates in tertiary education would also be raised from the current 23.6%
to 30% by 2012. Our fourth university will start taking in students by 2011 and the
Ministry of Manpower (MOM) and Workforce Development Agency (WDA) will also
ramp up the annual Continuing Education and Training (CET) institutional capacity –
from 50,000 to 250,000 training places in three to five years.
6
The data reflects average general government expenditures from 2001 to 2005 only. More recent data for other
countries is not available through the IMF Government Finance Statistics Yearbook.
9
BUDGET HIGHLIGHTS
Making Singapore a Liveable Home
The Government will continue to invest in making Singapore a liveable home for
Singaporeans, whilst remaining a global city that attracts and retains talent. Our
investment in transport infrastructure is a key part of these plans. By 2020, we will
have doubled the rail network, expanded our network of expressways, and integrated
road and rail lines to improve both public and private transport. We will also invest to
make our public transport system disability-friendly and elderly-friendly. To achieve
these goals, transport spending will rise from 0.8% of GDP in 2008 to about 2.9% of
GDP in five years’ time and be sustained at that level over the next five years.
Our housing estates will continue to be rejuvenated to enhance the quality of life and
the value of homes owned by Singaporeans through the Home Improvement
Programme (HIP), the Neighbourhood Renewal Programme (NRP), and the Lift
Upgrading Programme (LUP). To transform Singapore into a City-in-a-Garden, the
island-wide Park Development Programme will improve existing old parks and
develop new ones including Gardens by the Bay. In addition, the Government will
enhance our waterways through the ABC (Active, Beautiful, Clean) Waters
programme.
Building an Inclusive Society
Like many developed countries, Singapore's population is ageing, experiencing
falling fertility rates, and facing a widening income gap. We will be addressing these
elements so as to build an inclusive society.
Older citizens aged 65 and above as a share of citizen population would escalate
from the current 9% to 23% in 2037. An ageing society imposes more pressure on
our healthcare resources – the elderly accounts for around 40% of the hospitalisation
stays in our public hospitals. Going forward, we expect the elderly to account for
around two-thirds of our hospitalisation needs. An additional $2.3 billion will be spent
over the next five years to boost hospital capacity and upgrade existing facilities,
recruit and train manpower, and improve community hospitals and nursing homes. In
constant dollar terms, we expect to more than double the Government’s healthcare
expenditures over the next decade.
To address our low fertility rate, which sank to 1.29 in 2007, the Government will be
committing an additional $700 million a year on the enhanced Marriage and
Parenthood package of measures announced in August 2008. The package will
provide more financial and workplace support for parents as well as improve the
quality of child care centres and kindergartens.
Globalisation and rapid technological changes contribute to a widening income gap.
To strengthen our social compact and ensure that no Singaporeans are left behind,
we have implemented the Workfare Income Supplement Scheme (WIS) which seeks
to bolster the incomes of low-wage workers on the principle that the best way to help
people is to assist them in seeking and securing employment. In addition, support for
the vulnerable, who are unable to take care of themselves, will be strengthened by
enhancing social assistance and community support programmes such as the Home
Ownership Plus Education (HOPE) scheme and Centre-based Financial Assistance
scheme for Childcare (CFAC).
10
FISCAL OUTLOOK FOR FINANCIAL YEAR 2009
Generating Adequate Revenue
To meet these expenditure needs, the Government will require additional revenues
equivalent to 3% of GDP each year over the next five years, and possibly more
thereafter. Our ability to raise revenue through direct taxes will continue to be limited
by the need to maintain Singapore’s attractiveness as a key business hub in Asia.
The increase in GST of two percentage points in 2007 provided an additional 0.8%
GDP equivalent of revenues. With the implementation of the Net Investment Returns
Framework which allows for spending investment returns based on the long-term
expected real returns on our reserves, the gap in revenues needed for the additional
spending plans could be bridged.
Conclusion
Our current composition of revenues will provide us with the resources over the
medium term to meet our planned expenditure requirements, with enough fiscal
space to deal with unanticipated needs and contingencies. Therefore, this year’s
budget reflects our ability to continue with our long-term investment plans while
dealing with the immediate needs arising from the severe economic downturn.
2.3
Total Expenditure
Budget 2009 will continue to provide for developing infrastructure and expanding
provisions for education and healthcare despite lower operating revenues during this
downturn.
FY2009 Total Expenditure is estimated to be $43.6 billion (17.5% of GDP), which is a
significant increase of $4.7 billion (or 12.1% higher) from the revised FY2008
expenditure.
Operating Expenditure is projected to rise by $2.9 billion (or 9.9% higher) from the
revised FY2008 estimate to $32.2 billion. The increase is primarily accounted for by
spending on security and social development, especially health and education.
Development Expenditure is expected to increase significantly by $1.8 billion (or
18.8% higher) from the revised FY2008 estimate to $11.5 billion. The increase is
primarily due to the Government ramping up the spending on infrastructure projects.
These include road and rail works such as the Downtown Line and the Marina
Coastal Expressway, hospital construction projects such as the Khoo Teck Puat and
Jurong General Hospitals, and other industrial/commercial infrastructure projects
such as the Seletar Airport Infrastructure Upgrade and Jurong Rock Cavern.
FY2009 expenditures are summarised in Tables 6.3-6.5 in the Statistical Annex.
2.4
Key Changes in Taxes, Fees and Charges
Budget 2009 introduces a Resilience Package to help cushion our businesses and
households from the impact of the economic downturn. The measures include broadbased tax exemption schemes, tax deferral schemes, and tax rebates to help
businesses and households tide over this difficult period. The Government will also
extend the freeze on Government Fees and Charges for 2009.
11
BUDGET HIGHLIGHTS
In addition, Budget 2009 will continue to put in place long-term tax measures to
position our economy for growth. These include a Corporate Income Tax cut to 17%
from YA2010 onwards to maintain Singapore’s attractiveness as a location for
investments.
The net impact of these tax changes is expected to be a reduction in tax revenue of
around $2.4 billion in FY2009 (see Table 2.2).
Table 2.2: Key Changes in Taxes, Fees and Charges
Tax Change
Estimated Revenue
Gain/(Loss) per annum
($million)
Corporate/Personal Income Tax
•
Corporate Income Tax cut to 17% from YA2010 onwards
•
Accelerated write-down of Renovation and Refurbishment (R&R)
expenses
•
Enhanced fund management incentives
•
Temporary expansion of Foreign-Sourced Income Exemption
•
Accelerated write-down of capital allowances
•
Extension of Loss Carrybacks to three preceding YAs and increase
in cap
•
Removal of Income Tax on Net Annual Value
•
Personal Income Tax rebate
•
Increased Tax deductions for donations to Institutions of Public
Character (IPC)
(1,193)
Property Tax
•
Rebate for industrial and commercial properties
•
Tax deferral for land approved for development
•
Rebate for owner-occupied residential properties
•
Delayed increase in assessment rate for hotel rooms
(1,172)
Allow qualifying funds to claim input Goods and Services Tax
(34)
Road Tax rebate
(30)
Net Impact
2.5
(2,429)
Special Transfers
Budget 2009 provides for $6.1 billion of Special Transfers, including transfers that are
part of the Resilience Package. This includes:
(a) Jobs Credit scheme to help employers preserve jobs by providing cash
credits based on wage bills. The total cost of the Jobs Credit is $4.5 billion, of
which $1.1 billion has been front-loaded to first quarter of 2009 and paid out
of FY2008 Budget. The balance of $3.4 billion in Jobs Credit would be paid in
FY2009;
(b) Special Risk-Sharing Initiative, under which $0.4 billion is set aside as loan
loss budgets for the Government to share the losses of bank loans under new
loan and credit programmes for businesses.
12
FISCAL OUTLOOK FOR FINANCIAL YEAR 2009
The President has given his in-principle approval to fund the cost of the (a) Jobs
Credit scheme and (b) Special Risk-Sharing Initiative out of the past reserves 7 in
FY2009.
The Government continues to stay committed to set aside funds for long-term needs
that require a stable source of funding. A total of $300 million is set aside to top up
endowment funds. The Medical, Lifelong Learning and the ElderCare Endowment
Funds will each be topped up by $100 million. $260 million is set aside for the
LIFElong income (LIFE) Bonus and $450 million will also be used to top up the trust
for future CPF voluntary deferment and deferment bonus payouts.
We will also transfer an additional $400 million to the R&D Trust Fund under the
National Research Foundation (NRF) to fund projects that are targeted at boosting
research and development activity in Singapore.
2.6
Budget Position
Before taking into account Top-Ups to Endowment Funds and Trust Funds, and
before Net Investment Returns Contribution (NIRC), the Budgeted FY2009 position is
a Basic Budget Deficit of $14.9 billion (or 6.0% of GDP).
On 1st January 2009, revisions to the Constitution - to allow the Government to spend
up to 50% of the expected long-term real returns on reserves invested by GIC and
MAS - came into effect. On the remaining reserves, the existing NII framework
applies. Effective from FY2009, the NIRC will reflect the total amount of investment
returns that is taken into the Budget for spending.
After factoring in the Top-Ups to Endowment Funds and Trust Funds, and NIRC of
$7.7 billion, the estimated outturn for FY2009 is an Overall Budget Deficit of $8.7
billion (3.5% of GDP).
7
Actual approval for the draw on reserves would only be granted when the Supply Bill for FY2009 has been passed
by Parliament and assented to by the President.
13
BUDGET HIGHLIGHTS
Box 2.2: Macroeconomic Impact of Recent Fiscal Policy
The macroeconomic impact of the Budget may be assessed through fiscal impulse,
which estimates the first-order stimulus to aggregate demand arising from fiscal
policy during a given period. It focuses on the change in fiscal stance from year to
year. A positive fiscal impulse indicates a more expansionary fiscal stance compared
to the previous year, while a negative fiscal impulse indicates a less expansionary (or
more contractionary) stance. A budget deficit can thus still be contractionary (i.e. a
negative fiscal impulse) if it is smaller than the deficit position in the previous year.
The appropriateness of the fiscal impulse is often assessed against the prevailing
state of the economy. The latter can be measured by the output gap, which is the
difference between the actual level of activity in an economy (as measured by GDP)
versus the sustainable amount of activity given the capacity of the economy (i.e. the
maximum level of GDP that can be sustained without creating inflationary pressures).
6.0
6.0
4.0
4.0
2.0
2.0
0.0
0.0
-2.0
-2.0
-4.0
% of Potential GDP
% of GDP
Chart 2.2: Strong fiscal stimulus projected amidst economic slowdown
-4.0
FY98
FY99
FY00
FY01
FY02
FY03
FY04
Fiscal Impulse (LHS)
FY05
FY06
FY07
FY08
(rev)
FY09
(est)
Output Gap (RHS)
*The historical fiscal impulse series includes the impact of the New Singapore Shares Scheme announced in Budget
FY2001
The fiscal impulse for FY2008 is expected to be much larger than what was
estimated at the start of FY2008. This is due to the enhanced Growth Dividends and
U-Save payouts, new Marriage and Parenthood measures and higher costs of
infrastructure projects incurred during the financial year. In addition, part of the
Government’s 2009 Resilience Package to help businesses and households cope
with the economic downturn will be incurred in the last quarter of FY2008.
