Whether or not you take a keen interest in politics or global economics, the one thing you ideally should be interested in is the budget.
Well, because policy changes do affect you.
Think about a few changes from last year's budget that affected you, or are yet to affect you. One of them being the 2 per cent increase in GST (to be implemented between 2021 and 2025) or the 1 per cent increase in buyer's stamp duty (on residential property purchases).
Of course, a budget doesn't only spell doom and gloom, there are many positives to a budget too. Take, for instance, the one-off bonus (up to S$300) for Singaporeans aged 21 and above or the increase in the proximity housing grant.
The bottom line is, that all of these changes, even the macroeconomic ones, may directly or indirectly cause you to change your spending or saving patterns.
And this why you should know what to expect in 2019.
WHAT CAN YOU EXPECT FROM BUDGET 2019?
Come April 2021, Singapore will see its next general elections. Which is why many political enthusiasts and economists are keeping a close watch on the Budget 2019. Most of them believe that this budget may be what they term, an "election budget".
Which is good news since election budgets generally mean an increase in tax rebates and handouts. But what if this budget is not a pre-election budget?
It doesn't matter since the general consensus is that this financial year's budget is presumed to be expansionary. This means an increase in public expenditure and a decrease in taxes. Keeping in mind a possible global slowdown, these measures seem to be a good starting point to help lessen the impact of such a slowdown.
In addition to this, auditing firm PricewaterhouseCoopers (PwC) has made 19 recommendations to the government with regard to the budget as well.
So, let's start by taking a look at the measures PwC thinks is important. We'll then take into consideration what experts think and summarise what could be the most likely outcome of this year's budget.
A FEW OF PWC'S RECOMMENDATIONS
TO STRENGTHEN OUR INDUSTRIES
- Tax rebates for companies that enable and promote digitisation.
- Tax deductions for employee training to be increased.
TO STRENGTHEN OUR TRADE AND INVESTMENTS
- Help local businesses go international.
- Help reduce the costs involved in setting up new ventures by increasing deductions.
TO TAKE CARE OF OUR PEOPLE
- Increase expenditure on public infrastructure and healthcare.
- Medical insurance and health insurance policy premium payments to be given tax reliefs.
- Incentives to encourage new mothers and caregivers to continue or return to the workforce.
- Promote healthier lifestyles via a Fitness Tax Credit. This credit will reward those who participate in exercise programmes.
You can find the entire list of recommendations by downloading PricewaterhouseCooper's suggestions for the 2019 Singapore budget.
WHAT IS IN STORE IN 2019?
MEASURES TO HELP VULNERABLE SEGMENTS OF THE LABO
According to a recent DBS report, professionals, managers, executives, and technicians (PMETs) have become a vulnerable part of the workforce. This assessment comes from the fact that in the last 9 years, all employees who have been laid off have been from this particular section of the labour force.
Currently, the share of these workers has exceeded those with lower skills. The fact that a larger number of higher skilled workers are laid off goes against conventional wisdom.
Keeping this in mind, measures to help this vulnerable segment may be put into place. These could include:
- Improvements to schemes which help individuals acquire new skills or help them re-skill so that they can take on the challenges that today's jobs present. Such schemes include the Adapt and Grow scheme and Professional Conversion Programme (PCP).
- A one-off tax rebate for employees who have been retrenched or provide them with an extension when it comes to income tax payments.
In fact, Finance Minister Heng Swee Keat gave a statement on 5 February 2019 that the budget will focus on measures which enable, "our workers to learn new skills to upgrade".
MEASURES TO HELP TRANSFORM INDUSTRIES AND BECOME MORE COMPETITIVE OVER THE YEARS
Apart from strengthening the labour force, another incentive that the budget will focus on, is building capabilities that will help companies in Singapore increase their competitiveness in the long run. This will include helping businesses adopt technologies that will help them survive in an increasingly digitised world.
INCREASE IN PUBLIC INFRASTRUCTURE SPENDS
As mentioned earlier, an impending global recession requires measures to soften the blow on the Singaporean economy. Increasing spends on public infrastructure projects is one such way. This increased spending will lead to more job creation and also help boost the construction sector which is currently struggling, as noted in a FITCH Solutions report.
Another reason to build and maintain public infrastructure is to cater to the needs of an ageing population.
Implementation of a carbon tax to increase the quality of life of the average Singaporean
In his speech, Mr Heng said that a person's quality of life isn't just related to a strong economy. And this makes sense when you think about the fact that Singapore announced its decision to implement a carbon tax in 2019 during the 2017 budget speech.
It is, thus, likely that from this financial year onwards emitters of greenhouse gases will have to pay tax on the amount of these pollutants they release into the atmosphere.
The taxation system is expected to be upstream. This means that it will be applied to industries that directly emit gases or on power stations and not on electricity users. Currently, the tax rate ranges from S$10 to S$20 for every tonne of greenhouse gas that is emitted.
HEALTHCARE PACKAGE FOR SENIORS FROM THE MERDEKA GENERATION
Announced during the National Day Rally in August 2018, this year's budget will carry details about the healthcare package for senior citizens who are from the Merdeka Generation. These are people who were born in the 50s, and were around during the fight for independence, built the Singapore armed forces, and ended up joining the workforce early.
This package will cover the following healthcare needs of Singaporeans who are currently in their 60s:
- Medisave top-ups
- Subsidies on MediShield Life premium payments
- Payouts if you require long-term care
- Subsidies for outpatient services
This package is estimated to cost S$8 billion and its introduction may also increase consumer spending.
Like the S$300 one-off bonus which was part of last year's budget, this year too there could be surprise handouts. This could be in the form of a one-time handout or in the form of rebates and GST vouchers. And since the government has been keen on sharing fiscal surpluses with its citizens, it should come as no surprise that they do it this year too.
THE BOTTOM LINE
Whether or not this budget is an election budget, few things are clear. There is an impending global economic slowdown but Singapore has put in place measures to help soften the blow. One of these measures is to ensure that 2019's budget is expansionary in nature and this includes an increase in public infrastructure spends.
The government is also focusing on education and healthcare needs of its people.
What is left to be seen is how this budget will deal with situations such as the rising cost of living and re-employment of a large portion of the retrenched workforce.
Details of which we shall know come 18 February.
This article was first published in Bankbazaar.sg.