| GDP growth in 1997 is projected
to be between 5 to 7 per cent. For FY97, revenue collection
is estimated at $28.6 billion, while operating and development
expenditures are budgeted at $23.9 billion. The budget
surplus for FY97 is therefore expected to be $4.8 billion,
the lowest since FY92.
There are two main reasons for the
decline in the projected surplus. One is the slowdown
in the growth of revenue collection, due largely to
the cumulative tax cuts over the years. The other is
the rise in development expenditure, mainly because
of increased spending on economic development projects,
implementation of the Education IT MasterPlan, and the
construction of the North-East MRT line and the Bukit
Panjang LRT.
In the past five years, we have cut
the corporate tax rate from 31 per cent to 26 per cent.
We have similarly reduced the top marginal rate for
personal income tax from 33 per cent to 28 per cent,
with corresponding reductions to the other marginal
tax rates. Property tax was brought down from 16 per
cent to 12 per cent. We also abolished the stamp duty
for a number of instruments and reduced the rates for
others. All these measures resulted in an average revenue
loss of about $2.5 billion a year. The revenue loss
amounts to about one and a half times more than the
additional GST collection of $1.7 billion a year. Development
spending, on the other hand, has grown by more than
two and a half times from $3.6 billion in FY92 to $9.6
billion in FY96.
The tax cuts and higher development
expenditure are in line with our policy of keeping taxes
as low as possible, and directing spending to productive
infrastructure which will yield lasting returns. This
policy has served us well. It has provided the basis
for Singapore's economic growth. It will remain a cornerstone
of our economic strategies. We will continue to give
priority to investments in infrastructure and ensure
that our tax rates are competitive.
We reduced our corporate tax and personal
income tax rates last year. The lower rates will take
effect from Year of Assessment 1997. There is therefore
no need to make further adjustments to these tax rates
so soon after the last revision. As it is, our tax rates
are already among the lowest in the world. However,
we will continue to fine-tune our tax incentives to
promote activities which are of high value-add and high
growth potential. We will also adjust some of the personal
reliefs for income tax.
The projected surplus for FY97, although
lower than previous years, is still at a healthy level.
Government will therefore continue to return part of
these surpluses to Singaporeans. I will elaborate on
the details later.
Let me now deal with the tax changes
for companies. |
