to move that this Parliament approve the financial policy of the
Government for the financial year 1 April 2006 to 31 March 2007.
economy grew by 6.4% in 2005, much better than expected. Growth
was broad based, with strong performances in both manufacturing
and services. EDB attracted $8.5 billion of fixed asset
investments in manufacturing, up 3% from 2004, and $2.5 billion
annual total business spending from services,
up 11% from 2004. A record number of tourists visited Singapore 每
around 9 million, boosting the retail industry.
importantly, economic growth has translated into jobs. 110,800 new
jobs were created last year, the largest number created in any
year since 2000. We have reduced unemployment significantly, to
just 2.5% by the end of 2005.
fiscal position is good. I expect a budget surplus of $430 million
or 0.2% of GDP for FY2005, slightly larger than I had projected in
last year＊s Budget Statement. This is the result of healthy
investment income as well as efforts to contain expenditures.
outlook for 2006 is favourable. The US economy continues to
grow, underpinned by strong consumption and investment
economy is expected to improve in 2006 as domestic demand
China is still growing robustly, having successfully managed the
risk of overheating. India is set to continue growing, especially
if it deepens its economic reforms. Japan is emerging from
deflation, with confidence restored, company balance sheets
de-leveraged and the banking system strengthened.
Southeast Asian economies are expected to sustain their momentum.
Investor confidence is up, as reflected in the regional stock
market rallies. In Indonesia, the government has taken major
steps to slash fuel subsidies and raise interest rates, and to
strengthen its economic team. Domestic demand should remain firm
in Malaysia and Thailand, bolstered by consumption and government
the overall outlook is good, some downside risks remain. The key
risks are posed by the tightness in the oil market and global
macroeconomic imbalances. Disruptions in world oil supply could
cause prices to spike sharply, while a disorderly unwinding of the
US current account deficit could have knock-on effects on
financial stability, exchange rates, and trade liberalisation. The
frothy housing markets in some of the major economies and the
threat of Avian Influenza are also sources of concern.
Overall, if these risks are contained and the major economies
sustain their growth momentum, I expect the Singapore economy to
grow by 4-6% in 2006, with inflation in check at 0.5-1.5%. This
will support further job creation.
strong performance results not only from a favourable external
environment, but also, more importantly, from our efforts to
upgrade and restructure the economy. We must press on to adapt to
changing economic demands and secure our long-term
pace of change worldwide is accelerating, not slowing down. Other
countries are also reinventing themselves, and gearing up to
compete globally. In the Middle East, for example, the Gulf States
are on the move. They are investing in education and
infrastructure, attracting foreign investment, building
international companies like Dubai Ports and Emirates Airlines,
and using their oil and gas revenues to create a sustainable long
term basis for growth and development.
Singapore, we have embarked on a challenging enterprise 每 to build
a vibrant global city that is a centre for knowledge, talent, and
business. We have every prospect of succeeding. We have the
drive and talent, the ability to adapt to change, and the resolve
to meet and overcome challenges. Our workers, employers and the
Government have forged a strong tripartite partnership.
Internationally we have a trusted brand name, and a reputation for
integrity, quality, and reliability.
Globalisation favours economies like ours 每 open, nimble, and
enterprising. But it also poses challenges, especially for our
older and low-skilled workers whose wages and jobs are under
growing pressure. We must do more to help this group of
Singaporeans improve their lives, and to support their own efforts
to do better for themselves and their children. We must target
our assistance to those in need, and make a difference where it
Budget will therefore:
Support upgrading and restructuring of the economy
Singaporeans Move Forward Together
Share the fruits of growth with all Singaporeans through a
Our first priority is to press on with upgrading and
restructuring the economy, and create new jobs to replace old
First, we must become a knowledge hub in Asia. Innovation,
enterprise, and R&D will increasingly be the new sources of our
growth. We are strengthening R&D efforts in the universities,
research institutes, and industry. Our aim is to be a knowledge
exchange, a key node in a global network of people and ideas, and
a choice location for international events for both for-profit and
Second, we must build on our strengths in manufacturing and
services, to promote activities that place a premium on trust,
quality and service, not just efficiency and low cost. In
manufacturing, we must raise our productivity and skill levels. In
services, besides developing existing industries like logistics,
info-communication, banking and finance, and tourism, we must seek
new opportunities, such as in premier healthcare and education.
Third, we must support entrepreneurship and help promising local
companies to grow into regional and international players.
Fourth, we must build up our human capital. We will continue to
attract global talent who bring in new skills, create new value,
and enlarge our economic pie. At the same time, we will invest in
education and training, to equip Singaporeans with the skills and
mindsets to succeed in a knowledge-based, innovation-driven
Finally, we must maintain a competitive tax environment to attract
investments, reward enterprise and draw talents. Let me touch on
each of these areas.
First, becoming a knowledge hub.
Invest in R&D 每 Knowledge Creation
is the foundation upon which we will build Singapore＊s
competitiveness. Just as investment in education builds up our
human capital, so will investment in R&D build up our intellectual
and knowledge capital base. The Research, Innovation and
Enterprise Council (or RIEC) which I chair will spearhead this
critical national effort. It will be supported by the National
Research Foundation (or NRF) led by Dr Tony Tan. The RIEC will
review our overall R&D framework and our R&D plans for three key
sectors - the Biomedical Sciences sector, the Interactive and
Digital Media sector, and the Environmental and Water Technologies
requires long-term commitment. To develop new capabilities, we
must support projects on a sustained basis, buffering them from
the vagaries of year to year budgetary pressures, and judging
results over several years. I will establish an R&D Trust Fund, to
be administered by the NRF, and will regularly allocate a portion
of our budget for this Trust Fund. I aim to inject $5 billion
into the Fund over five years and will start with an initial
injection of $500 million this year. As worthwhile projects
emerge, many of which will be multi-year commitments, we can tap
on this fund to support them.
R&D Trust Fund, together with MTI＊s Science & Technology Plan 2010
and MOE＊s academic research plans, will help raise Singapore＊s
gross expenditure on R&D from 2.3% of GDP in 2004 to 3% by 2010.
This will put us on par with the European Union economies and
close the gap with world leaders in R&D like the Nordic countries
and the US.
Increased R&D investment will generate more intellectual capital
which can be exploited and commercialised. We have already begun
to do this. For example, Rolls-Royce and a Singaporean consortium
jointly invested US$100 million in developing a commercially
viable power system based on fuel cells. The Singaporean
companies were able to supply cutting-edge technologies that met
the high expectations of Rolls-Royce. Thus Nutek, a local SME
that manufactures automated manufacturing systems, used its
in-house engineering expertise to improve the production process
for fuel cells.
safe and reliable environment for the protection of Intellectual
Property Rights (IPR) is a critical factor in persuading
international companies to base their R&D activities here.
Because of our reputation as a trusted partner for businesses,
companies and other institutions are creating and hosting their
intellectual property in Singapore, assured that their IP will be
protected. Global Brands is the exclusive licensing agent for
FIFA worldwide and Warner Brothers Consumer Products in Southeast
Asia. Last year Global Brands announced the establishment of its
global HQ here to manage their IP representation portfolio. BASF,
one of the top two chemical companies in the world, is setting up
its first R&D laboratory in the Asia Pacific here, to conduct
fundamental research in nanotechnology. We must continue to
provide a safe IPR environment for such companies.
must also take a broader approach to recognising ownership of IP.
Multinational corporations based in Singapore often have
substantial economic rights in the form of regional control over
their IP, although the legal title is held by the foreign parent.
