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     FrontPage Edition: Thu 15 February 2007

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Budget Statement 2007

Source: www.mof.gov.sg

BUDGET STATEMENT 2007

Ready for the Future, Ready for the World

An Excerpt

Raising the Goods and Services Tax Rate
I have decided to raise the GST rate to 7% with effect from 1 July 2007.
It is prudent to implement the GST increase now, in one step, while the economy is strong. This is expected to raise additional revenues of $750 million this year, and $1.5 billion per year going forward...
GST Offset Package
This brings me to the measures we will take to offset the GST increase.
We will put in place a comprehensive set of measures for Singaporeans, with more for the lower-income.
The majority of Singaporeans will get offsets that are equal to at least five years of the increase in their GST expenditures.
Lower-income households will get much more than five years¡¯ worth. This GST Offset Package will cost the Government $4 billion in total over five years.
Helping Singaporeans Cope with the GST Increase
GST Credits
Of this $4 billion, $1.8 billion will be given out as cash, in the form of GST Credits. All adult Singaporeans will receive GST Credits in annual instalments.
The amount that a person receives depends on two factors ¡ª his assessable income (AI) and the annual value (AV) of his home, which is used as a proxy for his wealth.
I will give lower-income Singaporeans larger GST Credits.
Those who live in one- to three-room flats[4] and have annual assessable incomes of $24,000 or less will qualify for the largest quantum of $1,000, to be paid out in instalments of $250 per year over four years.
Nearly three-quarters of the population will receive GST Credits of $800, paid out in $200 per year.
Next, if you live in a larger home with an AV of more than $10,000, but you earn less than $100,000 a year, you will get $400 in GST Credits.
The top income group comprising those earning over $100,000 a year will get $100. It is a small gesture, but recognises that the GST increase affects everyone.

See: Table 1 ¨C Structure of GST Credits

NSmen and NSFs, including those aged below 21, will also get an additional $100 of GST Credits, to recognise their contributions to national security.
They will get their bonus GST Credits in the year that they qualify. So a person who becomes an NSF in 2008 or 2009 will also get the bonus GST Credits.
Singaporeans will have to sign up just once to qualify for all four years of GST Credits, though the amount they get will be assessed yearly based on their income and residence.
The first instalment will be paid out on 1 July this year, at the same time as the GST increase.
Senior Citizens¡¯ Bonus
I will give senior citizens more. Many of them will be concerned about the GST increase, because they have to meet living expenses out of their savings.
We will therefore provide Singaporeans aged 55 and above with a Senior Citizens¡¯ Bonus, as long as they have annual assessable incomes of $100,000 or less.
Those aged 60 and above will get more, with amounts ranging from $1,000 for those in the lower-income group, to $400 for those who are better off.
As with the GST Credits, the quantums will depend on their income and the annual value of their homes.
Two-thirds of the Senior Citizens¡¯ Bonus will be given in cash and one-third credited into their Medisave Accounts, on 1 July of each year.
For example, a 65-year-old retiree living in a three-room flat will get $1,000 of Senior Citizens¡¯ Bonus on top of the $1,000 he will get in GST Credits, making a total of $2,000 over four years. The Senior Citizens¡¯ Bonus will cost the Government $400 million.

See: Table 2 ¨CStructure of Senior Citizens¡¯ Bonus

Top-ups to Post-Secondary Education Accounts
We must also help families with the costs of their children¡¯s post-secondary education.
As I mentioned earlier, we will open Post-Secondary Education Accounts (PSEA) for all Singapore citizen children aged from seven to 20 from next year.
We will top up these accounts from time to time, when our surpluses allow, and give more to those who are less well-off.
I will credit the accounts of those in secondary school or older with $400 in 2008, and another $400 in 2009. Those of primary school age will get less as they can get more PSEA top-ups in future years if we are able to share surpluses.
The PSEA top-ups will cost $400 million and benefit around 650,000 children.

See: Table 3 - Structure of PSEA Top-ups (each year)

Utilities-Save (U-Save), Service and Conservancy Charges (S&CC), and Rental Rebates
As part of the GST Offset Package, I will also extend the Utilities-Save, S&CC and Rental Rebates to eligible HDB households for five years, from 1 April 2007 to 31 March 2012.
This will help low to middle-income households cope with increased household expenses due to the GST increase.
The U-Save and S&CC rebates will also be extended to those living in HDB executive flats. These rebates will benefit 800,000 HDB households and cost a total of $800 million over five years.
Property Tax Rebate
I will provide a one-off property tax rebate of up to $100 per year in 2008 and 2009, in other words, $200 in total, for all owner-occupied residential properties.
This will benefit about one million property owners, with three- and four-room HDB flat owners paying little to no property tax during these two years. This will cost the Government $200 million.
Assistance for Low-Income Families with Young Children
To help lower-income families with young children, we will increase financial assistance for kindergarten and childcare.
We will enhance the Kindergarten Financial Assistance Scheme (KiFAS) by increasing the level of subsidy from 75% of kindergarten fees to 90%, which means that low-income families will now be able to enjoy a subsidy of about $80 a month.
Subsidies for the Centre-Based Financial Assistance Scheme for ChildCare (CFAC) will be increased by between $20 and $40 a month for each child.
Other enhancements to the ComCare Fund programmes will be announced by MCYS later. These enhancements will cost a total of $6 million a year.
Assistance for Pensioners
The Government has decided to increase the Singapore Allowance further by $20 per month, and raise the gross pension ceiling from the current $1,100 to $1,150 per month. The revision will give an additional $4 million a year to pensioners residing in Singapore.
Public Transport Fund
While public transport remains affordable for the majority of Singaporeans, there are lower-income families who need more help.
The Government will commit $10 million to a Public Transport Fund (PTF) in October 2007, to be given out over three years. This will provide additional help to lower-income households for their public transport costs where necessary.
Assistance through Citizens¡¯ Consultative Committees (CCCs), Self-Help Groups and VWOs
Although we have a comprehensive GST Offset Package, it is possible that some households may face additional difficulties.
The best way to help them is through flexible assistance from their CCCs. I will therefore top up the CCC ComCare Fund by $5 million over five years.
To help lower-income Singaporean families, the Government will also provide $2 million over five years to the Self-Help Groups, and $3 million over five years for Government-funded VWO programmes. More details will be announced by MCYS.
Additional Subsidies for Healthcare, Education and Service and Conservancy Charges
The Government will provide the restructured hospitals and polyclinics with more grants to fully absorb the additional GST on subsidised healthcare services. This will cost the Government an additional $12 million a year.
We will also absorb the GST payable on school and miscellaneous fees, as well as fees and tuition grants at ITEs, polytechnics and universities. This will cost an additional $40 million a year.
Town councils will also get an additional $10 million a year to absorb the additional GST payable on Service and Conservancy Charges.
Overall Impact of the GST Offset Package on Households
Let me summarise the overall impact of the GST Offset Package for Singaporean households.
Most households will receive GST Credits, Senior Citizens¡¯ Bonuses, PSEA top-ups, U-Save, S&CC and rental rebates, and property tax rebates.
Taking these offsets alone, those living in four-room flats will receive benefits that are, on average, seven times the extra GST they will have to pay each year.
In other words, seven years¡¯ of offset. Even those in executive flats will receive four years¡¯ worth of offset.
The lowest-income households will receive the most ¡ª for instance, two-roomers will receive about 16 years¡¯ worth...
More... (Full Text of Statement)

Source: www.mof.gov.sg Press Release 15 Feb 2007

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