SINGAPORE: The Government will make several adjustments to further enhance the progressivity and resilience of Singapore’s tax system, Finance Minister Heng Swee Keat said on Monday (Feb 18).
These adjustments include allowing working mothers to claim Grandparent Caregiver Relief if they engage the help of their parents, grandparents, parents-in law or grandparents-in-law, to care for a handicapped and unmarried dependent child, regardless of the child’s age, if they have met all other conditions.
AdvertisementCurrently, working mothers who engage such help may claim Grandparent Caregiver Relief for a child 12 years old or below in the year preceding the year of assessment of claim.
The Not Ordinarily Resident (NOR) scheme will also be allowed to lapse after Year of Assessment 2020. The scheme, which was introduced in Budget 2002, allows an individual granted NOR status a five-year period to receive tax concessions. It was meant to attract talent with regional and global responsibilities to relocate to Singapore.
Mr Heng also said that tax incentives will also be extended and strengthened to enhance Singapore’s business competitiveness.
These include the extension of the 100 per cent Investment Allowance under the Automation Support Package for an additional two years until Mar 31, 2021. It was introduced in Budget 2016 for three years to support companies automate, drive productivity and scale up.
AdvertisementAdvertisement“The Government will continue to plan ahead for the long term,” he said. “My commitment to Singaporeans is that our overall taxes and transfers system will always remain fair, progressive and pro-growth.”
DIFFERENTIATED FISCAL STRATEGY TO FUND NEW INVESTMENTS
In his speech, Mr Heng said that new investments will be pursued using a differentiated fiscal strategy; one approach will be taken for major infrastructure investments, and another for recurrent social and security expenditures in areas like healthcare, pre-school education and security.
A “fairer and more robust approach” is to meet recurrent spending with recurrent revenues, Mr Heng said.
He said that many countries have taken the “easier route” by funding recurrent expenditures through borrowing. But he stressed that Singapore must not do this, as such borrowing “shifts the burden of paying for today’s needs onto future generations.”
“This is not the Singapore way,” he said.
A different approach will be taken for major infrastructure investments such as the development of Changi East and rail projects such as the Cross Island Line, the minister said.
“For these large and lumpy expenditures where the benefits span many generations of Singaporeans, paying for them through some borrowing is fairer and more efficient,” he said.
“Borrowing, done in a responsible and sustainable manner, will help instil financial discipline and distribute the share of funding more equitably across current and future generations.”
He said that the Government had borrowed in the 1980s to build Singapore’s first MRT lines, and statutory boards as well as Government-owned companies have also continued to fund many major investment projects through borrowings.
The Changi Airport Group, he added, would be taking up loans to fund its share of the infrastructure investments for the development of Changi East.
To lower financing costs, Mr Heng announced that to lower financing costs, the Government will, with the President’s concurrence, provide a guarantee for Changi East borrowings. He said this would allow them to tap on the strength of the Government’s balance sheet to back this “strategic investment” and lowers the cost of borrowing.
The Government is also further studying the option of using government debt as part of the financing mix for long-term infrastructure projects that the Government will be taking on directly, he added.
He added that when GST is raised, as announced in the previous Budget, the Government will ensure that the overall system of taxes and transfers remains fair and progressive.
More help will be provided to lower-income households and the elderly by enhancing the permanent GST Voucher Scheme, and the impact of the GST increase will also be cushioned for a period through a GST offset package.
Details will be announced at a later date.
Mr Heng said at the core of Singapore’s fiscal system is the commitment to keep the overall tax burden low, notwithstanding the need to raise revenues in the future.
“Ultimately, a competitive tax regime helps us to attract and retain investments and talent. These in turn help to bring in good jobs for Singaporeans,” he said. “A competitive tax regime is a key anchor to our economic growth, and the best way to sustainably increase tax revenues.”
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