We will recognise and incentivise such economic ownership of IP,
which is at least as important as legal ownership of IP. I will
extend writing down allowances for IP acquisition to these
economic (not just legal) owners of IP, on an approval basis. To
encourage R&D collaborations, I will also accelerate the write
down period for qualifying capital expenditure under cost-sharing
arrangements from five years to one year.
the World to
Singapore 每 Knowledge Exchange
To become a knowledge hub, we must not only be a
place for creating knowledge, but also be a centre for exchanging
knowledge and ideas, and for people and businesses to network with
Singapore is well suited for this role.
As a society, our ethos is open, cosmopolitan and pragmatic,
welcoming towards new ideas, and quick at adapting to a fast
well wired up, with 52% of homes having broadband internet access,
and nationwide wireless networks to keep us constantly in touch
with one another and the world. But we must continue to plan ahead
beyond present needs, and keep pace with rapid technological
countries and cities are already implementing ultra-high speed
broadband and wireless networks. Some are laying fibre to homes,
in anticipation of future demand. In today＊s world, a national
broadband network is basic infrastructure and a source of
competitive advantage. We will develop a new national broadband
network that is much faster than what is available today. It will
offer fast, efficient connectivity to all 每 in schools, in offices
and homes, and even on the move. It will help us plug into the
global knowledge grid, and stay competitive with other cities. The
cost is significant, but we can develop it together with the
private sector progressively over several years, adjusting to
demand at each stage. MICA will announce more details at the
Committee of Supply.
Singapore must be a place where people, businesses
and non-profit organisations from all over the world converge and
exchange ideas. Several International Organisations (IOs) and
Non-Governmental Organisations (NGOs) are already here. Last
year, the World Intellectual Property Organisation (WIPO) set up
in Singapore its first office outside the US and Europe. The
Singapore office aims to promote intellectual property development
and standards throughout Asia. WIPO has held conferences and
symposiums here, using us as a platform for knowledge transfer
among intellectual property experts. We will attract more IOs and
NGOs to locate their headquarters and research work here.
Hosting international events also creates opportunities for
knowledge networking. In 2005, we successfully hosted the
International Olympic Committee session, as well as the Global
Entrepolis@Singapore event which brought entrepreneurs, venture
capitalists and industry captains together. Next month, we will
host the first intellectual property diplomatic conference in
Asia, where IP policy makers from WIPO member states will
negotiate an international treaty concerning trademark laws.
September, we will host the largest international financial
meeting 每 the Board of Governors Annual Meetings of the IMF/World
Bank Group. More than 16,000 delegates and officials will visit
Singapore; they include finance ministers and central bank
governors from 184 countries, top financiers, CEOs from the
private sector and the international media.
spoke at the last National Day Rally about the need to improve our
service culture. To prepare for the IMF/World Bank meetings, we
will train 28,000 service staff from the tourism industry, to go
the extra mile in providing good service. We must work together
to provide our visitors and delegates a memorable and outstanding
Singapore Experience, so that they return home with eyes opened to
the possibilities of Singapore and Asia, and hearts warmed by the
graciousness and hospitality of our people.
second focus is to strengthen our manufacturing and services hub.
To do this, we must raise our productivity and build a strong
service culture based on quality and trust. WDA, STB and SPRING
are launching many initiatives to enhance our services
infrastructure, systems and workforce training. These include the
development of service competency standards and assessment tools,
a national quality scheme to accredit organisations that provide
good service, as well as certification and training programmes.
The Government will invest $63 million over three years in these
Manufacturing as a Key Engine of
Manufacturing remains a key part of
our economy, accounting for about a quarter of our GDP. We aim to
double our manufacturing output and value added by 2018. We must
with R&D, create value through innovation, and become a global
leader in niche areas.
Advanced economies like Japan have shown how to
sustain their manufacturing edge through higher productivity and
innovation. Canon is an example. Canon
continues to manufacture cameras in Japan. It replaced its long
conveyor belt assembly system with a cell system, where small
teams of workers work in cells to assemble a product from start to
finish. This is more efficient, because it allows for flexibility
in production and workers can see the production process ahead of
them. With the cell system, a worker can assemble a digital
camera much more quickly.
We too must upgrade our manufacturing sector.
have made good progress. For example, Seagate, the world＊s
largest hard disk drive company, has vertically integrated its
R&D, manufacturing and headquarters functions including
intellectual property management in Singapore. Its automated
※factory of the future§ manufactures various hard disk drives
here. Seagate develops and produces its latest generation of
1-inch hard disk drives here. These are used in advanced
electronics products such as Creative＊s Zen MP3 players.
Singapore is also home to a strong base of third party contract
manufacturers like UMC and Chartered Semiconductor. Presently,
tools bought on behalf of their overseas clients but used in
Singapore for the manufacturing process attract GST; this is often
added to the invoice, making us less cost competitive. To put our
contract manufacturers on an equal footing with their counterparts
in Taiwan or UK, I will allow the supply of tools used in the
manufacture of goods for export to be zero-rated for GST. This
change will take effect from 1 April 2006. IRAS will release
Develop a Full-Service Global Financial Centre
financial services, we are steadily becoming a full-service global
financial centre. The Banker magazine has ranked
Singapore first as ※financial centre of the future§. I will take
further measures to promote our wealth management, capital market
and treasury activities. I will just highlight the key changes.
critical mass of asset managers and advisors is located here, with
assets under management fast approaching $1 trillion. To further
support growth in the asset and wealth management industries, I
will make the following changes:
First, the Designated Unit Trust scheme will be
enhanced to allow other types of funds such as Restricted
Authorised Schemes to qualify for the DUT status.
Second, qualifying domestic trusts and their
underlying holding companies will be exempt from tax on their
locally-sourced investment income as well as foreign-sourced
income, to the extent that it mirrors the tax exemption enjoyed by
individuals. Beneficiaries will also enjoy tax exemption on trust
distributions made from such income.
Third, the scope of the Approved Trustee Company scheme and the
tax exemption scheme for foreign trusts will be expanded to
include a wider range of settlors and beneficiaries of the trusts.
Lastly, I will introduce a new tax incentive scheme
which exempts from tax resident funds with foreign investors.
encourage the development of our capital market and treasury
activities, I will make the following tax changes:
I will grant tax exemption on foreign-sourced
interest and trust distributions received by REITs listed on SGX
(known as S-REITS). For S-REITs and their special purpose
companies (SPCs) set up to hold overseas non-residential
properties, I will also allow recovery of GST incurred on the
setting up of SPCs and the acquisition and holding of overseas
non-residential properties by SPCs.
I will expand the Qualifying Debt Securities (※QDS§)
scheme to cover discount debt securities with tenure of more than
I will expand the scope of activities qualifying
for the Finance and Treasury Centre incentive to include trading
and arranging of derivative products, subject to counter-party
I will introduce a 5% concessionary tax rate on
clearing income for qualifying clearing members of a Singapore
Over-The-Counter (OTC) derivatives clearing facility for five
years. This will reinforce our position as a major oil-trading,
ship-broking and financial hub.
further promote Islamic Financing activities, I will harmonise the
tax treatment of four Shariah-compliant financial products with
the conventional products to ensure a level playing field with
respect to tax.
support the growth of the captive insurance industry, which
contributes to Singapore's position as an insurance hub, I will
grant income tax exemption for approved captive insurance
companies, for a period of 10 years.
brief description of all the tax changes for the financial sector
can be found in Annex A. MAS will release the details
Dynamic Maritime and Logistics Industries
the maritime and logistics industries, our business infrastructure
and connectivity are key strengths. We must attract more
international ship-owning and ship-operating companies to set up
operations in Singapore. This must be supported by a
comprehensive range of services which covers the entire maritime
and logistics value chain, including financing. To support growth
in these areas, I am introducing four changes in this Budget.