With the continual spillover of the global financial crisis to the real economy, growth
in 2009 is expected to slow significantly, with the output gap reversing from positive
to negative, falling to around -2.1% of potential GDP.
The fiscal impulse for FY2009 is estimated to be strongly positive, which will be
appropriate given the large negative output gap. The bulk of the Resilience Package
will be incurred in FY2009, which will help to preserve jobs, enhance business cashflow, provide support for households as well as invest in infrastructure for the longterm. The Resilience Package will be on top of the continued payouts to households
from the 2007 GST Offset package and the 2008 Surplus Sharing package.
Taken together, the fiscal stimulus in FY2008 and FY2009 will provide crucial support
as the economy transits to a period of slow growth. The fiscal impulses in these two
years are also significantly larger compared to the fiscal impulses during the previous
downturns in FY1998 and FY2001.
14
[II] FEATURE ARTICLES
♦
♦
♦
DISCRETIONARY FISCAL POLICY
IN ECONOMIC DOWNTURNS
MAXIMISING VALUE IN PUBLIC
SECTOR PROJECTS THROUGH
SMART PROCUREMENT
COMPETITIVE TAX REGIME
DISCRETIONARY FISCAL POLICY IN ECONOMIC DOWNTURNS
3 Discretionary Fiscal Policy in Economic Downturns
Fiscal policy refers to a government’s decisions on taxes and expenditures (either on
the purchase of goods and services, or transfer payments). Together with monetary
policy, it is one of the two traditional tools of macroeconomic management.
3.1
Smoothing Effect of Automatic Stabilisers
Procyclical Tax Collections
Taxes typically work as an automatic stabiliser. During high growth years, tax
revenues from corporate profits and personal incomes, as well as from consumption
such as Goods and Services Tax tend to be higher. As taxes are extractions from the
economy, the higher tax collections serve to dampen aggregate demand, thereby
reducing inflationary pressures.
Conversely, during years of low GDP growth or even contraction, tax collections
would automatically adjust themselves to lower levels and reduce the extractions
from the economy to mitigate the effect of slowing aggregate demand.
In Singapore, most tax revenues are highly procyclical, which help to dampen
economic cycles. This can be seen from the following Table 3.1.
Table 3.1: Correlation Coefficients of Key Revenue Sources with GDP8
All
Revenues
CIT
PIT
0.92
0.98
0.97
GST
Stamp
Duty
Property
Taxes
Motor
Vehicle
Taxes
0.93
0.68
0.78
0.53
Smoothing Government Expenditures in Singapore
In addition, the expenditures of most government ministries in Singapore are pegged
to a seven-year moving average of past and projected GDP. Government
expenditures are injections into the economy as they add to the aggregate demand
for goods and services. Therefore, volatility in government spending is reduced by
pegging government spending to a smoothed average of GDP growth. In years when
actual GDP growth is high, government spending increases are muted to mitigate
inflationary pressures. Conversely, government spending would not fall in tandem
with sharp GDP contractions and exacerbate falling aggregate demand 9 during a
downturn.
3.2
Discretionary Fiscal Policy in a Sharp Downturn
Automatic stabilisers (viz. procyclical tax revenues and more stable Government
expenditures) could be supplemented by discretionary fiscal policy especially during
a sharp downturn. Discretionary fiscal policy includes measures to further reduce
extractions from the economy such as providing additional tax rebates to effectively
reduce tax collections, and measures to introduce injections into the economy such
8
Based on correlations of revenue, adjusted for rate changes for GDP between 1998 and 2007.
See Budget Highlights (2006) for a full description:
http://www.mof.gov.sg/budget_2006/budget_speech/downloads/FY2006_Budget_Highlights.pdf
9
17
FEATURE ARTICLES
as additional government spending on goods and services, and grants and tax
credits to increase the incomes of households and businesses.
3.3
Limitations of Discretionary Fiscal Policy
Discretionary fiscal policy has several limitations which reduce its effectiveness as a
countercyclical tool.
Long Time Lags. It takes time for government agencies to implement discretionary
fiscal policies. For example, additional government projects to be implemented in a
recession needs to be designed, tendered out and evaluated for cost-effectiveness
before the projects are awarded. In addition, where transfers are made to increase
incomes of households and businesses, there is a time lag between their actual
receipt of cash and actual expenditures into the economy.
Leakages and Savings. The scope for using discretionary fiscal policy as a tool for
macroeconomic stabilisation is more limited for countries with open economies due
to import leakages. The effect of fiscal transfers on aggregate demand would also be
blunted in economies with high savings rates because the injections into households
or businesses are not fully spent but kept as precautionary savings.
Fiscal Sustainability: Trading off Long-term Investments. Discretionary fiscal policy
means running a larger deficit in a year of low growth. Such measures can lead to
persistent deficits, and threaten long-term sustainability and competitiveness. This is
because the deficits are typically financed by increased borrowing which would
eventually be repaid through higher taxes. In addition, the Government’s borrowing
could lead to higher interest rates and crowd out funds for private investments and in
turn reduce long-term growth prospects.
3.4
Discretionary Fiscal Policy’s Role in Severe and Prolonged
Downturns
There are however the following arguments for discretionary fiscal policy especially in
a severe and prolonged downturn.
Enhancing Fiscal Multipliers through Better Targeting and Timing. The effectiveness
of discretionary fiscal policy can be enhanced if the measures are delivered in a
timely manner and targeted at individuals and companies that would need them the
most during a prolonged downturn. The probability of mistiming due to lags is also
reduced in a prolonged downturn.
Value in Providing Relief. Regardless of the economic impact, fiscal policy can do
much to improve the well-being of households and individuals. It can reduce the loss
of incomes of individuals and provide relief in a recession even if the fiscal impulse is
weakened through “leakage”, e.g. by spending on imports.
Improvement of Expectations. By providing help to counter a downturn, businesses
and households would have more confidence that the economy would recover. This
reduces the precautionary savings inclination that could further dampen consumption,
and stem a downward spiral.
18
DISCRETIONARY FISCAL POLICY IN ECONOMIC DOWNTURNS
Box 3.1: Conducting Fiscal Policy in a Downturn
In a downturn, fiscal policy should ideally be:
Targeted. Government measures should be targeted at individuals and companies
that would need them the most. Their tendency to spend the resources provided to
them will also enhance the multiplier of the fiscal measure. In addition, the measures
should take into account the nature and dynamics of the downturn – for example, a
downturn caused by a contraction of a specific sector such as tourism would warrant
different measures from a downturn characterised by credit constraints.
Timely. The measures should ideally have short implementation and effect lags. This
means that it should not take too long to implement, and the time taken before the
resources are spent within the economy should be minimal. Direct government
expenditure into the economy that leverages on existing schemes and systems
would have the shortest time lag.
Temporary. The measures should be temporary to prevent them from becoming a
permanent drain on resources in the long-term. It is important to ensure that the
measures should not compromise long-term budgetary health.
It should also be noted that the actual effect the same fiscal measure would have on
the economy can differ across downturns because of the structure of the economy
and the nature of the downturn. Taking into account the additional uncertainty in
terms of the duration and severity of each downturn, discretionary fiscal policy in any
downturn should comprise a broad spectrum of different measures.
3.5
Effectiveness of Discretionary Fiscal Policy in Singapore
Multiplier of Discretionary Fiscal Measures Not Insignificant
In Singapore, the multiplier from previous applications has typically been positive but
small, depending on how they are targeted (see Box 3.2 for the fiscal multipliers of
various measures). Targeted transfers at the lower income tend to have a higher
multiplier, as does the Government’s direct consumption of goods and services. For
example, measures such as WIS, GST Credits and Government hiring plans would
have a significant economic multiplier. While taxes and investments tend to have a
lower multiplier, they tend to provide a longer term boost to economic growth.
Short Implementation Lags
The effectiveness of discretionary fiscal policy is enhanced by the short
implementation lags in Singapore. This is due to our efficient tax and CPF systems
that enable the Government to distribute transfers quickly.
No Trade-Off on Long-Term Objectives
Given Singapore’s policy of running a balanced budget over a business cycle, fiscal
policy in Singapore tends to be financed from accumulated budget surpluses rather
than from borrowing. This enhances the impact of temporary measures, as the
Government is unlikely to need to finance fiscal policy through higher future taxes.
Neither would the Government need to borrow to finance the deficit – therefore it
would not draw on the credit in the market and crowd out private investments.
19
FEATURE ARTICLES
Singapore has therefore made judicious use of discretionary fiscal stimulus
measures to supplement the fiscal automatic stabilisers built into our system - Overall
Budget Balance has been broadly countercyclical over the past ten years (see Chart
3.1 and Chart 2.2 of Box 2.2 Macroeconomic Impact of Recent Fiscal Policy).
Chart 3.1: Overall Budget Balance has been largely countercyclical
10.0
20.0%
8.0
6.0
15.0%
% of GDP
2.0
10.0%
0.0
-2.0
5.0%
GDP Growth
4.0
-4.0
-6.0
0.0%
-8.0
-10.0
-5.0%
FY98
FY99
FY00
FY01
FY02
FY03
FY04
Overall Budget Balance (% of GDP) (LHS)
3.6
FY05
FY06
FY07
GDP Growth (RHS)
FY08
(rev)
FY09
(est)
Expansionary Budget 2009
Budget 2009 is a significantly expansionary budget given that Singapore could be
entering the worst recession in the last three decades. We will therefore run a
sizeable budget deficit, even after taking into account the higher investment returns
of our reserves that we will tap on through the new Net Investment Returns
framework (see Table 3.2).
Table 3.2: Comparison of 2009 Overall Budget Balance and Basic Balance with
Previous Budgets
FY
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
20
Overall Budget Balance
$ (Billions)
0.93
4.88
3.98
(2.70)
0.19
(1.89)
(0.11)
(1.49)
(0.06)
7.66
(2.15)
(8.67)
% of GDP
0.7
3.4
2.4
(1.8)
0.1
(1.1)
(0.1)
(0.7)
(0.0)
3.1
(0.8)
(3.5)
Basic Balance (excludes Net
Investment Income and
Endowment Fund Top-ups)
$ (Billions)
% of GDP
0.93
0.7
5.19
3.6
2.50
1.5
(2.27)
(1.5)
(2.89)
(1.8)
(3.79)
(2.3)
(2.45)
(2.3)
(1.04)
(0.5)
(1.29)
(0.6)
6.05
2.4
(2.80)
(1.1)
(14.94)
(6.0)
DISCRETIONARY FISCAL POLICY IN ECONOMIC DOWNTURNS
Components of Discretionary Fiscal Measures
The Resilience Package of $20.5 billion as announced in Budget 2009 will have five
components:
(i) Jobs for Singaporeans. $5.1 billion would be spent to help preserve jobs
through Job Credits Scheme and related programmes. These measures
would have the additional benefit of helping businesses with costs and cashflow as well.
