Singapore's public finances look to be healthy despite a slowing economy. Revenue is on target and government spending is actually lower than projected earlier, going by private sector estimates.
All that means the Budget deficit for the current fiscal year may be quite a bit smaller than expected.
For the first nine months of the current fiscal year, from April to December last year, revenue collected by the Government was around $49.1 billion.
That represents 76.3 per cent of what was estimated at the start of the financial year for the full year, according to Ministry of Trade and Industry figures released last month.
In other words, government coffers have pulled in a little more than three-quarters of projected revenue in three-quarters of the year.
United Overseas Bank (UOB) economist Francis Tan estimates that the Government will run into a much smaller deficit than projected.
The critical factor here is spending. UOB estimates that total government expenditure will come in at about $62.65 billion, compared with the Government's projection of a heftier $68.22 billion.
Mr Tan estimates that the deficit will be around $690 million - significantly less than the $6.67 billion the Government had flagged. "It is very likely that the Government was being super prudent initially and projected very large numbers."
Based on the actual spending for the first three quarters and UOB's estimate for the fourth quarter, spending across all sectors - social development, security and external relations, and economic development - is expected to be up year-on-year.
Spending in the social development sector will be up 10.7 per cent from a year earlier, with healthcare expenditure surging by 14.2 per cent and education expenditure rising 4 per cent, said Mr Tan, adding that that was "still a lot of spending".
While the Government has been able to keep tax collection at a healthy level, its spending - up until now - has been climbing at a faster rate than revenue growth in recent years. And it has also made clear its intentions to invest heavily in infrastructure, skills training for Singaporeans and building industry capabilities until 2020.
This means that the Government has to boost its future revenues to keep up with ever-rising spending.
HSBC economist Joseph Incalcaterra thinks Singapore's fiscal situation is sustainable, with the necessary measures already in place to support higher spending.
Revenues are set to increase in the coming years as the hike in personal income tax for top earners from 20 per cent to 22 per cent kicks in from next year, he said.
And Singapore investment firm Temasek Holdings' inclusion in the Net Investment Returns framework from this year may add another $4 billion to the overall Budget.
Introduced in 2009, the framework lets the Government spend up to 50 per cent of long-term expected real returns - which include realised and unrealised capital gains - generated from the assets managed by GIC and the Monetary Authority of Singapore. And from this year, Temasek will be added to the pool.
But some tax experts and MPs are less upbeat. They think the Government will need to find new revenue sources to balance the Budget.
And growing the economy is the best way to do so, they said. "Corporate tax, goods and services tax (GST) and individual tax are the biggest contributors to tax revenue, and these revenues will grow with increased economic activity," said KPMG head of tax Tay Hong Beng.
PwC Asia-Pacific indirect taxes leader Koh Soo How noted that while a hike in tax rate will generally be a quick fix, it is unlikely the Government will do that in its first Budget after last year's general election.
But building up Singapore's external wing and helping local small and medium-sized enterprises compete regionally may not necessarily be enough in an era of slower growth, said Dr Tan Wu Meng, a member of the Government Parliamentary Committee for Finance and Trade and Industry.
He thinks that in the medium term, taxes may have to be raised. But however the Government raises additional revenues, it should be done in a way that is progressive overall. So, his preference is for hikes in wealth-related taxes such as property tax rates on non-owner-occupied residential properties.
Mrs Chung-Sim Siew Moon, head of tax services at Ernst & Young Solutions, suggested collecting more "sin taxes" from higher duties on alcohol, betting and cigarettes.
Mr Liang Eng Hwa, chairman of the Government Parliamentary Committee for Finance and Trade and Industry, also suggested the possibility of tax hikes.
But he warned that high taxes may take some shine off Singapore's attractiveness as an investment and business destination.
UOB's Mr Tan said it will be "tough" for the Government to try to boost tax revenue, given the slowing economy. He noted that corporate and personal income taxes, as well as betting tax, track nominal gross domestic product (GDP) closely. So, as the economy slows, the revenue from these taxes can be expected to slow as well.
The GST, on the other hand, has given a strong boost to the Government coffers since its introduction in 1994, along with its rate hikes in 2003 and 2007. And it does not seem to be related to GDP.
But Mr Tan thinks a GST hike is out of the question. "It is one form of tax that affects every single person, and it is very politically sensitive."
This article was first published on March 14, 2016.
Get a copy of The Straits Times or go to straitstimes.com for more stories.