Details can be found in Annex B.
First, to encourage the development of ship financing activities
in Singapore, I will introduce a Maritime Finance Incentive to
grant tax exemption for qualifying income of ship investment
vehicles and a 10% concessionary tax rate for qualifying income of
ship investment managers.
Second, to entrench shipping companies in Singapore, I will
enhance the Approved International Shipping incentive by allowing
companies to renew their incentives for a third period of 10
years, lengthening the maximum period of incentive from 20 years
to 30 years.
Third, to lower the compliance cost for traders enjoying the 10%
concessionary tax rate under the Global Trader Programme, I will
remove the need for companies to show that the derivative trades
are incidental to the physical trades before such income can be
treated as qualifying income.
finally, I will allow automatic GST suspension for goods removed
from Zero-GST warehouses by all those who qualify under the Major
Exporter Scheme and Approved Third Party Logistics Company Scheme.
This will give them greater flexibility to conduct their business
via logistics and warehousing companies.
Up New Services
Beyond our traditional services industries like finance and
logistics, we will continue to grow new services industries like
education, healthcare, and the creative industries. Our efforts
are showing results. In education, we have brought in 16 leading
international universities including INSEAD, Duke University, MIT
and University of Chicago Graduate School of Business.
We have also attracted the first private foreign
comprehensive university, the University of New South Wales, which
is expected to reach an enrolment of 15,000 students in 15 to 20
healthcare, foreign patient numbers are growing rapidly 每 on
average 20% per year. In 2005, about 374,000 foreign patients
sought medical treatment in Singapore. They come not only from
Indonesia and Malaysia, our traditional markets, but increasingly
from the rest of Asia, particularly the Middle East. They seek
treatment both at private and public sector institutions,
attracted by our high medical standards, and reputation for
quality and reliability.
the creative industries, Singapore is attracting international
design companies such as BMW Designworks, digital media firms and
media funds. Singapore talents and enterprises are also making
their mark abroad. Eric Khoo＊s film ※Be With Me§ has won critical
acclaim at numerous prestigious international Film Festivals.
Singapore's first 3D animated film, ※Zodiac, the Race Begins§ has
been sold to 22 countries after it was showcased at Cannes. To
encourage creative talents, I have decided to include industrial
design, interactive and digital media as new fields qualifying for
the existing tax concessions that exempt 90% of the royalties
earned by these creative individuals.
Support Entrepreneurship and
The third area of focus is to support
entrepreneurship, help local enterprises grow into global players
and ease regulatory restrictions so as to promote enterprise.
efforts to encourage entrepreneurship are seeing some results.
According to the 2005 Global Entrepreneurship Monitor report,
Total Entrepreneurial Activity (TEA)
in Singapore increased from 5% in 2004 to 7% in 2005, still modest
but encouraging. More budding entrepreneurs 每 be it from the ITEs,
polytechnics or universities 每 are taking the plunge to start
their own businesses.
example, ten years ago Crestar Education Group first ventured into
China and set up a nursery school for the expatriate community in
Suzhou, where Singapore was helping to build an industrial park.
Today, Crestar has 19 kindergarten centres throughout China,
including Shanghai, Beijing, Shenzhen, Changzhou and Dalian.
Support Local Enterprises Going Global
enterprises aspiring to become international players can tap on a
range of assistance to realize their potential for growth and
internationalization. One measure to help SMEs is EnterpriseOne, a
multi-agency initiative which will be launched later this month.
The EnterpriseOne Portal is the primary channel to provide
business information and government e-services. The portal is
supported by a hotline and Enterprise Development Centres (EDCs)
such as the Association of Small and Medium Enterprises (ASME),
offering business advisory services. Customised initiatives such
as the Local Enterprise and Association Development (LEAD)
programme, will encourage industry associations to take the lead
in developing enterprise competitiveness in their respective
industries. MTI will elaborate on these schemes in the Committee
Reduce the Regulatory Burden on Local Enterprises
way to help entrepreneurs and businesses is to reduce the weight
of regulation. Regulations raise invisible but damaging costs.
Many laws require individuals, businesses and other private
entities to retain records for substantial periods. For example,
the Companies Act and the Income Tax Act require records to be
kept for seven years. I regularly hear requests to shorten these
record- keeping requirements, as businesses find them burdensome
have valid reasons to require records to be kept for a
sufficiently long period. They may be useful as evidence in civil
and criminal cases. Sometimes, international treaties oblige us
to require the retention of documents for certain periods.
Nevertheless, we should seek to lighten the burden on businesses
inter-ministry team has reviewed the record-keeping requirements
prescribed in our many pieces of legislation. I have decided to
reduce the record-keeping period in 17 statutes, generally to five
years. The details can be found in Annex C.
our Human Capital
To become a knowledge hub and a centre for
enterprise, we must continue to attract global talent. Management
guru Peter Drucker has called knowledge workers
※the single biggest factor for competitive
advantage in the next 25 years.§
one of the most innovative firms in the world, takes Drucker＊s
words to heart. To generate a continuous stream of new ideas, it
systematically looks for the most talented programmers and
computer scientists in the world, knowing that
smart businesses must
每 to use Drucker＊s words - ※strip away everything that gets in
their knowledge workers＊ way§.
Singapore must be a place where global talent with diverse
backgrounds and cultures want to live, work and play. George
Lucas set up Lucasfilms＊ first and only studio outside US in
Singapore partly because of our cosmopolitan appeal. When the
studio opened in October last year, its first batch of 35
animators came from 19 nations, including Panama and Ecuador. We
will continue to develop new attractions such as the Integrated
Resorts and the Singapore Flyer, to make ours an interesting,
lively and fun ※City-in-a-Garden§.
Besides attracting talent, we are also investing in our own
people. We are providing our students with opportunities, from the
primary up to tertiary level. Our schools are striving to develop
critical thinking skills and creativity in our students. We are
reshaping the education landscape to allow greater diversity and
bring out the best in every young Singaporean.
opening up more curriculum options for them, including new ＆O＊ and
＆A＊ levels subjects, and Elective Modules for those in the Normal
A new school for the Arts is being set up, adding to our
specialised schools in sports, and science and mathematics. Our
students have more choices than ever before.
A sizeable number of our students go to the
polytechnics, including many who have done well enough to qualify
for places in the junior colleges. Our secondary schools will do
cater to students who can benefit from some exposure to applied
education while still in secondary schools.
Some schools will partner our polytechnics to introduce new
applied subjects such as electronics and digital media
as electives. We will
also allow students to be directly admitted into polytechnics
based on their talents and abilities, just as we have allowed
direct admission into junior colleges and secondary schools.
are also investing more in our universities. The Government aims
to have 25% of each primary one cohort enrolled in publicly-funded
universities by 2010, up from the 21% in 2002. To fund the
additional places and invest in new physical infrastructure, MOE
will allocate an additional $2 billion to the university sector
over the next five years, or an average of $400 million each year.
By then, Government investment in our three publicly-funded
universities is expected to reach $1.9 billion annually, or 1% of
Maintain a Competitive Tax Environment
Finally, we must continue to keep our taxes low, to keep our
business environment competitive, and spur enterprise and
entrepreneurship. Singapore cannot have a high tax, high
spending model. The Scandinavian countries do this, but in
quite different circumstances. We are much more reliant than they
are on foreign investments and talent. We must compete for these
against many other countries, in the region and beyond. Our own
people and businesses are also more mobile, and can easily move
out of Singapore in search of lower taxes elsewhere. Our policy
choices are therefore much more tightly constrained.
strategy therefore is to pursue low taxes and tight expenditures.