(ii) Stimulating bank lending. Budget 2009 introduced the Special Risk-Sharing
Initiative that would be supported by $5.8 billion of government capital which
will generate a potential $11 billion worth of credit. However, only a small
fraction of this would eventually be expended as loan losses.
(iii) Enhancing business cash-flow and competitiveness. Various tax measures
and grants costing $2.6 billion would be put in place to help businesses with
cash-flow and enhance competitiveness.
(iv) Supporting families. $2.6 billion would be allocated to support Singaporean
households this year, with lower-income households receiving more.
(v) Building a home for the future. The Government will commit $4.4 billion to
infrastructure development. In the short term, this provides some fiscal
stimulus; and in the longer term, it helps to position Singapore for any future
economic recovery. The ability to continue such investments for the future is a
key feature of Singapore’s fiscal strategy.
To minimise the implementation time lag, some measures of the package will be
front-loaded beginning March 2009, thereby increasing the Overall Budget Deficit for
FY2008.
Fiscal Sustainability
The Budget 2009 Resilience Package includes exceptional measures to cope with
the global economic downturn. Such measures go well beyond normal
countercyclical responses such as rebates, but are appropriate given the scale and
nature of the downturn.
The Government has thus decided to seek the President’s concurrence to fund two
of the extraordinary measures – the Jobs Credit scheme targeted at preserving jobs
during the downturn, and the Special Risk-Sharing Initiative aimed at stimulating
bank lending.
3.7
Conclusion
The global economic and financial crisis has placed increasing emphasis on fiscal
policy as a tool to manage economic cycles. This is because the transmission
mechanism of monetary policy to the real economy has been weakened significantly
due to the credit crunch resulting from the financial crisis. Many countries around the
world have thus introduced fiscal stimulus packages to provide significant
countercyclical boost to their economy.
Singapore has also chosen to respond to this economic downturn with significant but
temporary discretionary fiscal measures that would not come at the expense of fiscal
21
FEATURE ARTICLES
sustainability. Bearing in mind our major trading partners in the US, Europe, and East
Asian economies are also undertaking significant fiscal measures at around the
same time, we expect the effectiveness of our fiscal measures to be enhanced
despite the high leakages of the Singapore economy; ultimately the world is a closed
economy.
Although the fiscal actions are unlikely to forestall a recession, they would mitigate
the impact and avert an even sharper downturn where more businesses fail and
unemployment soars.
Box 3.2: Fiscal Multipliers in Singapore
The budget balance shows the state of a government’s finances. During an economic
downturn, a government tends to run a budget deficit as it spends more than the
revenue it takes in order to bolster the economy. Fiscal multipliers measure how a
government’s fiscal stimulus (i.e. the budget deficit) translates into economic stimulus
i.e. how much does GDP change for every additional dollar in government spending
or revenue.
Table 3.3: Studies on Singapore’s Fiscal Multipliers
Fiscal Policy
Increase in Government
Consumption
Increase in Government
Investment
Increase in Transfers to Lowest
40th Percentile of Households
Increase in Transfers to All
Households
Cut in Corporate Tax Rate
Impact on GDP
MAS (2008)10
Abeysinghe and
Choy (2007)11
High
Moderate
Low
Moderate
High
-
Moderate
-
Moderate
-
There is large uncertainty over the size of fiscal multipliers; fiscal multipliers across
the world range from less than zero to larger than four, depending on the
methodology and assumptions used, the type of fiscal policy, and the country of
interest12. They also seem to have declined over time with increasing globalisation.
Studies for Singapore have shown that the fiscal multipliers for Singapore tend to be
positive but fall in the lower range of international studies (see Table 3.3). The small
fiscal multiplier is due to Singapore’s small open economy, and increases in spending
are likely to leak out of the economy due to Singapore’s high reliance on imports. Our
high savings rate also limits the impact of fiscal policy.
10
MAS’s Monetary Model of Singapore.
Abeysinghe and Choy (2007), “The Singapore Economy: An Econometric Perspective”, Chapter 8.
12
IMF (Dec 08) Staff Position Note SPN/08/01 “Fiscal Policy for the Crisis”.
11
22
MAXIMISING VALUE IN PUBLIC SECTOR PROJECTS THROUGH SMART
PROCUREMENT
4 Maximising Value in Public Sector Projects through
Smart Procurement
4.1
Procurement Policy – Cost Effectiveness and Value for Money
The Government’s procurement policy has always been to achieve the greatest cost
effectiveness and to derive maximum value for money. This is the enduring objective
even as needs are becoming more complex and demands more sophisticated.
4.2
Smart Procurement
Over the past few years, government agencies have been progressively adopting
“Smart Procurement” techniques underpinned by several key considerations:
4.3
(i)
Achieving greater efficiency at the Whole-of-Government (WOG) level
(ii)
Optimising value on a whole life cycle basis
(iii)
Building capacity for the future
(iv)
Promoting innovation and enterprise
Achieving Greater Efficiency at the Whole-of-Government (WOG)
Level
Economies of scale can readily lead to big cost savings. Since 2003, the Public
Service has been aggregating its procurement needs in areas ranging from electricity
to stationery. But beyond the same commodity items commonly used by different
agencies, other services that may at first blush appear unique to each agency offer
opportunities too for WOG aggregation. It takes some effort to establish common
standards and procedures without having to compromise the decision-making
autonomy of the agencies. However the consequential benefits can be immense. A
good example is the aggregation of infocomm technology (ICT) requirements across
government agencies through a common platform known as SOEasy (see Box 4.1).
Box 4.1: What is SOEasy?
Heterogeneous Environment for Similar ICT Needs
Most public agencies have had considerable autonomy over the procurement and
implementation of their ICT operating environment, which has resulted in a highly
heterogeneous one. While agencies’ desktops and networks may perform similar
functions, unwittingly they were implemented differently through the use of dissimilar
software or configurations. Hence, there is a huge potential for seamless
collaboration, savings and efficiency if the public sector can standardise its desktop
and network applications.
Standardising ICT Platform via SOEasy
Multinational companies (MNCs) such as Citigroup and Cisco have reaped
substantial benefits from the implementation of the Standard Operating Environment
(SOE). Similarly, standardising the ICT environment of the Singapore Public Service
across the WOG would help reduce the time and costs required to introduce ICT
innovations and implement new ICT services. For example, anti-virus patches can be
distributed speedily to all desktops and servers in the event of a virus threat. With this
in mind, the Government appointed the oneMeridian consortium in February 2008 to
23
FEATURE ARTICLES
develop and implement SOE for the public sector, and has since renamed the
standardised platform SOEasy.
Efficiency and Savings through SOEasy
SOEasy is expected to be implemented by 2010 and it will provide public officers
across 74 agencies with an agile infocomm environment that promotes innovation
and enhances productivity at work. This common ICT environment will not only
improve operational efficiency, but also promote innovation and enhance work
productivity for public sector. The integrated services and networking platform will
also facilitate collaborative work amongst public officers and will translate into an
approximate average savings of 28% over current infocomm expenditure for
equivalent services13. SOEasy would enable and facilitate public officers to truly work
as One Government.
4.4
Optimising Value on a Whole Life Cycle Basis
Great efforts have often been directed at establishing the specifications to clearly
articulate the requirements of a project, particularly one that is large and complex.
Evaluating the offers to choose the most cost effective candidate is just as
challenging. However complicated and involved this may be, it is a mistaken belief
that specifying the requirements and then considering the candidates on the initial
capital outlays would lead to the best outcome. In fact, for most projects, the initial
outlay constitutes but about one-third of the life cycle cost of the project. Government
agencies are hence moving towards optimising the value of their projects on the
whole life cycle basis.
The challenge lies in assessing different business models and selecting the ones that
would enable government agencies to extract the highest value over the life cycle
and not be misled by the size of the capital outlay. To optimise value, agencies would
have to be very clear what the needs are and take into account different factors in the
procurement process, such as owning or leasing of buildings/equipment, and
evaluating the merits of different types of financing options for large projects.
Public Private Partnership (PPP) is one such option. Through long-term partnerships
with the private sector, optimal risk-sharing could be achieved. The private sector
partner could be motivated to introduce new technology and innovative practices, as
well as find opportunities to open up the public facility where possible for commercial
use to share the cost. As with any public sector projects, government agencies will
continue to remain responsible for the supervision and successful implementation of
the project within the stipulated life cycle cost. The Ministry of Finance (MOF) will
continue working with agencies to examine the feasibility of PPP for the procurement
of large projects, and adopting PPP models when they can generate greater value
over the entire project life cycles.
13
“S$1.3b Standard ICT Operating Environment Tender Awarded to oneMeridian”, IDA news release, 28 Feb 2008.
24
MAXIMISING VALUE IN PUBLIC SECTOR PROJECTS THROUGH SMART
PROCUREMENT
Box 4.2: Public Private Partnership for Ulu Pandan NEWater Plant
The Ulu Pandan NEWater Plant (Ulu Pandan NP) is the fourth and largest NEWater
plant in Singapore, supplying about half of the total NEWater supply for Singapore’s
use. The other three NEWater plants are located in Bedok, Kranji and Seletar, and
are owned and operated by Public Utilities Board (PUB). Unlike them, the Ulu
Pandan NP was developed using the PPP model by the private sector service
provider, Keppel Seghers, who will supply NEWater to PUB for a period of 20 years
from 2007 to 2027.
Benefits of PPP for Ulu Pandan NP
Leveraging on the respective strengths of the public and private sector partners, the
PPP approach has resulted in a lower tariff for NEWater. The cost saving in the price
of NEWater after the plant was put into operation was passed on to consumers.
Other benefits of the PPP model include:
Economic Optimisation. Under PPP, the design, construction, operation and
maintenance are undertaken by the same company or consortium. Therefore, there
is a strong incentive to factor in and optimise the operation and maintenance costs of
the plant by taking on a life cycle perspective.
In the case of Ulu Pandan NP, Keppel Seghers adopted the “optimal lifecycle
costing” approach instead of finding the cheapest way to build the plant. For
instance, the use of several energy-saving features such as the variable speed drive
adopted for the pumps could potentially translate into lower production costs and
savings which are then passed on to consumers 14 even though the initial capital
outlay may be higher.
Greater Room for Innovation. For Ulu Pandan NP, the technical requirements
specified in the contract are essentially based on performance/outcome with the
quality and quantity of NEWater as the key performance criteria. This gives Keppel
Seghers more flexibility to innovate and optimise the design of the plant instead of
following pre-determined specifications so long as they are able to meet the key
performance criteria.
