Hurrah for the Budget? (Yes, for Income Tax)

As a budget with mostly one-off handouts e.g. growth bonus up to $800 depending on income and HDB flat size, this is a populist budget, an election budget or a pork barrel budget. To be brutally honest, it is a good budget for the masses.

We can naturally anticipate a higher GST after the election as that is the norm of the right hand giving and the left hand taking with any government, and hopefully the GST credits accompanying the higher GST to follow after the election is relatively adequate. But I look too far ahead and should focus on the budget at hand.

The selective decrease in income tax, more tax brackets and tax rebate is the most attractive for the middle income, the traditionally sandwiched class neglected in the government’s emphasis on the less privileged (with their conservancy rebates and GST credits) as the ultra-rich can take care of themselves. A 20% tax rebate capped at $,2000 is repeated.  The last time it was done was in 2008 and if this is done every 2-3 years, it is indeed lots of money saved for the taxpayer. There is also the significant decrease in tax for those earning less than $160,000 per year. Those earning less than $40,000 a year have an income tax of 3.5% instead of 5.5%, the biggest drop in tax rates actually among all the income tax groups.

While not everybody would be happy as greed is good, the government has probably appeased most of the middle class for now with the income tax revisions.


SINGAPORE (AFP) – – Singapore on Friday unveiled more than a billion dollars in grants and will increase the tax firms must pay for hiring foreign staff amid expectations a general election will be called soon.

Lower-income Singaporeans will receive up to Sg$800 ($627) by May 1 as their share of the city-state’s record 14.5 percent economic growth in 2010, Finance Minister Tharman Shanmugaratnam told parliament.

“To share the fruits of last years exceptional economic growth, I will give growth dividends to all adult Singaporeans,” he said.

“The majority of Singaporeans — 80 percent — will get Sg$600 to Sg$800 each… The growth dividends will benefit about 2.5 million Singaporeans and cost the government Sg$1.5 billion ($1.18 billion) this year.”

Shanmugaratnam also rolled out income tax reductions and rebates aimed at the middle class.

Rising inflation and a massive influx of foreign workers in recent years are expected to be hot issues in elections that must be held within a year.

Tharman said levies on companies hiring foreigners will be raised next year in order to slow down the flow of guest workers mostly coming from China, India and Southeast Asia.

“If we do not take further steps now to raise the foreign worker levy, it will be difficult for us to prevent the proportion of foreign workers from rising over time, and exceeding our long-term target of one-third of the workforce,” he said.

With falling birth rates threatening its long-term economic prospects, Singapore rolled out the welcome mat for foreign workers during the 2004-2007 global economic boom.

But after the 2008 financial crisis, the government took a fresh look following complaints from citizens that foreigners were increasingly competing for jobs, housing, medical care and even space on metro trains.

Eugene Tan, an assistant law professor at the Singapore Management University, said the government would likely call elections before June.

“I think probably within the next… two to three months. The budget certainly puts it (government) in the good books of Singaporeans,” he told AFP.

“I think certainly the entire package sweetens the ground… This certainly is a very good position to go to the voters and seek their mandate… It’s as good as it can be.”


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