A light, predictable, and efficient tax regime will promote
growth, which in turn will boost revenues and ensure sufficient
resources for our needs. After the major tax restructuring in the
last five years, our main taxes are at about the right levels,
although this does not mean that we will never need to adjust our
taxes or increase spending. I will touch on each of our main
taxes in turn.
personal income tax rates are already lower than those in most
other countries. The top rate is 21%, reducing to 20% from Year
of Assessment 2007. As announced in my Budget Statement last
year, the marginal tax rates for the other income brackets will
also be reduced, so that all taxpayers will benefit.
Besides lowering the rates, we have made significant changes in
our personal income tax system to attract talent. In Budget 2002,
I accepted the Economic Review Committee＊s recommendation to
create a new class of taxpayers called the ※Not-Ordinarily
Resident§ taxpayers. The response has been encouraging. Over 2002
and 2003, there were 2,800 successful applicants for NOR status.
We will review the scheme periodically to ensure that it remains
have also reduced our corporate tax rate significantly. Corporate
taxes are coming down in many countries, particularly in Europe.
Ireland has adopted a two-tier tax rate system: 12.5% for trading
income, and 25% for non-trading income. Many Central and Eastern
European economies, hungry for foreign investments, have flat
taxes which are around 20%. Some are even lower 每 Slovakia and
Poland have cut their rates to 19%, and Hungary has reduced its
rate to 16%.
1. Corporate Income Tax Rates
headline corporate tax rate at 20% is one of the lowest in
the region, coupled with what is effectively only a 5% rate for
the first $10,000 of chargeable income, and 10% for the next
$90,000, as well as zero tax for start-ups for the first three
years of incorporation. Even more importantly, our effective
corporate tax rate is highly competitive. Recently, a Canadian
think-tank, the C.D. Howe Institute, carried out a cross-country
study of the effective tax rate, i.e. the tax payable as a
percentage of the pre-tax return on capital. Of the 36 countries
surveyed, Singapore had the lowest effective tax rate, even below
Ireland and Hong Kong. Our effective tax rates for the
manufacturing and services sectors are 5.8% and 6.6%
respectively. For now, therefore, I see no need to reduce the
corporate tax rate further.
rates form just one part of a competitive tax infrastructure. Our
wide network of Agreements for the Avoidance of Double Taxation (DTAs)
also gives companies based in Singapore a strong advantage. We
currently have 50 tax treaties, covering almost all our major
economic partners. Last year, we secured favourable capital gains
tax provisions from India under the Singapore-India DTA. Together
with the Comprehensive Economic Cooperation Agreement (CECA) with
India, this makes Singapore a very attractive springboard for
investments into India. We are currently in negotiations with
several other countries, including China, and will keep up efforts
to expand and update our present network of tax treaties.
Budget 2003, I introduced the foreign-sourced income tax exemption
(or FSIE) regime to facilitate repatriation of income and
investments into Singapore. Some companies which engaged in
substantial economic activities overseas have found themselves
unable to meet the qualifying rules for this tax exemption. To
encourage companies to remit their foreign income, I will grant
tax exemption on foreign income that is disqualified from the FSIE
regime, if they are remitted under specific scenarios or
circumstances. IRAS will be releasing details.
facilitate share-based compensation schemes, I will grant
deductions to employee stock options granted through treasury
shares. As we move to a more flexible wage system, companies are
increasingly linking employee remuneration to the performance of
the company by granting stock options or direct share awards. In
some cases, companies may incur costs to buy back their own shares
which are then held as ※treasury shares§ before being used to
fulfil the stock option or share award obligations. Since
share-based compensation also forms a part of staff costs, I have
decided to grant a tax deduction to companies that have incurred
actual outlay for the employee stock options and other share-based
compensations. This will take effect from Year of Assessment
encourage more MNCs to locate their holding functions in
Singapore, I have decided with immediate effect to exempt from tax
any gains by approved holding companies on the disposal of shares
in subsidiaries, if they own at least 50% of the shares for a
period of not less than 18 months. Further details can be sought
from the EDB who will administer this scheme.
will also continue to provide more clarity and certainty in our
tax rules. We have introduced an Advanced Ruling system with
effect from 1 January this year, which allows taxpayers to seek
binding rulings from IRAS.
will provide businesses with more guidance on transfer pricing
issues. Tax authorities around the world are stepping up efforts
to combat companies＊ efforts to shift profits through transfer
pricing. As more of our companies expand overseas, they must be
aware of these transfer pricing risks. To help them, IRAS will
provide guidance on applying the arms-length principle, and
assistance in resolving disputes with foreign tax authorities on
transfer pricing issues. More details will be released by IRAS
will also rationalise the administrative conditions for businesses
to claim Industrial Building Allowances (IBA). Details of these
changes, to be implemented for buildings purchased on or after 1
January 2006 are summarised in Annex D.
make our business environment more flexible, we introduced the
Limited Liability Partnership (or LLP) business structure. To
date, more than 1,000 LLPs have been formed. We have received
suggestions to extend to these partnerships the incentive schemes
that are currently available to companies. As a principle, we
award tax incentives based on whether the business brings in new
activities or creates new value for Singapore, regardless of its
business structure. Hence I am prepared to allow tax incentives to
be awarded also to partnerships. We will start on a scheme by
scheme basis, and consider broader-based implementation after
further study. This will help attract new investors and grow the
financial and other industries.
capture the true value-added of insurance services and
reduce the business costs of general insurers, I am
allowing them GST claims in two circumstances. First, insurers
will be able to claim GST based on the tax fraction of the cash
indemnities paid to non-GST registered policyholders under
contracts that are subject to GST. Second, insurers will be
allowed to claim GST on expenses incurred on their policyholders'
passenger cars, for example, repairs. These changes will be
effective from 1 January 2007 onwards.
and Services Tax
GST is an important and stable source of revenue. At 5%, our GST
rate is among the lowest in the world. Because we have minimal
exemptions, we have kept the overall rate low and spread the tax
burden widely and fairly among the different goods and services
consumed in Singapore. The result is low compliance costs,
minimal economic distortions, and sustained revenues.
have suggested lowering GST rates on particular classes of goods
or services, such as food. The purpose is ostensibly to help the
poor, but this is not an effective way to do so. Most of the
revenue lost from such concessions goes to higher income
households, who spend much more on most items than poorer
households, including necessities like food. A better approach to
help the poor is through focussed programmes targeted at them,
such as rebates on Service & Conservancy Charges (S&CC), rentals,
or utility charges. This indeed is the Government＊s approach.
two major assets taxes are property tax and estate duty. For
property tax, I have decided to remove the property tax
surcharge. This was introduced in 1974 to discourage foreigners
from owning landed properties. It is no longer needed as we now
regulate property ownership by foreigners through the Residential
Property Act and most of these landed properties have been
divested. This change will take effect on 1 July 2006.
has been a lively debate on estate duty, with Singaporeans
speaking up on both sides of the issue. One recent letter to the
Straits Times Forum set out cogently the rationale for the estate
duty. I quote: ※Many feel that estate duty is, in fact, the most
moral of taxes. The individual himself is not affected by the tax,
by definition 每 he is dead when it is levied. Thus its impact
during the wealth-development phase of an individual＊s life is
less distorting than other forms of taxation. The development of
wealthy dynastic elites carries with it the risk that meritocracy
will degenerate into oligarchy as the elites define and control
the measures of merit.§
Indeed, this is the reason why we have retained estate duty all
these years. We want every citizen to succeed in life because he
has worked for it, and not because he has inherited wealth. An
intergenerational tax levied upon those who inherit wealth helps
to re-balance opportunities with each passing generation.