Business Opportunities for the Private Sector. Under traditional procurement, PUB
would contract the private sector to design and construct its facilities after which it will
operate and maintain these facilities. With PPP, PUB is able to tap on the expertise
and experience of practitioners in the water treatment and recycling industry to not
just design and build but also to run and maintain the facilities. This opens up
business opportunities for the private sector to be involved in service delivery to the
public sector.
4.5
Building Capacity for the Future
In 2007 and 2008, the construction industry experienced steep cost hikes due to
increases in material prices and capacity crunch within the industry. To relieve cost
pressures on the construction sector, the Government deferred public projects
estimated at $4.7 billion15. Apart from raw material cost increases that are beyond
14
NEWater Project Summary, MOF
http://www.mof.gov.sg/policies/attachments/Public%20Info%20on%20PPP.Newater.final.pdf
15
“Government will not implement measures to stimulate property sector”, Channel NewsAsia, 26 Nov 2008,
http://www.channelnewsasia.com/stories/singaporebusinessnews/view/392434/1/.html
25
FEATURE ARTICLES
our control, capacity bottlenecks arising from manpower and equipment shortages
have also contributed to such a situation.
To alleviate such a situation in future, the Government will provide a long-term
projection of its construction demands so the industry could better plan their capacity
build up whether in manpower or equipment investments. Government spending in
construction projects was approximately $10 billion in 2007. With our plans to further
improve our infrastructure to create a high quality living environment, there are many
major transport and housing projects in the pipeline. Expenditure on construction is
estimated to average at least $6 billion per year over the next 10 years. Our
construction industry should take advantage of this sustained demand to build up
capacity. The Government would also benefit from smoother year to year
expenditures without the supply-side bottlenecks.
Box 4.3: Mitigating the Effects of Cost Hikes and Supporting Capacity Building
in the Construction Sector
The following measures illustrate how Government procurement can help to mitigate
the effects of increased construction costs for public sector projects, and also build
up the capacity of the construction industry in Singapore.
Tackling Cost Hikes
(a) Price Fluctuation Clause in Construction Contracts
The prices for construction materials tend to be volatile. In the absence of flexible
contractual provisions, contractors would price in such risks in their bids, resulting in
higher costs for public projects. Government agencies have been advised in 2008 to
adopt price fluctuation clauses for key construction materials such as concrete and
reinforcement bars. This way, contractors would be assured that they could be
reimbursed for variations in prices, instead of pricing in such uncertainties in their
bids.
(b) Demand Aggregation
Demand Aggregation (DA) allows procuring organisations to leverage on volume to
extract economies of scale. In the construction sector, the public sector can lower the
cost of materials by aggregating common purchases across agencies. For example,
the use of bulk tenders for the supply of concreting sand and aggregates has
enabled the government to enjoy the benefits of DA for its public housing projects, in
addition to achieving a key objective of buffering against supply glitches.
(c) Value Management
Value Management (VM) brings together decision-makers, technical specialists and
other stakeholders to identify the purpose, importance and benefits of a project
through a structured and collaborative process. It aims to maximise project value
within given time and cost constraints through collaboration. Where used during the
early development stages of projects, VM can help to identify and facilitate trade-offs
that need to be made across agencies on different objectives (such as economic
versus social benefits), and enable participants to achieve consensus on optimal
solutions that provide the best value for money. Given the complexity and potentially
high costs involved in construction projects, the application of VM offers immense
potential for generating significant value whilst saving on construction costs.
26
MAXIMISING VALUE IN PUBLIC SECTOR PROJECTS THROUGH SMART
PROCUREMENT
Capacity Building
(a) Providing Longer Project Pipelines for Better Visibility
Contractors may submit higher bids when they are uncertain over prospects for new
projects even though they currently have visibility of the government’s project
schedule for the next year. But in reality, contractors often need longer-term
information to work out the resources needed to bid for projects. The Building and
Construction Authority (BCA) has therefore worked with MOF to gather more pipeline
information on public sector construction projects over a three-year horizon (instead
of the current year) and had shared these with the industry during BCA’s annual
"Construction and Property Prospects Seminar" in January 2009. With more
information of impending public projects over a longer time horizon, contractors and
consultants can better plan their workload and resource requirements.
(b) Upgrading Local Capability
It is imperative for contractors to continually enhance their capabilities to remain
competitive. This can be done by investing in capital assets such as construction
equipment, or in human capital, by upgrading their skills in areas like project
management, for example. On its part, the Government would review existing
government procurement policies and processes to better support the construction
sector. Collectively, these would build up the capacity of the construction sector that
would allow it to seize new opportunities when the economy recovers.
4.6
Promoting Innovation and Enterprise
The Public Sector Innovation Framework (PSIF) was launched in 2008 to promote
public-private collaborations in bringing about breakthroughs in the public services.
Under the PSIF, public agencies can propose projects that address their needs
through innovation when there are no off-the-shelf solutions to bring about desired
outcomes. Innovation Platforms (InnoPlats) provide the collaborative framework to
guide ideas from basic stage to realisation by bringing together user public agencies,
industry promotion agencies, technology developers and private sector players in
solving problems.
The Government has set aside $220 million for FY2008 to FY2010 as a seed fund for
experimentation, test-bedding and building capabilities of the PSIF. Government
procurement processes have also been refined to support this strategic shift and to
allow government agencies to harness the full potential of public-private
collaborations.
Box 4.4: Adopting Smart Procurement Practices to Enable Private-Public
Collaborations
Existing procurement procedures allow public agencies to collaborate with the private
sector to procure goods and services through limited tenders or open sourcing.
Limited Tenders
For products that are not readily available in the market, agencies can use limited
tendering so long as the intended government procurement satisfies certain
conditions such as:
27
FEATURE ARTICLES
(i) There is only a sole supplier. This would be a common situation for works of arts
or for reasons connected to the protection of exclusive rights such as patents or
copyrights.
(ii) For projects that are of R&D nature, government agencies may need to procure
prototypes or a first product or service to support further research and
experimentation.
Open Sourcing
Where open sourcing is still the preferred option, several procurement approaches
can be considered:
Request-For-Information (RFI): This process is essentially an information-gathering
or market-testing stage. No formal price bids will be submitted under RFI.
Request-For-Proposal (RFP): This process is used when agencies specify the
problem to be solved, rather than specifying a pre-determined product or solution, so
to give flexibility to suppliers.
Spiral Contracting: For projects with potential benefits that are unclear at the on-set,
the contracts can be structured into multiple stages which could be exercised as
options when the preceding stage proves successful. For example, Stage 1 may call
for Proof of Concept, Stage 2 for the development of prototype and Stage 3 for a pilot
trial. When the project goes into commercial production, government agencies would
generally open up the project for competition to enable more suppliers to participate.
In October 2007, the Ministry of Health (MOH), the Infocomm Development Authority
of Singapore (IDA) and The Enterprise Challenge (TEC) adopted the RFP process to
issue a joint Healthcare Call-for-Collaboration (CFC). This was to invite healthcare
institutions and infocomm partners to form consortia to design, develop and test
innovative solutions on improving the efficiency in the healthcare system and clinical
care quality. This approach stemmed from the belief that the public sector can better
leverage on infocomm technology to provide innovative solutions through closer
collaboration with the private sector.
This CFC resulted in the commitment of $3 million from 2008-2010 to fund the
development of a number of projects that would achieve this objective, such as an
intelligent and real-time operating theatre dashboard system, an integrated children
mental wellness system, and a healthcare information exchange portal. Where there
is potential for further development and application of these innovative solutions, and
there remain additional R&D elements or patent/copyright issues, the consortia may
be appointed through limited tendering without infringing intellectual property rights.
4.7
Conclusion
The Government will continue to adopt a “Smart Procurement” approach to achieve
the greatest cost-benefit and maximise value for money. It will continue to seek out
new modes of procurement that would give it best value on a life cycle and
sustainable basis.
28
COMPETITIVE TAX REGIME
5 Competitive Tax Regime
Singapore’s tax policy supports business creation and growth. The tax burden is kept
competitive to encourage companies to set up and expand their businesses here.
The competitiveness of businesses is hence sharpened, in turn creating jobs and
other opportunities for a robust economy.
5.1
Pro-business Tax Regime
At 18%, Singapore’s headline corporate tax rate is internationally competitive. This
headline tax rate however belies the much lower effective tax rate that companies
actually pay. Our Partial Tax Exemption scheme for companies further reduces the
effective tax burden by exempting up to $152,500 of chargeable income from tax.
The newly introduced 1% cut in headline rate, to be effective from Year of
Assessment (YA) 2010, will sharpen our competitive edge further (see Box 5.1).
Box 5.1: International Corporate Tax Rates
Japan
40.7%
Countries
US
40.0%
Australia
30.0%
UK
30.0%
Indonesia
30.0%
Vietnam
28.0%
Sw eden
28.0%
Korea
27.5%
Malaysia
26.0%
Sw itzerland
19.6%
Singapore
17.0%
HK
16.5%
Ireland
0.0%
12.5%
10.0%
20.0%
30.0%
40.0%
50.0%
Corporate Tax Rates (%)
*The chart shows how Singapore’s new corporate headline tax rate of 17% measures up against other key
jurisdictions. Comparables’ headline rates were derived from KPMG’s Corporate and Indirect Tax Rate Survey 2008.
Other attractive features of Singapore’s tax regime are as follows:
ƒ
Our territorial system of taxation means that only income sourced in
Singapore, or income derived overseas but received in Singapore, is subject
to tax.
ƒ
Under our Foreign-Sourced Income Exemption regime, most foreign-sourced
dividends, branch profits and service income that are remitted to Singapore
by companies are exempt from tax.
ƒ
Our loss transfer system of group relief allows a qualifying company to
transfer its current year trade losses, capital allowances and donations to
29
FEATURE ARTICLES
another company within the same group so that the overall tax burden of the
group is reduced.
5.2
ƒ
Companies are allowed to carry forward their unutilised trade losses and
capital allowances indefinitely, subject to conditions. Unutilised donations can
be carried forward for up to five years.
ƒ
Current year unutilised trade losses and capital allowances of up to $100,000
may be set-off against assessable income of the immediate preceding year to
get a refund of tax previously paid. For losses incurred in YA2009 and
YA2010, the $100,000 cap is increased to $200,000 and the time limit for loss
carryback has also been extended to three preceding years. These temporary
changes aim to ease the cash-flow of businesses in this economic downturn.
ƒ
Under our One-tier Corporate Tax System, dividends issued by tax resident
companies are not taxed in the hands of shareholders.
ƒ
Gains that are capital in nature are not taxable in Singapore.
ƒ
Our wide network of Avoidance of Double Taxation Agreements (DTAs)
facilitates cross-border trade and investment.
Starting a Business
A key challenge for budding entrepreneurs is the need to raise capital to finance the
start-up costs for their business. To provide adequate capital for such start-ups,
venture capital firms are given income tax exemption on income from qualifying
investments to encourage such venture investments. The Enterprise Investment
Incentive also allows investors of qualifying start-ups to get a deduction of their
investment losses in approved investments, thus sharing the downside risks with
investors.
