The 2013 Singapore Budget was announced by Finance Minister Tharman Shanmugaratnam on 25 February. As Singapore’s economic growth is expected to slow down due to the ongoing economic restructuring and the global financial crisis, much emphasis is placed in this budget to help businesses, workers, and households affected by the economic problems.

The aims of this year’s budget are to transform Singapore’s economy to achieve quality growth and to take further steps towards a more inclusive society to help disadvantaged groups like retirees, lower-income groups, and children.

Businesses
As part of the government’s initiative to reduce the economy’s dependence on foreign workers, related policies will be tightened. The foreign worker levies will be increased, and the eligibility criteria for S Passes and Employment Passes will be tightened.

A generous Wage Credit Scheme will also be introduced to benefit workers and businesses. Under this scheme, the government will co-fund 40% of wage increase for Singaporean workers over the next 3 years.

Other measures to strengthen innovation and improve productivity are also introduced to encourage businesses to restructure.

Social mobility
Measures are also introduced to promote more education opportunities for lower-income students. The government will double the spending on the pre-school sector over the next 5 years to over $3 billion, to assuage the concerns of the rising costs of a pre-school education. The Ministry of Education will also set up some kindergartens to develop good practices in the pre-school sector.

On the school level, the Edusave endowment funds will be topped up by $300 million.

Progressive tax system
The progressive tax system will be strengthened so that the bulk of taxes will be paid by the high-income group and most of the benefits will be enjoyed by the lower-income group.

The property tax for 99% of the homes will be lowered, while the tax for the top 1% of the homes will be increased.

A tiered Additional Registration Fee (ARF) will replace the current ARF scheme. Now, a luxury car with an Open Market Value of $75,000 will pay 43% more ARF as compared to the previous system.

Direct assistance
Due to inflation and cost-of-living concerns, the government will also provide households with $1.7 billion to cope with the challenges. These include personal income tax rebates and rebates on Service & Conservancy Charges.

Extra resources
Singapore Budget 2013 Website: http://www.singaporebudget.gov.sg/budget_2013/about_budget.html

Thinking question
  1. Is it equitable to impose a higher tax rate on the higher earners and a lower rate on the lower income group? Why?

References
Budget in Brief, http://www.singaporebudget.gov.sg/budget_2013/download/FY2013_Budget_in_Brief.pdf