Against these merits, we must weigh the shortcomings of our estate
duty system, which critics have highlighted. The exemption limit
of $9 million for residential properties is much higher than the
$600,000 limit for all other assets. This biases investment
choices and results in very narrow coverage, with only the top 3%
of estates paying estate duty. The collection is modest 每 on
average about $70 million per year, though no Finance Minister
will sniff at this sum. More fundamentally, even if we fix these
specific weaknesses, we cannot stop people from avoiding estate
duty through creative estate planning. And Singaporeans probably
know a lot more about estate planning after the Straits Times
published an article on ※6 best ways to avoid death tax§!
Several jurisdictions have abolished estate duty in recent years,
including Australia, Malaysia, New Zealand and Hong Kong. In
Singapore, any change must preserve our tax revenue and maintain
the principle of taxing wealth. The Ministry of Finance is
studying the matter carefully, in the context of our overall
regime of assets taxes. We should reach a conclusion by the next
Additional Registration Fee (ARF)
me briefly touch on some of the other major taxes. First, there
will be no further reduction in ARF in this Budget. We have
significantly lowered the upfront cost of owning cars. Today, a
medium-sized car costs about half of what it did eight years ago.
Congestion is under control, with the help of the ERP system. We
will continue to monitor the situation, but for now there is no
need to reduce ARF further.
Tobacco and liquor duties
seriously considered raising tobacco duties, but have
reluctantly decided against it because we are already seeing
revenues declining, not because people are smoking less but
because smuggling has gone up. On liquor duties, there
will be no changes for now because we have largely rationalised
Slot machine taxes
will be no changes to our gambling taxes. But I will change
the basis of slot machine taxes. Hitherto, slot machines
have been taxed at 30% of deemed turnover. This turnover is
estimated based on the amount of coins in the cash box. So we
restrict machines to paying a maximum of 200 coins per win, in
order that there will be more coins in the cashbox and therefore
more taxes to collect! These rules were put in place in the 1950s
but slot machine technology has clearly moved on since then, as
has the theory of taxation. I will therefore change the basis of
taxation to 12% of actual turnover (which is equivalent to 30% of
deemed turnover), and remove the 200 coin payout limit.
till 2001, we enjoyed regular budget surpluses due to strong and
stable economic growth, buoyant revenues, and favourable
demographics. The environment has changed. Economic growth has
become tougher and more volatile, we have lowered our tax rates
substantially, and new spending priorities have emerged. Our
operating revenues alone are no longer able to meet total
expenditures. But with Net Investment Income Contribution, we are
able to balance the budget over the business cycle.
major taxes are at about the right levels. Going forward, I do
not foresee major changes on the revenue front. However, new
spending needs, in the areas of healthcare, education and
training, and R&D, will put pressure on our public finances. We
must therefore continue to keep government lean, so that we can
fund new spending priorities. I will highlight two measures we
are taking in this area.
First, the Centre for Shared Services (CSS) will be up and running
by May 2006, to deliver selected human resources and finance
processing activities to government agencies. It will help us
achieve greater efficiency through economies of scale and
streamlining of procedures. I expect annual cost savings of 15%
in operating expenditure on these services when operations have
Second, we will continue to exercise tight control on headcounts
in the public sector, and ensure that every post is fully
justified. Since the introduction of the Manpower Management
Framework (MMF) in July 2004, we have achieved an overall 2.9%
reduction in headcount, mainly through re-organising existing
functions, with some help from natural attrition. I have decided
to continue with the MMF cuts until FY06, followed by a headcount
freeze for three years. But we will continue to make exceptions
for new functions so that agencies can meet emerging needs.
PART III 每
HELPING SINGAPOREANS MOVE FORWARD TOGETHER
Speaker, Sir, this Government＊s approach has consistently been to
grow the economy and ensure that all citizens enjoy the fruits of
growth. As Singapore prospered, incomes went up across the board.
At the same time, the Government has heavily subsidised public
housing, education and basic healthcare, to ensure that even the
poorest citizens get a fair start in life, and a stake in
Home Ownership Scheme has made Singapore a home-owning society.
Even the lowest 20% of the population have substantial home equity
每 an average of $138,000 per household. This is no small
achievement, unimaginable in any other country. Our schools and
post-secondary institutions provide high quality education to all.
Every student has the opportunity to do well and rise to the top,
regardless of family background, and many have done so. Our
healthcare system delivers good and affordable medical care to
rich and poor alike.
Moving ahead, we will need to augment this broad-based approach
with a more targeted one. We can be confident that our economy
will do well, and that incomes of skilled and knowledge workers
will continue to rise. But the incomes of unskilled workers will
be under pressure. Globalisation is stretching out our income
distribution. This is happening in countries all over the world,
as hundreds of millions of workers from India and China enter the
global workforce. It is happening even in India and China,
between the cities and villages and within the cities themselves.
We can either slow down our upgrading and
restructuring by erecting barriers to protect our companies and
workers, or we can press on with restructuring. Slowing down is
not a solution, as the economy will stagnate and incomes will fall
across the board, worsening our problems. Instead we must
continue restructuring, adapting to the global economy and taking
full advantage of market forces to grow our own economy and
generate the resources to help those affected by globalisation.
But our measures to
help this group must be targeted, sustainable, and supportive of
our work ethic.
me elaborate. First, we will focus our assistance more closely on
the lower-income groups, so as to make a difference to those whose
needs are greatest. When there are surpluses to share, we will
also give more to these groups. We have already been doing this
with schemes such as the Service & Conservancy Charge (S&CC)
rebates, rental rebates, and Utilities-Save rebates. But we will
do more, in a more systematic way.
Second, we will design assistance measures to encourage recipients
to work and get ahead through their own efforts, rather than
free-ride on state support. We must avoid the pitfalls of
Western-style state welfare. It is expensive, wasteful, and
ultimately unsustainable. But more damagingly, it creates a
mindset of entitlement and dependency, erodes the work ethic, and
saps economic vitality.
Third, as we introduce new schemes, we must experiment, adapt and
feel our way forward. Whatever scheme we introduce, over time
people will adapt their behaviour to gain maximum advantage from
it, leading to unforeseen and unintended consequences. We have
seen this happen even when the amounts involved are quite modest,
such as with the Economic Downturn Relief Scheme a few years ago.
So, we should avoid creating permanent schemes unless we are very
confident of how they will work. Instead, we should experiment
with new schemes, see how they work out, and adjust and improve as
we gain experience.
Fourth, we must always maintain fiscal discipline. We must ensure
we have the resources to fund the schemes we introduce, and not
make reckless commitments without considering how to pay for
them. This prudence is what has distinguished Singapore from
many other countries which spent on social programmes beyond their
means, resulting in heavy debt burdens, high inflation, and loss
of confidence in the currency and in the government＊s economic
management. We must never allow this to happen here.
Finally, we need to involve the community and grassroots network
in this social effort. They know the ground well and can assess
where the needs are greatest. The schemes launched under ComCare
are a good example of how community leaders can help us to target
and deliver assistance for the needy. ComCare supports a wide
range of schemes and projects carried out by grassroots
organisations and voluntary welfare organisations (VWOs), and in
the year since it was launched, has helped thousands of needy
households. As ComCare activities are growing, I have decided to
top up the ComCare Fund by another $100 million, increasing the
capital sum of the Fund from $500 million to $600 million.