To ease the cash-flow of start-ups, we have allowed pre-commencement expenses
to be deductible if they are incurred from the first day of the same accounting year in
which the company earns its first dollar. Such business expenses are usually only
deductible after a company has commenced operation.
5.3
Growing a Business
Helping Small and Medium Size Enterprises (SME)
Qualifying start-ups enjoy full tax exemption on the first $100,000 of chargeable
income and a 50% exemption on the next $200,000 of chargeable income during
their first three YAs. Beyond the first three YAs, companies can still enjoy the broadbased Partial Tax Exemption scheme that aims to especially help SMEs, which
allows for a 75% exemption on the first $10,000 of chargeable income and a 50%
exemption on the next $290,000 of chargeable income. For a company with
$300,000 of chargeable income, only 8.4% of this income will be taxed. This means
SMEs in Singapore enjoy the lowest corporate tax rate among major jurisdictions.
Encouraging Innovation and R&D
A comprehensive set of new R&D tax measures was introduced in Budget 2008 to
encourage pervasive innovation. Companies can now enjoy a tax deduction equal to
150% of qualifying spending on R&D done in Singapore. We also introduced a new
30
COMPETITIVE TAX REGIME
incentive that grants companies R&D tax allowances of up to $150,000 (computed
based on 50% of their first $300,000 chargeable income) which can be utilised to
offset their assessable income if they expend incremental expenditure on qualifying
R&D activities in subsequent years. This scheme will especially help spur SMEs to
do more R&D in Singapore.
Another scheme introduced in Budget 2008 was the R&D Incentive for Start-up
Enterprises (RISE). Currently, start-ups can carry forward their losses indefinitely to
offset against taxable income in subsequent years, subject to conditions. Under RISE,
start-ups that have expended at least $150,000 in a year on qualifying R&D
activities in Singapore have an additional option to convert their adjusted tax
losses into cash grants of up to $20,250, during their first three YAs. R&D intensive
start-ups, which commonly run losses in their initial years, will benefit most from the
scheme.
Relieving Businesses of Running Costs
Singapore has an attractive regime for deductions and allowances. Most business
operating expenses are deductible except for a small number of specific expenses
that are statutorily disallowed. Capital expenditure for most plant and machinery are
written-down over just three years under our current capital allowance regime. For
certain prescribed fixed assets such as computers and automation equipment, the
write-down period is further accelerated to only one year. Qualifying companies
looking to base their intellectual property (IP) rights in Singapore will also gain from
the automatic writing-down allowances for IP acquisition costs over a period of five
years, which is comparable to key IP holding jurisdictions like the Netherlands and
Switzerland.
In Budget 2009, we have introduced an accelerated capital allowance regime which
allows businesses to write down over two years, instead of the present three years,
plant and machinery acquired for the financial years ended 2009 and 2010. To
further encourage businesses to acquire new equipment in these two years, the
write-down rate will be 75% of cost for the first year with full write-down of the cost by
the second year of claim.
To encourage SMEs to renovate their business premises, especially those in the
service and retail sectors, we introduced a new Renovation and Refurbishment (R&R)
allowance in Budget 2008 which allows businesses to write down their qualifying
R&R costs over a period of three years. As announced in Budget 2009, the writedown period will be accelerated to one year for YA2010 and YA2011. This
accelerated write-down will help businesses which intend to refurbish their premises
in 2009 or 2010 during the slowdown.
Attracting Talent
Critical to any business is the ability to attract and retain talent. Our personal income
tax regime is highly competitive (see Box 5.2). Estate duty was removed last year to
encourage individuals to grow and manage their wealth from Singapore. Other tax
schemes are available to help employers in their efforts to recruit global talents. For
example, to help employers defray costs incurred in the recruitment and relocation of
global talent, the Ministry of Manpower (MOM) and Inland Revenue Authority of
Singapore (IRAS) administer a scheme that grants Double Tax Deduction for such
expenses to qualifying businesses.
31
FEATURE ARTICLES
Box 5.2: Top Individual Income Tax Rates
Sw eden
55.0%
Japan
50.0%
Australia
45.0%
Countries
Ireland
41.0%
UK
40.0%
Vietnam
40.0%
Sw itzerland
40.0%
US
35.0%
Indonesia
35.0%
Korea
35.0%
Malaysia
28.0%
Singapore
20.0%
HK
0.0%
16.0%
10.0%
20.0%
30.0%
40.0%
50.0%
60.0%
Top Individual Income Tax Rates (%)
*Headline rates for comparables were derived from KPMG’s Individual Income Tax Rate Survey 2008.
Another example is the Equity Remuneration Incentive Scheme (ERIS). Many
companies now use equity-based remuneration as a tool to motivate and incentivise
their employees. ERIS helps to encourage employers to use such remuneration
arrangements by providing employees with a partial income tax exemption on gains
made on employee stock options or share awards. Employers may also get a
deduction for qualifying costs incurred in respect of treasury shares.
5.4
Expanding and Internationalising a Business
Companies looking to expand overseas can tap on the Overseas Investment
Development scheme which grants a double tax deduction for certain expenses
incurred from exploring overseas investment opportunities (e.g. overseas project
development office). In addition, local businesses venturing abroad can apply for the
Overseas Enterprise Incentive, which offers tax exemption on qualifying income from
their overseas projects for up to 10 years.
Singapore’s extensive network of DTAs – with a total of 60 comprehensive treaties in
force to date – offers both local and foreign investors a competitive edge when doing
business outside of Singapore. As companies venture into the global market in
search of business opportunities, DTAs will help to relieve double taxation of income
by providing certainty on taxing rights. Companies will also enjoy preferential
withholding tax rate for dividends, interest and royalties derived from businesses in
treaty countries.
For income derived from countries with which Singapore does not have a DTA,
Singapore grants unilateral tax credits to offset the foreign taxes paid. These
unilateral tax credits are available for all forms of Foreign-Sourced Income including
rental and interest income. This has further enhanced Singapore’s status as an
international business hub.
32
COMPETITIVE TAX REGIME
5.5
Consolidating and Restructuring a Business
Companies often grow through mergers and acquisitions. The introduction of
changes to the tax treatment of corporate amalgamations announced in Budget 2009
will help address another important aspect of a company’s growth cycle. Under the
new tax framework, the tax consequences arising from an amalgamation will be
minimised so that companies can readily restructure and position themselves for
growth.
5.6
Low Effective Tax Rate (ETR)
Companies in Singapore enjoy low effective tax rates, taking into account the low
headline tax rate, Partial Tax Exemption and where applicable, tax incentives to
promote economic activity in high growth, high value-added sectors. In a recent study
conducted by MOF and Ernst & Young, it was shown that our overall effective tax
rates are most competitive (see Box 5.3).
5.7
Conclusion
Singapore’s tax regime has always been aimed at enhancing business
competitiveness. The measures announced this year, particularly the cut in headline
tax rate to 17%, bear further testimony to Singapore’s pro-enterprise philosophy and
intent to be a preferred place for innovation and enterprise.
Box 5.3: MOF / Ernst & Young Study
Objective
In January 2008, MOF conducted a study with Ernst & Young to compare the
effective corporate tax rates of companies in the manufacturing and financial sector
vis-à-vis four other jurisdictions – Hong Kong, Shanghai, Dublin and Zurich. This was
done by comparing the effective corporate tax rate computed for six company profiles
of varying sizes from the manufacturing and financial sectors (see Chart 5.1) in each
tax jurisdiction.
Methodology
Profit and loss account and fixed asset information of the test profiles were
developed from actual company data and transfer prices were benchmarked for
consistency with industry norms. Tax computations for each profile were then
prepared for each jurisdiction based on the specific tax laws of the jurisdiction. From
the tax computations, the total effective corporate tax rates were derived (see Chart
5.2). This approach enables key aspects of the tax regime relevant to the company
profile to be considered in the comparison.
33
FEATURE ARTICLES
Chart 5.1: Base Profiles
Types of
companies
Industry 1:
A manufacturing company
Industry 2:
A financial services company
(excluding deposit taking and
lending activities)
A mediumsized local
company
No foreign entities, export
sales, limited IP
M1
Boutique firm
FS1
A large local
conglomerate
A local group with
manufacturing, R&D, sales and
distribution activities
M2
Homegrown finance house with
integrated services
FS2
Subsidiary of a
large MNC
Local subsidiary of a US MNC
with regional HQ activities,
manufacturing, sales and R&D
M3
Local subsidiary of global
investment bank
FS3
The scope of the study was confined to corporate tax burden (including local
surcharges and in the case of China, business tax) and excluded the effects of tax
contributions from property tax, consumption tax and labour tax. Relevant tax
incentives were also accorded to the appropriate company profiles.
Results
Key findings from the study are as follows (results are summarised in Chart 5.2
below):
(1)
Singapore is competitive, albeit we do not always offer the lowest ETR.
(2)
Singapore is the most competitive jurisdiction in the case of the medium-size
manufacturing company (i.e. M1). This is despite Singapore having a higher
headline tax rate (at 18%) than Dublin. Our lower effective tax rates stem
from our Partial Tax Exemption which is especially beneficial for companies
with lower turnover.
(3)
Singapore is also comparable with Hong Kong in competitiveness for the
boutique firm (FS1) and the home grown finance house (FS2).
(4)
Singapore has the most competitive tax regime for subsidiaries of MNCs in
both the manufacturing and financial sector (i.e. M3 and FS3). Our lead is
largely attributed to a combination of our tax incentives and our ForeignSourced Income Exemption regime.
34
COMPETITIVE TAX REGIME
Chart 5.2: Effective Corporate Tax Rate
Singapore
Hong Kong
Shanghai
Dublin
Zurich
18.0%
16.5%
25.0%
12.5%
21.3%
M1
14.3%
-
26.4%
16.7%
21.3%
M2
12.6%
-
22.0%
9.9%
16.0%
M3
4.8%
-
15.0%
12.7%
9.7%
FS1
16.5%
16.1%
45.5%
14.1%
21.3%
FS2
16.0%
16.3%
39.2%
13.2%
21.3%
FS3
9.5%
16.1%
44.7%
14.0%
13.1%
Headline Tax
Rate
Total ETR
Notes
1. Total ETR = accounting tax charge divided by profit before tax.
2. Zurich headline rate of 21.3% takes into account federal, cantonal and communal (municipal) taxes.
3. In the case of Hong Kong, ETR for M1, M2 and M3 were not applicable as Hong Kong’s economy is dominated
by the financial and business sector, with manufacturing playing a lesser role.
.