Consistent with this framework, we have set up many panels and
committees to brainstorm ideas on how to provide greater help to
the needy and vulnerable. These include the Ministerial Committee
on Low Wage Workers, the Tripartite Committee on Employability of
Older Workers and the Committee on Ageing Issues, which have all
published their reports. The Government accepts their
recommendations and will work with all partners and stakeholders
to implement them.
most major recommendations were from the Ministerial Committee on
Low Wage Workers, chaired by Minister Ng Eng Hen, which proposed a
comprehensive plan to help this group of workers, comprising six
pillars. The overarching principle guiding the Committee＊s
approach is Workfare rather than Welfare. The best way to help
people is to help them to find work, so that they can take care of
themselves and their families. The Government fully endorses this
principle. Let me now outline the Government＊s response to each
of the six pillars.
first priority is to expand job opportunities, so that low wage
workers can find better and higher-paying jobs which they are able
will step up the Job Re-creation Programme (JRP) to cover more
sectors and more workers. NTUC and WDA have already made good
progress in re-designing jobs and creating viable career
progression paths for low wage workers. We have seen good results
in sectors like landscaping, security, cleaning, healthcare,
education, shipbuilding, public transport, and retail. Last year,
7,200 jobs were targeted for job re-creation, and 4,600 job
seekers were matched to these re-created jobs.
WDA and NTUC will ramp up the JRP. They target to
re-create 10,000 jobs a year. To support these efforts, the
Government will allocate $40 million over three years.
will give extra help to older workers who find it harder to learn
new skills and find jobs, through the ADVANTAGE! scheme. This was
a recommendation of the Tripartite Committee, but it complements
the proposals of the Low Wage Workers Committee. The ADVANTAGE!
scheme will help employers adopt practices which will maximise the
strengths of older workers. These include adopting employment
practices that do not discriminate by age, moving away from
seniority-based wage structures, and re-employing retiring
workers. WDA will set aside $30 million over two years for this
second strategy is to equip low-wage workers with the necessary
skills to take on better and higher-paying jobs.
Workforce Skills Qualifications System
Workforce Skills Qualifications (WSQ) system, developed by WDA,
will provide training and skills progression pathways for workers,
enabling them to progress from a certificate, to an advanced
certificate, to a professional diploma, and maybe even graduate
certificates or diplomas. WDA will allocate $100 million over
three years to develop the WSQ system for the major industry
sectors. The system will include setting up institutions that
deliver high quality adult worker training. The first such
institution, the Singapore Institute of Retail Studies, has been
jointly set up by WDA and Nanyang Polytechnic.
will invest another $30 million over three years as part of WSQ to
help 45,000 low wage workers improve generic skills such as
problem-solving and communication, as well as English, numeracy
and IT literacy, to make them more employable. We will also
provide an additional $4 million every year to make training more
accessible to SMEs and workers involved in contract or
sub-contract employment arrangements.
Top-up to Lifelong Learning Fund
ensure adequate support for our workers to re-train and re-skill
themselves, I have also decided to top up the Lifelong Learning
Fund by $100 million to $2.1 billion.
third strategy is to provide more social support for low-income
families so that the parents can go out to work. This will help
the family become more self-sufficient, and impart to the children
the right social values on the importance of work.
MCYS will put in place a new Work Support
programme, which will include assistance such as higher childcare
and student care subsidies. Further details will be announced at
the Committee of Supply.
fourth strategy is to create hope for the future, to ensure that
the children do better than their parents, and can help lift their
parents out of poverty instead of inheriting their problems. We
will invest more in the education of children from low-income
families, to help them become school-ready and work-ready.
Income Thresholds for Financial Assistance Scheme
First, we will ensure that education remains affordable for all,
even the poorest. Currently, about 15,000 students benefit from
our Financial Assistance Scheme. Their school fees and 50% of
their standard miscellaneous fees are waived. They also receive
free textbooks at the primary and secondary level and a bursary at
the Junior College/Centralised Institute level. We will raise the
household income thresholds for this scheme, and also enhance the
benefits it offers.
Support for Kindergarten and Childcare
we will provide more support for kindergarten and childcare, to
help children from needy families to become ※school-ready§. The
Kindergarten Financial Assistance Scheme will help with the
start-up cost of sending their child to kindergarten. We will also
enhance childcare subsidies for the first and second child under
the Centre-based Financial Assistance for Childcare scheme.
Income Threshold for Edusave Merit Bursary
Edusave Merit Bursary is targeted at students from lower middle-
income families who have performed in the top 25% of their level
and stream. Since 1995, we have maintained the household income
threshold at $3,000. I have decided to increase the income
threshold to $4,000 so that an additional 17,000 students can
benefit from the bursary.
Invest in Vocational Training
help our youth acquire employable skills, we will invest more in
vocational training. As a start, MOE and ITE will enhance and
upgrade the programme at the Vocational Training Centre to
customise it to students＊ learning styles, and help equip them
with relevant skills for life-long learning. More details will be
announced at the Committee of Supply.
Home Ownership Plus Education (HOPE) scheme encourages young,
low-income families to limit themselves to at most two children,
so as to give these children the best chance of success.
Presently, HOPE is only open to couples if both have no more than
two ＆O＊ level passes. We will relax this to include parents
without post-secondary qualifications, and also slightly older
couples who despite having post-secondary education, still earn
low incomes after working for some years. However, we will
maintain the rule that the couple must have no more than two
children to be eligible for HOPE.
fifth strategy is to reward work, so that everyone is encouraged
to continue working, rather than rely on state welfare. Some of
our assistance to low- income earners should therefore depend on
their efforts to work. The Low Wage Workers Committee has
recommended a Workfare Bonus for older and lower- income workers.
I will elaborate on such a scheme later.
Additional CPF Housing Grant
Through the Government＊s home ownership scheme, we have helped
many Singaporeans to become homeowners, and to have a valuable
asset which can help see them through their retirement.
Currently, all families who buy similar flats enjoy the same
subsidy, regardless of whether they are well off or poor. But
other things being equal, lower-income families buying a flat
should receive bigger subsidies. We will do so in two ways 每 by
giving them an additional CPF Housing Grant, and providing them
with more affordable housing options.
additional housing grant will be paid into the CPF Ordinary
Accounts of HDB flat buyers. The grant will be on top of existing
housing subsidies. In line with the Workfare principle, at
least one of the flat buyers must have been working for two years
prior to the flat purchase to qualify for the grant. First-timer
citizen households with monthly incomes of up to $3,000 will be
eligible, whether they are buying new or resale HDB flats. The
grant ranges from $5,000 to $20,000. Households with a monthly
income of up to $1,500 will receive the maximum grant of $20,000.
We will extend the grant to households earning between $1,500 and
$3,000, but at a lower quantum. This will cover 40% of first-time
buyers, or an estimated 6,000 households annually.
$20,000 is a substantial sum. It is 20% of the selling price of a
3-room flat, purchased from HDB. It will be an even larger
fraction of the price of a 2-room flat, which the Low Wage Workers
Committee has recommended that HDB build for sale. The additional
CPF Housing Grant will cost the Government $75 million a year.
Additional CPF Housing Grant for First-Timer
Monthly household income
Not exceeding $1,500
$1,501 每 2,000
$2,001 - 2,500
$2,501 每 3,000
Affordable Housing Options
objective is to enable 90% of households to own their own homes.
While most Singaporeans can afford at least a 3-room flat, a small
group earning around $1,000 per month have difficulties doing so,
and therefore cannot benefit fully from the home ownership
subsidies. The 2-room flats to be built for sale will provide
more affordable housing options for this group of low-wage
workers. MND will release more details during the Committee of
Finally, the Low Wage Workers Committee has recommended that we
give more to lower-income Singaporeans when we share the fruits of
the nation＊s progress because they face greater challenges coping
with the rising cost of living and will appreciate special help
during periods of economic downturn. The Government accepts the
recommendation and I will now elaborate on what I will do in this
Mr Speaker, Sir. We want to make Singapore the best
home for all Singaporeans. This is a home where everyone has a
place and a purpose, where opportunities abound, and where growth
and prosperity is for all to share.