35
[III] STATISTICAL ANNEX
Table 6.1: Overall Fiscal Position for FY2000 to FY2009 ($million)
FY2000
FY2001
FY2002
FY2003
FY2004
FY2005
FY2006
FY2007
FY2008
(Revised)
40,498
37,972
2,397
129
38,901
29,247
9,654
1,597
7,404
FY2009
(Budgeted)
33,427
30,971
2,341
115
43,622
32,157
11,465
-10,195
6,151
39
STATISTICAL ANNEX
Operating Revenue
31,439
28,496
25,469
25,315
27,469
28,171
31,289
40,375
Tax Revenue
25,628
24,172
21,502
21,501
23,799
25,687
28,827
36,630
Fees and Charges
5,650
4,134
3,805
3,492
3,366
2,246
2,202
3,630
Others
162
190
162
321
305
238
259
115
Total Expenditure
27,908
27,305
27,152
28,499
28,957
28,634
29,905
32,982
Operating Expenditure
18,415
18,536
19,359
19,991
20,355
21,445
23,925
25,952
1
Development Expenditure
9,494
8,769
7,793
8,508
8,602
7,189
5,980
7,030
Primary Surplus/(Deficit)
3,531
1,190
-1,683
-3,184
-1,487
-463
1,384
7,393
Special Transfers:
1,835
5,264
1,802
603
1,661
829
3,570
2,142
Special Transfers Excluding Top-Ups to
Endowment and Trust Funds:
1,035
3,464
1,201
603
961
579
2,622
1,342
4,394
4,741
Jobs Credit scheme
1,125
3,375
2
Special Risk-Sharing Initiative
388
New Singapore Shares
2,450
Growth Dividends
1,362
0
1,055
Economic Restructuring Shares
1,201
600
854
80
GST Credits
533
920
460
Senior Citizens’ Bonus
109
245
121
Workfare Bonus Scheme Fund and Workfare Income
400
297
Workfare Income Supplement Scheme Special
33
100
Utilities-Save Scheme
8
63
64
148
205
118
3
Service and Conservancy Charges/Rental Rebates
59
36
64
65
73
40th Anniversary NS Bonus
201
0
4
CPF Top-Up
913
1,010
0
4
99
412
479
0
226
Edusave Account and PSEA
45
188
490
3
MediShield Scheme for the Elderly
108
4
5
Other Measures for Elderly and Lower income
14
0
2
9
32
Assistance to SMEs
0
21
21
R&D Incentive for Start-up Enterprises
50
7
Basic Surplus/(Deficit)
2,496
-2,274
-2,884
-3,787
-2,448
-1,042
-1,238
6,051
-2,796
-14,936
Top-Ups to Endowment and Trust Funds:
800
1,800
600
0
700
250
948
800
3,010
1,410
6
Top-Up to Endowment Funds / Skills Development
800
1,800
600
700
250
448
300
1,600
300
National Research Fund
500
500
800
400
CPF Deferment and Voluntary Deferment Bonus
350
450
LIFE Bonus
260
260
7
NII/NIR Contribution
2,287
1,375
3,675
1,900
3,043
2,777
2,131
2,405
3,654
7,673
Overall Budget Surplus/ (Deficit)
3,983
-2,698
191
-1,887
-105
1,486
-55
7,656
-2,153
-8,673
* Fiscal position may not be comparable across financial years due to reclassification of revenue and expenditure items. Figures may not add up due to rounding.
1
Development Expenditure excludes land-related expenditure from FY2001.
2
This includes the new Bridging Loan Programme, Trade Credit Insurance Programme, and Loan-Insurance Scheme-Plus.
3
Prior to FY2005, Service and Conservancy Charges and rental rebates were subsumed under Ministry of National Development’s Operating Expenditure.
4
Consist of CPF Ordinary Account, Pre-Medisave, Medisave and CPF Share Ownership Top-Up schemes.
5
Consist of Senior Pensioners Grant Scheme, public transport vouchers and assistance through Citizens’ Consultative Committees, Self-Help Groups and Voluntary Welfare Organisations.
6
Consist of Top-Ups to Edusave, Medical, Lifelong Learning, Community Care (formerly known as Community Assistance) and ElderCare Funds.
7
On 21 October 2008, Parliament passed the Bill to amend the Constitution to allow the Government to spend up to 50% of the expected long-term real returns on reserves invested by GIC and
MAS. On the remaining reserves, the existing NII framework applies. Effective from FY2009, the NIRC will reflect the total amount of investment returns that is taken into the Budget for spending.
40
FY2000
Operating Revenue
FY2001
FY2002
FY2003
FY2004
FY2005
FY2006
FY2007
FY2008
(Revised)
FY2009
(Budgeted)
31,439
28,496
25,469
25,315
27,469
28,171
31,289
40,375
40,498
33,427
Corporate Income Tax
Personal Income Tax
Statutory Boards’ Contributions
Assets Taxes
Customs and Excise Taxes
Goods and Services Tax
Motor Vehicle Taxes
Vehicle Quota Premiums
Betting Taxes
1
Other Taxes
8,316
4,030
1,192
1,606
1,847
2,121
2,506
3,105
1,494
2,516
7,821
4,547
862
1,517
1,803
2,134
1,972
2,089
1,575
1,939
6,822
4,049
625
1,308
1,730
2,165
1,446
1,778
1,550
1,809
5,921
3,862
488
1,512
1,901
2,957
1,486
1,543
1,524
1,851
6,107
3,956
1,405
2,058
1,924
3,470
1,392
1,257
1,534
1,952
7,340
4,324
1,249
1,910
1,973
3,815
1,432
321
1,501
2,143
8,474
4,707
955
2,112
1,887
3,978
1,745
93
1,571
3,399
9,250
5,687
1,683
2,582
1,985
6,165
2,189
673
1,714
5,375
10,100
6,219
2,143
2,837
1,988
6,574
2,048
379
1,810
4,253
8,205
6,055
312
1,030
2,001
6,560
1,595
319
1,860
3,354
Other Fees and Charges
2
Others
2,545
162
2,045
190
2,027
162
1,949
321
2,109
305
1,925
238
2,109
259
2,956
115
2,018
129
2,022
115
Table 6.2b: Revenue Collections for FY2000 to FY2009 (% of GDP)
FY2000
Operating Revenue
FY2001
FY2002
FY2003
FY2004
FY2005
FY2006
FY2007
FY2008
(Revised)
FY2009
(Budgeted)
19.3%
18.7%
16.1%
15.3%
15.0%
14.2%
14.6%
16.1%
16.0%
13.4%
Corporate Income Tax
Personal Income Tax
Statutory Boards’ Contributions
Assets Taxes
Customs and Excise Taxes
Goods and Services Tax
Motor Vehicle Taxes
Vehicle Quota Premiums
Betting Taxes
1
Other Taxes
5.1%
2.5%
0.7%
1.0%
1.1%
1.3%
1.5%
1.9%
0.9%
1.5%
5.1%
3.0%
0.6%
1.0%
1.2%
1.4%
1.3%
1.4%
1.0%
1.3%
4.3%
2.6%
0.4%
0.8%
1.1%
1.4%
0.9%
1.1%
1.0%
1.1%
3.6%
2.3%
0.3%
0.9%
1.1%
1.8%
0.9%
0.9%
0.9%
1.1%
3.3%
2.2%
0.8%
1.1%
1.1%
1.9%
0.8%
0.7%
0.8%
1.1%
3.7%
2.2%
0.6%
1.0%
1.0%
1.9%
0.7%
0.2%
0.8%
1.1%
3.9%
2.2%
0.4%
1.0%
0.9%
1.9%
0.8%
0.0%
0.7%
1.6%
3.7%
2.3%
0.7%
1.0%
0.8%
2.5%
0.9%
0.3%
0.7%
2.1%
4.0%
2.5%
0.8%
1.1%
0.8%
2.6%
0.8%
0.1%
0.7%
1.7%
3.3%
2.4%
0.1%
0.4%
0.8%
2.6%
0.6%
0.1%
0.7%
1.3%
Other Fees and Charges
2
Others
1.6%
0.1%
1.3%
0.1%
1.3%
0.1%
1.2%
0.2%
1.2%
0.2%
1.0%
0.1%
1.0%
0.1%
1.2%
0.0%
0.8%
0.1%
0.8%
0.0%
* Figures may not add up due to rounding.
Consist of Stamp Duty, Foreign Worker Levy, etc.
2
Prior to the Constitutional amendments to protect 50% of NII in FY2000, interest on development loans was classified as ‘Others’.
1
STATISTICAL ANNEX
Table 6.2: Revenue Collections for FY2000 to FY2009 ($million)
Table 6.3: Operating Expenditure by Sector for FY2000 to FY2009 ($million)
FY2000
Total
FY2001
FY2002
FY2003
FY2004
FY2005
FY2006
FY2007
FY2008
(Revised)
FY2009
(Budgeted)
18,415
18,536
19,359
19,991
20,355
21,445
23,925
25,952
29,247
32,157
Social Development
Education
National Development
Health
Environment and Water Resources
Community Development, Youth and Sports
Information, Communications and the Arts
6,654
4,277
325
1,072
390
377
213
7,770
4,767
398
1,445
414
513
234
7,946
4,824
409
1,451
448
572
241
8,615
4,997
414
1,904
453
619
228
8,500
4,975
377
1,604
479
814
251
8,778
5,215
336
1,680
408
844
294
10,520
6,352
671
1,840
414
903
341
11,472
6,786
900
2,019
453
962
352
13,118
7,486
827
2,416
618
1,351
422
14,826
8,015
744
3,084
748
1,799
437
Security and External Relations
Defence
Home Affairs
Foreign Affairs
8,041
6,561
1,300
180
8,865
7,089
1,580
196
9,468
7,694
1,563
211
9,634
7,714
1,708
212
10,228
8,243
1,752
233
10,981
8,889
1,825
267
11,540
9,273
2,010
257
12,399
9,660
2,428
311
13,225
10,473
2,407
345
14,057
11,007
2,683
367
Economic Development
Transport
Trade and Industry
Manpower
1
Info-Communications and Media Development
2,908
2,390
412
107
-
1,113
406
553
130
24
1,133
385
564
156
28
995
292
497
158
47
884
289
392
161
42
919
277
436
166
39
984
285
473
188
38
1,113
321
528
227
37
1,778
382
693
673
31
2,041
389
740
856
55
811
388
120
170
134
788
352
112
173
151
812
379
103
186
143
747
333
96
182
135
743
318
97
187
141
768
345
100
186
136
880
428
106
195
151
967
438
107
247
176
1,126
518
126
257
225
1,233
577
135
278
243
Government Administration
Finance
Law
Organs of State
Prime Minister's Office
* Figures may not add up due to rounding.
Media Development programme has been reclassified from social development to economic development.