The Government has made a practice of periodically
sharing its budget surpluses with Singaporeans. In 2001, we
distributed New Singapore Shares (NSS) to every citizen. In 2003,
we gave Economic Restructuring Shares (ERS) to offset the increase
in the Goods and Services Tax (GST). And in difficult times, we
have cushioned the impact on lower-income Singaporeans through
rebates and assistance measures. We have also made many CPF
top-ups to help older Singaporeans meet their retirement and
healthcare needs. Taking all these measures together, the
Government has shared nearly $8 billion of surpluses with
Singaporean individuals and households in the past five years
(FY01-FY05). We will continue to share surpluses in an equitable
way so that all citizens benefit from the nation＊s progress.
After the last general election in 2001, we ran
budget deficits for several years. We now have a modest budget
surplus in FY2005 and project another surplus (before Special
Transfers) for FY2006. We also have some capital receipts from
our Statutory Boards, as well as investment income from the
transition year of 2001, a portion of which accrued to the current
government when it took office. Thus we have managed to
accumulate some reserves over this term of Government. In view of
the good economic performance last year and the positive outlook,
I have decided to share part of these surpluses with Singaporeans
I will call this surplus sharing initiative the
Progress Package (Providing Opportunities
through Growth, Remaking Singapore for Success).
This is a package for everyone, but it aims to achieve specific
social objectives. It will benefit all Singaporeans, because
everyone contributed to our economic restructuring efforts and
should now share in the fruits of growth. However, I will weight
it more towards the lower-income groups, in line with our
philosophy that we should progress together as one people.
Low-wage workers will receive more, to reward them for their
efforts and encourage them to be self-reliant. I will also give
more to older workers and retirees; they are most affected by the
dislocation and uncertainty of economic restructuring, and most
worried about medical costs and retirement expenses. They have
made significant contributions to building today＊s Singapore; we
must not forget their efforts. I will set aside something for
education, because children are our hope for the future. And
finally, we must also remember the sacrifices of the generations
of NSmen who have safeguarded our security over the past 40 years,
and enabled us to build a stable and prosperous Singapore.
the Fruits of Growth with all Singaporeans
First, I will distribute Growth Dividends to all
adult citizens. The Growth Dividends differ from previous surplus
sharing schemes like the New Singapore Shares (NSS) and Economic
Restructuring Shares (ERS) in two respects. Previously, we gave
NSS and ERS in the form of shares, on which Singaporeans could
earn dividends over time if they did not encash their shares.
Many chose to encash their shares early instead of waiting for the
dividends, despite the attractive interest rates. I have therefore
decided to distribute the Growth Dividends in the form of cash
which can be collected immediately upon allotment.
Second, those who are less well-off will receive
more Growth Dividends. The amount that a person receives will
depend on two factors: his income and his wealth.
His income will be assessed by the Inland Revenue
Authority of Singapore (IRAS). We will use what IRAS calls
Assessable Income (AI). Those earning not more than $24,000 per
year will get more. I have decided on $24,000 as the cut-off as
this is roughly the median income for Singaporean workers.
I will use the Annual Value (AV) of his property,
as assessed by IRAS, as a proxy for his wealth. Those living in
properties with AV less than or equal to $6,000 will get more.
$6,000 will cover all those who live in 1, 2, and 3-room HDB flats
and almost everyone who lives in a 4-room HDB flat. At the top
end, those living in properties with AV of more than $10,000,
which are the larger private properties, will get a smaller
Table 2. Structure of Growth Dividends
Annual Value of Home $6,000 or less
Annual Value of Home more than $6,000 and up
Annual Value of Home more than $10,000
Annual Assessable Income $24,000 or less
Annual Assessable Income more than $24,000
If your property has an AV of $6,000 or less and
you earn $24,000 or less a year, you will qualify for the largest
quantum of $800. If you live in a property with AV more than
$10,000, you will get $200. From time to time lower-middle income
Singaporeans remind me that they too need a helping hand, as they
earn only slightly more than the lower-income groups but often
just miss out on our social safety nets. I understand their
concerns. This is why the highest quantum of $800 will cover 45%
of the population, not just the lower-income but also the
lower-middle income earners.
Singaporeans can look forward to receiving their
Growth Dividends on 1 May 2006. The Growth Dividends are expected
to cost the Government $1.4 billion.
Reward Low-Wage Workers for Work
Second, I will give a one-off Workfare Bonus to
older, lower-income workers.
As recommended by the Low Wage Workers Committee,
the Workfare Bonus will target the lowest 20% of income earners
aged 40 and above. But to be fair to those who earn slightly
more, the Government has decided to give the Bonus also to those
up to the 30th income percentile, or a monthly income
of up to $1,500, provided they live in properties with Annual
Value (AV) of not more than $10,000. This will cover most older
low-wage workers living in HDB flats. Between 300,000 and 400,000
Singaporeans will benefit from the Workfare Bonus.
The Bonus quantum will depend on an individual＊s
income. The Committee had recommended a one month bonus for those
earning up to $900 and half a month bonus for those earning more
than $900 up to $1,200. I have decided to be a bit more
generous. Nearly all full-time workers earn more than $400.
Those earning more than $400 and up to $900 will therefore receive
$1,200. Those earning more than $900 to $1,200 will get a bonus of
$800, while those earning more than $1,200 to $1,500 will get
$400. There may be a few regular workers who earn $400 or less a
month. These exceptional cases will receive a bonus of three
months of their income. To help workers save for their
longer-term healthcare needs, 10% of the Workfare Bonus will be
set aside and credited into the Medisave account.
The Workfare Bonus is a reward for regular and
productive work. The Bonus will be split into two portions.
Eligible workers who have worked continuously for at least six
months in 2005 will receive the first portion of the Bonus on 1
May 2006. If they continue to work for at least six consecutive
months in 2006, they will be paid the second portion of the bonus
on 1 May 2007. The bonus for each year will depend on their
average monthly income for the period they had worked in that
year. The Government will set aside $400 million for the Workfare
Table 3. Structure of Workfare Bonus
Average Monthly Income
Bonus to be paid on 1st May, 2006
$400 and below
1.5 months salary with minimum bonus of $75
Above $400 to $900
Above $900 to $1,200
Above $1,200 to $1,500
Bonus to be paid in 2006 for working at least 6 continuous months
in 2005 and to be paid in 2007 for working at least 6 continuous
months in 2006.
Third, to help lower-income households cope with
living expenses, I have decided to extend the Utilities-Save
rebates for another year. Households in 1- and 2-room HDB flats
will continue to enjoy $200 in rebates in FY2006; those living in
3-room HDB flats will get $100 in rebates; those living in 4-room
HDB flats $80 and those living in 5-room HDB flats $60. The
rebates will cost the Government $60 million.
Rebates for Service & Conservancy Charges and Rent
HDB households will also continue to benefit from
the S&CC and rental rebates that were given out as part of a
five-year package in FY02. In FY06 and FY07, households will
receive between half a month to four months of S&CC waivers, with
more for those living in 1-, 2- and 3-room flats. In addition,
those living in 1- and 2-room HDB flats will also enjoy between
one to three months of rental waivers.
the Elderly meet Retirement and Healthcare needs
Top-ups to Eldercare Fund and Medifund
To help elderly and low-income Singaporeans cope
with their healthcare needs, I will top up the Eldercare Fund and
Medifund by $100 million each.