1
STATISTICAL ANNEX
41
42
FY2000
1
FY2001
FY2002
FY2003
FY2004
FY2005
FY2006
FY2007
FY2008
(Revised)
FY2009
(Budgeted)
Total
9,494
8,769
7,793
8,508
8,602
7,189
5,980
7,030
9,654
11,465
Social Development
Education
National Development
Health
Environment and Water Resources
Community Development, Youth and Sports
Information, Communications and the Arts
4,517
1,591
2,069
140
528
92
97
4,170
1,473
1,770
145
502
118
162
3,971
1,774
1,089
82
771
112
143
4,387
1,218
1,865
103
952
90
160
3,858
1,239
1,153
114
1,101
97
155
2,944
867
1,010
85
775
97
110
2,141
608
675
96
570
103
89
2,824
742
1,187
185
381
234
95
2,815
760
1,127
339
329
113
148
3,249
687
1,172
621
345
155
270
Security and External Relations
Defence
Home Affairs
Foreign Affairs
1,585
861
654
70
1,362
730
570
62
1,068
509
478
81
1,020
524
439
57
899
377
473
49
869
363
460
46
840
355
399
86
828
349
396
83
758
330
365
62
870
440
350
80
Economic Development
Transport
Trade and Industry
Manpower
2
Info-Communications and Media Development
3,147
1,130
1,820
18
179
2,906
1,508
1,293
82
23
2,255
1,203
1,009
38
5
2,615
1,115
1,421
54
25
3,016
1,776
1,154
52
33
2,746
1,617
1,055
36
39
2,786
1,518
1,207
15
46
3,189
1,621
1,516
24
28
5,774
3,426
2,286
35
27
6,841
4,252
2,531
51
7
245
57
131
38
18
331
70
213
30
18
499
100
325
33
41
486
214
184
47
42
828
308
329
151
40
630
350
218
31
32
213
10
167
11
25
189
44
123
6
14
307
127
158
11
11
504
279
172
16
38
Government Administration
Finance
Law
Organs of State
Prime Minister's Office
* Figures may not add up due to rounding. Expenditure on research and development has been reclassified as part of ministries’ expenditure for FY1998 to FY2000.
1
Development Expenditure excludes land-related expenditure from FY2001.
2
Media Development programme has been reclassified from social development to economic development.
STATISTICAL ANNEX
Table 6.4: Development Expenditure by Sector for FY2000 to FY2009 ($million)
Table 6.5: Total Expenditure by Sector for FY2000 to FY2009 ($million)
FY2000
1
FY2001
FY2002
FY2003
FY2004
FY2005
FY2006
FY2007
FY2008
(Revised)
FY2009
(Budgeted)
Total
27,908
27,305
27,152
28,499
28,957
28,634
29,905
32,982
38,901
43,622
Social Development
Education
National Development
Health
Environment and Water Resources
Community Development, Youth and Sports
Information, Communications and the Arts
11,171
5,868
2,393
1,212
918
469
311
11,940
6,240
2,167
1,591
916
631
396
11,917
6,598
1,498
1,533
1,219
684
385
13,001
6,214
2,278
2,007
1,405
709
388
12,358
6,214
1,529
1,718
1,579
912
406
11,721
6,082
1,346
1,765
1,183
941
404
12,661
6,959
1,347
1,936
984
1,006
430
14,298
7,528
2,087
2,205
834
1,196
448
15,933
8,246
1,953
2,754
947
1,463
569
18,076
8,701
1,917
3,705
1,093
1,954
707
Security and External Relations
Defence
Home Affairs
Foreign Affairs
9,626
7,422
1,954
250
10,228
7,819
2,150
258
10,536
8,203
2,040
293
10,654
8,238
2,147
270
11,127
8,620
2,225
282
11,850
9,252
2,285
313
12,380
9,628
2,409
343
13,227
10,009
2,824
394
13,983
10,803
2,772
408
14,927
11,447
3,033
447
Economic Development
Transport
Trade and Industry
Manpower
2
Info-Communications and Media Development
6,055
3,520
2,232
124
179
4,020
1,914
1,846
212
47
3,389
1,588
1,573
194
33
3,610
1,408
1,918
212
73
3,900
2,066
1,545
213
75
3,665
1,894
1,491
202
78
3,770
1,803
1,680
204
83
4,301
1,942
2,043
251
65
7,552
3,809
2,979
707
57
8,882
4,641
3,271
907
63
Government Administration
Finance
Law
Organs of State
Prime Minister's Office
1,056
445
251
208
152
1,118
422
325
202
169
1,310
479
427
219
185
1,233
547
280
229
177
1,571
626
426
338
181
1,398
696
318
217
167
1,094
438
273
206
177
1,155
482
229
254
190
1,433
645
284
268
236
1,737
855
307
294
281
43
STATISTICAL ANNEX
* Figures may not add up due to rounding. Expenditure on research and development has been reclassified as part of ministries’ expenditure for FY1998 to FY2000.
1
Development Expenditure excludes land-related expenditure from FY2001.
2
Media Development Programme has been reclassified from social development to economic development.
44
FY2000
1
FY2001
FY2002
FY2003
FY2004
FY2005
FY2006
FY2007
FY2008
(Revised)
FY2009
(Budgeted)
17.2%
18.0%
17.1%
17.2%
15.8%
14.4%
13.9%
13.2%
15.3%
17.5%
Social Development
Education
National Development
Health
Environment and Water Resources
Community Development, Youth and Sports
Information, Communications and the Arts
6.9%
3.6%
1.5%
0.7%
0.6%
0.3%
0.2%
7.9%
4.1%
1.4%
1.0%
0.6%
0.4%
0.3%
7.5%
4.2%
0.9%
1.0%
0.8%
0.4%
0.2%
7.8%
3.8%
1.4%
1.2%
0.8%
0.4%
0.2%
6.7%
3.4%
0.8%
0.9%
0.9%
0.5%
0.2%
5.9%
3.1%
0.7%
0.9%
0.6%
0.5%
0.2%
5.9%
3.2%
0.6%
0.9%
0.5%
0.5%
0.2%
5.7%
3.0%
0.8%
0.9%
0.3%
0.5%
0.2%
6.3%
3.2%
0.8%
1.1%
0.4%
0.6%
0.2%
7.2%
3.5%
0.8%
1.5%
0.4%
0.8%
0.3%
Security and External Relations
Defence
Home Affairs
Foreign Affairs
5.9%
4.6%
1.2%
0.2%
6.7%
5.1%
1.4%
0.2%
6.6%
5.2%
1.3%
0.2%
6.4%
5.0%
1.3%
0.2%
6.1%
4.7%
1.2%
0.2%
6.0%
4.7%
1.1%
0.2%
5.8%
4.5%
1.1%
0.2%
5.3%
4.0%
1.1%
0.2%
5.5%
4.3%
1.1%
0.2%
6.0%
4.6%
1.2%
0.2%
Economic Development
Transport
Trade and Industry
Manpower
2
Info-Communications and Media Development
3.7%
2.2%
1.4%
0.1%
0.1%
2.6%
1.3%
1.2%
0.1%
0.0%
2.1%
1.0%
1.0%
0.1%
0.0%
2.2%
0.8%
1.2%
0.1%
0.0%
2.1%
1.1%
0.8%
0.1%
0.0%
1.8%
1.0%
0.7%
0.1%
0.0%
1.8%
0.8%
0.8%
0.1%
0.0%
1.7%
0.8%
0.8%
0.1%
0.0%
3.0%
1.5%
1.2%
0.3%
0.0%
3.6%
1.9%
1.3%
0.4%
0.0%
Government Administration
Finance
Law
Organs of State
Prime Minister's Office
0.6%
0.3%
0.2%
0.1%
0.1%
0.7%
0.3%
0.2%
0.1%
0.1%
0.8%
0.3%
0.3%
0.1%
0.1%
0.7%
0.3%
0.2%
0.1%
0.1%
0.9%
0.3%
0.2%
0.2%
0.1%
0.7%
0.3%
0.2%
0.1%
0.1%
0.5%
0.2%
0.1%
0.1%
0.1%
0.5%
0.2%
0.1%
0.1%
0.1%
0.6%
0.3%
0.1%
0.1%
0.1%
0.7%
0.3%
0.1%
0.1%
0.1%
Total
* Figures may not add up due to rounding. Expenditure on research and development has been reclassified as part of ministries’ expenditure for FY1998 to FY2000.
1
Development Expenditure excludes land-related expenditure from FY2001.
2
Media Development Programme has been reclassified from social development to economic development.
STATISTICAL ANNEX
Table 6.5b: Total Expenditure by Sector for FY2000 to FY2009 (% of GDP)
Table 6.6: Total Expenditure by Expenditure Type for FY2000 to FY2009 ($million)
FY2000
FY2001
FY2002
FY2003
FY2004
FY2005
FY2006
FY2008
(Revised)
FY2007
FY2009
(Budgeted)
Total Expenditure
27,908
27,305
27,152
28,499
28,957
28,634
29,905
32,982
38,901
43,622
Operating Expenditure
18,415
18,536
19,359
19,991
20,355
21,445
23,925
25,952
29,247
32,157
Running Costs
15,047
16,387
17,051
17,295
17,797
18,874
19,666
21,710
23,511
25,402
Expenditure on Manpower
3,276
3,351
3,370
3,375
3,535
3,629
3,914
4,736
4,762
5,161
Operating Grant
3,031
3,735
3,858
4,042
4,039
4,244
3,918
4,211
4,827
5,381
Other Operating Expenditure
8,740
9,302
9,824
9,878
10,222
11,001
11,835
12,763
13,911
14,860
0
0
0
0
0
0
0
0
11
0
3,368
2,149
2,308
2,696
2,558
2,570
4,259
4,242
5,736
6,755
309
394
491
457
485
546
611
665
1,369
1,595
3,058
1,754
1,817
2,240
2,073
2,024
3,648
3,577
4,367
5,161
Capital Injections
Transfers
Social Transfers
Subventions
1
Development Expenditure
9,494
8,769
7,793
8,508
8,602
7,189
5,980
7,030
9,654
11,465
Direct Development
5,462
4,503
3,962
4,221
4,349
3,522
2,760
3,086
3,591
4,658
Capital Grant
4,032
4,266
3,831
4,287
4,150
3,663
3,162
3,797
5,873
6,540
-
-
-
1
103
4
58
146
190
267
Capital Injections
45
STATISTICAL ANNEX
* Figures may not add up due to rounding.
Development Expenditure excludes land-related expenditure from FY2001.