Top-ups to CPF Special / Retirement and Medisave Accounts
For Singaporeans aged 50 and above, I will top-up
their CPF Special or Retirement and Medisave accounts. These
top-ups will be tiered by age and Annual Value (AV).
Those aged 60 and above who live in a property with
an AV of $6,000 and below will get the largest top-up of $800.
Those aged between 50 and 59 staying in properties with AV above
$10,000 will receive the lowest amount of $100. We will divide
the top-ups equally between the CPF Special or Retirement Account
and the Medisave Account to cater to both retirement and
healthcare needs. The top-ups will be made on 1 May 2006. They
are expected to cost the Government $500 million.
Top-Ups to CPF Special/Retirement Account and Medisave Account
Annual Value of Home $6,000 or less
Annual Value of Home more than $6,000 and up
Annual Value of Home more than $10,000
60 & above
Invest in the Next Generation
In last year＊s Budget, I topped up the Edusave
account of every primary and secondary school student by $100, to
fund education enrichment activities. Our schools today offer a
wide range of enrichment activities, from educational tours to
music and sports. It is no wonder that the education industry is
thriving! This year, I have put aside $50 million for education
as part of the Progress Package. But instead of making equal
top-ups into every student＊s Edusave account, MOE will create
Opportunity Funds in every school. The schools can use these
Funds to provide more curricular and enrichment opportunities for
We will set up Opportunity Funds in all the MOE
schools, Junior Colleges/Centralised Institute, ITEs and Special
Education (SPED) schools. Neighbourhood schools have many good
programmes and offer a quality of education that few other
countries can match. They can go further to expand the boundaries
of their students＊ learning, and help all students take advantage
of the opportunities they provide regardless of family income. It
is how we level up. We will give each school a grant for this
purpose, with neighbourhood schools getting double the grant per
capita compared to independent and autonomous schools. A typical
primary school will receive a grant of $118,000 while a typical
neighbourhood secondary school will receive a grant of $150,000.
MOE will not dictate what exactly the schools
should spend the Opportunity Funds on. But schools should seek to
provide students with opportunities to learn beyond the classroom
and to build firm foundations for learning. For example, schools
can provide subsidies to help poor students purchase personal
computers to use for project work, or they can subsidise study
trips to regional countries, to help broaden students＊ horizons
and make learning come alive.
The self-help groups, namely CDAC, MENDAKI, SINDA
and the Eurasian Association, all play an important part in
reaching out to students from lower- income households. I will
therefore set aside a total of $2 million for these self-help
groups to set up their own Opportunity Funds, on the basis of
matching donations from their communities. They can then do more
to help children from low-income families.
Recognise the Contributions of our NSmen
Finally, I want to recognise the many
contributions of our national servicemen, and the heavy sacrifices
that they have made. They safeguard Singapore＊s survival and
security, which are the pre-conditions for our economic success
and growth. In the past, we have recognised their contributions
through the recommendations of the RECORD committees. We have also
given NSmen more in surplus sharing exercises, such as in CPF
top-ups and the allocation of New Singapore Shares and Economic
Restructuring Shares. NSmen and their parents and spouses are
also eligible for tax reliefs.
Anniversary NS Bonus
The Fourth RECORD committee chaired by Minister Ng
Eng Hen has recommended that we give more to NSmen in this year＊s
surplus-sharing exercise. The 40th Anniversary of
National Service is approaching. One and a half generations of
male Singaporeans have served NS. 400,000 have completed their
full time and Operationally Ready National Service (ORNS) training
cycle, and handed on their duties to the current batches of NSmen.
To show our gratitude to these ex-NSmen and NSmen who have
completed their ORNS training cycle, we will give them a 40th
Anniversary NS Bonus of $400.
National servicemen who are still serving, either
in the full time or ORNS units, and have not yet completed their
ORNS training cycle, will receive a 40th Anniversary NS
Bonus of $100.
The 40th Anniversary NS Bonus will be
paid on 1 May 2006. It will cost the Government $200 million.
Beyond this one-off package, the RECORD IV
committee has also recommended several permanent schemes. First,
when NSmen complete their ORNS cycle in future, they will receive
an ORNS Completion Award of $300.
Additional Tax Relief for NS Key Command and Staff Appointment
Second, RECORD IV has recommended doing more for NS
key appointment holders. They occupy critical command and staff
posts. They bear heavier responsibilities in leading their units,
keeping the SAF operationally ready, and transforming the SAF into
a third-generation fighting force. They are called up for more
In-Camp Trainings (ICTs) and serve longer during each ICT than
other NSmen. I have therefore decided to grant NS key appointment
holders an additional tax relief of $2,000 over and above the tax
relief that they would normally receive as NSmen.
Changes to the assessment period for NSmen tax relief
Third, to align the recognition given to NSmen with
their contributions in the work year, we will change the basis
period for NSmen Tax Relief from the preceding calendar year to
the preceding work year. This will take effect from Year of
Assessment 2007. This will be fairer to NSmen who are called up
for NS activities in two work years but within the same calendar
the Progress Package will help typical families
Let me illustrate how the Progress Package will
benefit some typical Singaporean families. An elderly couple in
their 60s, retired with no children and living in a 3-room flat,
will receive $3,300. A family of four living in a 4-room flat,
with two parents in their 50s, the father an ex-national
serviceman earning $1,500 a month, the mother a housewife, the son
serving National Service and the daughter in secondary school,
will receive a total of $3,780. The daughter will also benefit
from her school＊s Opportunity Fund, through subsidised enrichment
Notification letters will be sent out in late March
to all Singaporeans informing them of the total amount that they
can expect under the Progress Package. To accept this Package,
all they need to do is to sign up through ATMs, the website or
hard copy forms. Singaporeans can look forward to receiving their
Growth Dividends, Workfare Bonus and 40th Anniversary
NS Bonus, and the CPF top-ups on 1 May 2006.
In total, the Government will share $2.6 billion
with Singaporeans under the Progress Package. Every citizen will
benefit. This package will help us achieve our social objectives
of helping the lower-income groups, looking after the elderly,
investing in the young and recognising the efforts of our NSmen.
Speaker, Sir. Before factoring in Special Transfers, we expect a
surplus of $0.7 billion for FY2006. Taking into account the
Progress Package, the top-ups to the endowment funds and our
investments in R&D, we are left with a budget deficit of $2.9
billion. The Government is able to finance this from funds
accumulated in its current term and will not need to draw on past
reserves. More details on our fiscal position can be found in
Annex E and the Budget Highlights.
Singapore 每 Our Best Home
Speaker, Sir, this Budget aims to build a vibrant economy where
opportunities abound, and an inclusive society where no one is
prospects for Singapore are excellent. Asia is on the rise,
powered by the booming economies of China and India.
Globalisation has made knowledge and networks key sources of
competitive advantage. We are well-placed to ride these trends.
We have a competitive environment for enterprise. We have a hard
working labour force. We have a reputation for trust and
credibility. We must build on these strengths, upgrade our
economy, and equip our workers with new skills. We must
differentiate ourselves from others by competing not just on cost
but also on service, quality and innovation. As we become a key
node in a global network of people, ideas, and businesses, we will
create opportunities that extend beyond the shores of an island of
just four million people.
Growing our economy is only one aspect of making Singapore our
best home. We must extend a helping hand to those who face
difficulty coping with globalisation and change. We must help
low-income households to improve their prospects, and older
Singaporeans to live full and active lives. And we must invest
in our young, who are the hope for our future. This will
strengthen our bonds, and assure every Singaporean of a brighter
future, as we create our best home in Singapore.
Speaker, Sir, I beg to move.