1
46
FY2000
Civil List
Attorney-General's Chambers
Auditor-General's Office
Cabinet Office
Judicature
Parliament
Presidential Councils
Public Service Commission
Community Development, Youth and Sports
Defence
Education
Environment and Water Resources
Finance
Foreign Affairs
Health
Home Affairs
Information, Communications and the Arts
Law
Manpower
National Development
Prime Minister's Office
Trade and Industry
Transport
Total
1
FY2001
FY2002
FY2003
FY2004
FY2005
FY2006
FY2007
FY2008
2
(Revised)
FY2009
3
(Budgeted)
45
212
150
11
739
48
5
9
3,968
1,525
48,933
4,958
3,569
1,062
1,670
18,135
1,454
820
1,020
10,601
558
1,970
3,977
50
255
163
10
707
53
7
8
4,054
1,526
49,370
4,751
3,900
1,081
948
18,928
2,002
787
1,069
10,596
421
2,487
3,822
47
276
157
10
678
55
8
9
4,194
1,527
51,128
4,757
3,614
1,082
939
19,373
2,058
853
1,208
10,259
425
2,545
3,756
51
282
146
10
716
54
8
8
4,009
1,524
51,099
4,500
3,044
1,111
1,038
20,173
2,063
741
1,277
7,391
421
2,503
3,776
53
274
127
10
571
48
8
9
3,719
1,525
51,462
4,501
2,649
1,074
1,125
20,965
2,547
709
1,327
7,136
415
2,491
3,623
52
270
112
10
540
52
8
9
3,709
1,524
52,844
3,817
2,529
1,121
1,097
20,899
2,530
677
1,397
6,666
450
2,544
3,534
48
254
103
10
513
50
8
9
3,708
1,525
45,745
3,350
2,750
1,138
1,115
20,510
2,592
734
1,606
6,679
475
2,539
3,520
53
253
104
11
537
46
8
10
3,760
1,525
46,666
3,485
2,906
1,149
1,162
20,994
2,684
733
1,701
6,673
468
2,607
3,547
56
329
146
12
798
55
10
10
4,265
1,524
49,963
3,967
3,185
1,317
1,269
22,395
3,144
830
2,083
7,476
534
2,879
4,074
56
329
158
12
796
55
10
12
4,393
1,524
50,036
3,963
3,280
1,315
1,306
23,153
3,408
826
2,196
7,476
564
2,998
4,247
105,439
106,995
108,958
105,945
106,368
106,391
98,981
101,082
110,321
112,113
1
Numbers for FY2000 to FY2007 are for actual headcount.
Numbers for FY2008 are for revised establishments.
3
Numbers for FY2009 are for budgeted establishments.
2
Note:
Establishments reflect the number of officers that ministries could hire, but is not reflective of actual headcount, as establishments may not be filled by ministries even though they may be kept in
anticipation of a future need. E.g. the revised establishments for FY2006, as reported in Budget Highlights 2007, was 115,974, but the actual headcount for FY2006, reported here, was only 98,981.
STATISTICAL ANNEX
Table 6.7: Headcount by Ministry for FY2000 to FY2009
[IV] GLOSSARY
GLOSSARY
6 Glossary of Terms
Avoidance
of
Double
Taxation
Agreement (DTA)
A DTA is a bilateral treaty entered into
between two countries to avoid double
taxation. It provides better certainty and
lowers the burden to taxpayers by defining
taxing rights of the source and resident
countries and lowering source taxation for
income earned from cross-border trade
and investments. In addition, the DTA
provides for relief against double taxation
and an official channel for taxpayers to
dispute cases of double taxation which
may occur in contradiction to the DTA's
arrangements.
Automatic Stabilisers
In macroeconomics, automatic stabilisers
work as a tool to dampen fluctuations in
real GDP without any explicit policy action
by the Government.
Best Sourcing
A tool under the Economy Drive designed
to determine the most economic provider
of government services through markettesting, i.e. comparing in-house service
provision with market alternatives, so that
the Government can select the service
channel and service provider that offers
the best value for money.
Block Budget Framework
Under the Block Budget Framework,
ministries’ budgets are capped as a fixed
percentage of a smoothened measure of
the nominal GDP. Their budgets therefore
adjust in line with the overall state of the
economy. Block budgets establish limits
on spending by each ministry and by
Government as a whole.
Call for Collaboration (CFC)
A process through which proposals that
lead to collaborative work between two
parties are solicited. Unlike a tender,
where specific procurement parameters
are laid out for bidders, CFCs spell out
broad parameters around which a joint
working relationship can be assembled.
Central Provident Fund (CPF)
A
fully-funded
compulsory
defined
contribution scheme in which workers and
employers set aside a portion of wages in
individualised accounts for retirement.
Centre-based Financial Assistance
Scheme for Childcare (CFAC)
A subsidy scheme for childcare fees, on
top of the Government childcare subsidy,
to encourage low-income families to place
their children at childcare centres while
the parents are at work.
Chargeable Income
The portion of income assessable to tax
after
accounting
for
exemptions,
deductions and allowances.
Continuing Education and Training
(CET)
CET refers to the education and training
activities for adults who have left the
formal school system. This fulfils the
social and economic objectives of keeping
our people employed in the changing
economy.
Countercyclical
Moving in the opposite direction compared
to the overall economic cycle: rising when
the economy is weakening, and falling
when the economy is strengthening. See
also Procyclical.
Customs Duty
A tax on goods imported into Singapore.
In Singapore, customs duty is principally
imposed on stout and porter, beer and ale,
medicated samsu and other samsu.
Development Expenditure
Generally refers to expenses that
represent a longer-term investment and
results in the formation of a capitalisable
asset of the Government. Examples of
spending areas are the acquisition of
heavy equipments, as well as capitalisable
assets, e.g. buildings and roads.
Effective Tax Burden
The amount of tax suffered by a taxpayer
after accounting for the all relevant
provisions of the tax system, and not just
49
GLOSSARY
focusing on a single characteristic such as
the headline corporate tax rate.
Medifund, Edusave Fund and ComCare
Fund.
Estate Duty
Duty charged on the assets of a deceased
person.
Gross Domestic Product (GDP)
A measure of the total flow of goods and
services produced by the economy over a
specified time period, normally a year. It is
obtained by valuing outputs of goods and
services at market prices. Real GDP
refers to GDP figures adjusted for inflation.
Excise Tax
A tax on goods whether manufactured in
Singapore or elsewhere. In Singapore,
excise tax is imposed principally on
tobacco, petroleum products, motor
vehicles and liquor to achieve social and
transport policy objectives.
Fiscal Impulse (FI)
A measure of the first-order impact of the
Government’s net injection or withdrawal
from the economy arising from its fiscal
policy. If the Government extracts more
revenue than it spends as compared to a
previous year, it is subtracting from the
aggregate demand pressures inherent in
the economy, fiscal impulse would be
deemed as contractionary. Conversely, if
the Government extracts less revenue
than it spends as compared to a previous
year, this would be deemed as an
expansionary fiscal impulse.
Financial Year (FY)
Singapore Government’s Financial Year
2009 is from 1 April 2009 to 31 March
2010.
Goods and Services Tax (GST)
Goods and Services Tax (GST) is a tax on
domestic consumption of almost all goods
and services in Singapore. The tax is paid
when money is spent on goods or
services, including imports. It is a multistage tax which is collected at every stage
of the production and distribution chain.
GST is often used inter-changeably with
the Value Added Tax (VAT).
Government Endowment Fund
A fund established with an injection of
Government monies as principal on which
the income generated will be used to
finance specific programmes on an
ongoing basis. The 5 government
endowment funds include the Lifelong
Learning Fund, the Eldercare Fund,
50
Home Ownership Plus Education
(HOPE)
A package of comprehensive assistance
to young low-income families and their
children to help them break out of the
poverty cycle.
Intergenerational Equity
In the context of endowment fund
spending, it is the concept of striking a fair
balance in wealth distribution between the
present and future generations.
Net Investment Income (NII)
Under Article 142(4) of the Constitution,
Net Investment Income (NII) refers to the
dividends, interest and other income
received from investing our reserves, as
well as interest received from loans, after
deducting expenses arising from raising,
investing and managing the reserves.
Net Investment Income Contribution
(NIIC)
As reflected in the budget statements, it is
the part of NII that is taken into the budget
to augment the Government’s revenues,
and ensure a sustainable fiscal position.
Net Investment Returns (NIR)
The sum of: (1) the long-term expected
real returns on the reserves invested by
GIC and MAS and (2) the NII on the
remaining reserves.
Net Investment Returns Contribution
(NIRC)
As reflected in the budget statements, it is
the part of NIR that is taken into the
budget for spending.
GLOSSARY
Nominal Returns
Nominal returns are the rate of return on
an investment without adjustment for
inflation. See also Real Returns.
Operating Revenue
Refers to Government receipts credited to
the Consolidated Revenue Account and
Development Fund Account excluding
investment and interest income, capital
receipts (lumpy and less regular in timing)
and investment adjustments. The main
components are Corporate Income Tax,
Personal Income Tax and Goods and
Services Tax.
Operating Expenditure
Generally refers to expenses incurred to
maintain the operations and other regular
activities of the Government. Components
include expenditure on manpower (EOM)
– for wages of public service officers,
other operating expenditure (OOE) – for
all other forms of expenditure incurred in
the running of the Government, and
operating grants to statutory boards and
aided educational institutions, which
support the day-to-day running of these
agencies.
Output Gap
The difference between the actual level of
activity in an economy (as measured by
GDP) versus the sustainable amount of
activity given the capacity of the economy
(i.e. the level of GDP that the economy
could potentially achieve without creating
unhealthy inflationary pressures). It
measures the degree of resource
utilisation of the economy. The output gap
is typically reported as a percentage of
GDP to give a sense of the proportion with
which the economy is over or under
capacity. Where the output gap is
negative (deflationary gap), the economy
is not operating at full capacity, and may
well be in danger of sliding into a
recession if demand is not boosted.
Where the output gap is positive
(inflationary gap), it indicates that the
economy is operating over-capacity,
resources are stretched and inflation
pressures are strong.
Past Reserves
Refers to the reserves not accumulated by
the Government during its current term of
office, with reserves being the excess of
assets over liabilities.
Primary Budget Position
The Primary Budget Position, defined as
Operating Revenue less Total Expenditure,
measures the ability of the Government to
meet its annual expenditures through its
regular collection of revenue (taxes, fees
and charges).
Procyclical
Moving in the same direction as the
overall economic cycle: falling when the
economy is weakening, and rising when
the economy is strengthening. See also
Countercyclical.
Public Private Partnership (PPP)
A model under the Best Sourcing
framework, Public Private Partnership
(PPP)
is
a
long-term
partnering
relationship between the public and
private sectors to bring together the
expertise and resources of the public and
private sectors to provide services to the
public more efficiently and effectively,
particularly in those that require the use of
new infrastructure assets.
Real Returns
Real returns refer to the gains from an
investment over and above the rate of
inflation. See also Nominal Returns.
Stamp Duty
A tax imposed on commercial and legal
documents relating to unlisted stock and
shares and immovable property.
The Enterprise Challenge (TEC)
An initiative driven by the Prime Minister's
Office that provides funding for testing
innovative ideas that have the potential to
improve the delivery of public services
Workfare Income Supplement (WIS)
Scheme
Targeted at older low wage workers, it
complements the changes to CPF
employer and employee contribution rates
that came into effect on 1st July 2007. It
51
GLOSSARY
provides incentives for older low wage
workers to find work and stay in work,
while at the same time helping them to
save for their longer term needs.
Total Returns
All the returns arising from an investment,
including income from dividends and
interest, as well as appreciation or
depreciation in value of the investment.
Total (Government) Expenditure
Sum of Operating and Development
Expenditure. It excludes Special Transfers
unless otherwise mentioned.
Year of Assessment (YA)
Refers to the year in which tax on the
income earned in the preceding year is
assessed.
52