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BUILDING ON OUR STRENGTHS, CREATING OUR BEST HOME
1. In his Budget Statement for Financial Year (FY) 2006,
Prime Minister and Minister for Finance Lee Hsien Loong announced
a range of tax and other initiatives to support the ongoing
restructuring and upgrading of the economy, comprehensive
measures to help low-wage workers adapt to the global economy,
and a $2.6 billion Progress Package to share budget
surpluses with all Singaporeans.
2. PM Lee noted that the economy’s growth of 6.4% in
2005 was much better than expected. 110,800 new jobs were
created in 2005, bringing down the unemployment rate to 2.5%.
Describing the fiscal position as good, PM Lee reported an
overall budget surplus of $0.4 billion for FY2005 and projected
a surplus of $0.7 billion before Special Transfers for FY2006.
Taking into account Special Transfers, which include the Progress
Package, top-ups to the endowment funds and investments
in R&D, the Budget is expected to be in deficit of $2.9
billion. PM Lee assured the House that the Government will
be able to finance this deficit from funds accumulated in
its current term and will not need to draw on past reserves.
Upgrading and Restructuring the Economy
3. PM Lee said that Singapore’s strong economic performance
was the result not only of a favourable external environment,
but more importantly, efforts to remake the economy. However,
other countries were also reinventing themselves and gearing
up to compete globally. PM Lee said that Singapore needed
to press on with upgrading and restructuring the economy,
and outlined strategies for Singapore to differentiate itself
and move ahead of the competition. (See Key Budget Initiatives
1
for details)
4. First, to become a knowledge hub in Asia. PM Lee
identified innovation, enterprise and R&D as key sources
of future growth for the economy. The Government will inject
$500 million into a newly set up R&D Trust Fund, targeted
to reach $5 billion over five years. In addition to knowledge
creation, Singapore will aim to be a centre for knowledge
exchange, a key node in a global network of ideas, people
and businesses, and a choice location for international events.
To enhance IT connectivity, PM Lee said that Singapore will
develop a new national broadband network that is much faster
than what is available today.
5. Second, to build on strengths in manufacturing and
services. The Government will promote activities that
place a premium on trust, quality and service, not just efficiency
and low cost. In manufacturing, the focus will be on raising
productivity and skill levels. In services, in addition to
developing existing growth industries like logistics, info-communication,
banking and finance, and tourism, Singapore will seek opportunities
in emerging areas such as premier healthcare, education and
creative industries.
6. The Budget contained several measures to promote the development
of Singapore as a financial centre, with enhanced tax incentives
for asset and wealth management, capital and treasury markets,
and captive insurance. Measures to grow the maritime and logistics
industries included a new Maritime Finance Incentive offering
tax exemption for qualifying income of ship investment vehicles
and a 10% concessionary tax rate for qualifying income of
ship investment managers. Shipping companies will be allowed
to renew their Approved International Shipping incentive for
a third period of 10 years, lengthening the maximum period
of incentive from 20 years to 30 years.
7. Third, to support entrepreneurship and enterprise.
The Government will facilitate the growth of promising local
companies into international players and ease regulatory restrictions
to promote enterprise. A key initiative will be to reduce
the record-keeping requirement for companies and individuals
across 17 statutes, in most cases to just five years.
8. Fourth, to grow human capital. The Government will
continue to attract global talent who will bring in new skills,
create new value and enlarge the economic pie. At the same
time, the Government will invest in education and training
to equip Singaporeans with the skills and mindsets to succeed
in the knowledge economy. Selected secondary schools will
work with polytechnics to introduce new applied subjects such
as electronics and digital media as electives. Students will
also be able to gain direct admission to the polytechnics
based on their talents and abilities, similar to the junior
colleges and secondary schools. The Government will allocate
an additional $2 billion to the university sector over the
next five years.
9. Fifth, to maintain a competitive tax environment.
PM Lee said that the Government will continue to keep taxes
low to attract investments, reward enterprise, and attract
talents. He added that the major taxes were at about the right
levels, following the extensive tax restructuring over the
last five years. Singapore’s personal and corporate
income tax regimes were among the most competitive in the
world. PM Lee also said that the Government was reviewing
the continued relevance of Estate Duty, in the context of
Singapore’s overall assets tax regime.
Helping Singaporeans Move Forward Together
10. PM Lee said that even as Singapore pressed on with restructuring,
the Government will take more active and focused measures
to help those most affected by globalisation. He said that
the Government had accepted the recommendations of the Ministerial
Committee on Low Wage Workers. PM Lee emphasised that Singapore’s
approach was based on Workfare – that the best
way to help people was to help them to work, so that they
could help themselves and their families. He outlined the
key elements of this approach.
11. First, the Government will help the lower-income more.
When there are surpluses to share, more will be given to them.
Second, in helping the lower-income, the Government will encourage
them to work, rather than free-ride on state support. This
is to avoid the pitfalls of Western style state welfare which
is expensive and wasteful, and creates a mindset of entitlement
and dependency. Third, the Government will experiment, adapt
and improve on the new schemes which are being introduced.
Fourth, the Government will ensure that it has the fiscal
resources to fund any new schemes before embarking on them,
rather than make reckless commitments without considering
how to pay for them. Finally, the Government will involve
the community and grassroots networks in this social effort.
They know the ground well and can assess where the needs are
greatest.
12. PM Lee announced a comprehensive package of measures
to help low-wage workers. (See Key Budget Initiatives 2
for details)
13. First, the Government will expand job opportunities
to help low-wage workers find better and higher-paying jobs
which they are able to do. The Government will spend $40
million over three years to re-create 10,000 jobs each year
under the enhanced Job Re-creation Programme. $30 million
will also be set aside over two years to help companies hire
and re-employ older workers through the ADVANTAGE! scheme.
14. Second, the Government will equip low-wage workers
with higher skills for better jobs. Workers will have
training and skills progression pathways for their upgrading
through the Workforce Skills Qualifications System. Training
will be provided to 45,000 low-wage workers to help improve
their problem-solving and communication skills as well as
English, numeracy and IT literacy so that they will be more
employable. About $30 million will be spent over three years
for this. Training will also be made more accessible to SMEs
and workers involved in contract or sub-contract employment
arrangements. To ensure that workers have adequate resources
for retraining, the Government will top up the Lifelong Learning
Fund by $100 million to $2.1 billion.
15. Third, the Government will provide better social support
to enable work. Parents from low-income families will
be provided with additional childcare and student care subsidies
under the new Work Support Programme aimed at enabling people
to go out to work. The Government will also top up the ComCare
Fund by $100 million to $600 million to help needy households.
16. Fourth, the Government will invest more in the education
of children from low-income families. The income thresholds
and benefits for the Financial Assistance Scheme in schools
will be increased, making education more affordable. Low-income
families will receive increased subsidies for kindergarten
and childcare for their children. The income threshold for
the Edusave Merit Bursary will be raised from $3,000 to $4,000,
benefiting an additional 17,000 students. Vocational training
programmes will be enhanced for youths to gain employable
skills. The Home Ownership Plus Education (HOPE) scheme will
be expanded to encourage young, low-income families to focus
resources on their children.
17. Fifth, the Government will reward low-wage workers
for working. Older, lower-income workers will be given
a Workfare Bonus ranging from $150 to $1,200 under the Progress
Package. First-timer citizen households with monthly incomes
of $3,000 and below will qualify for an additional CPF Housing
Grant ranging from $5,000 to $20,000 to help them purchase
their first home. In line with the Workfare principle,
at least one of the flat buyers must be working for a minimum
of two years prior to the flat purchase to qualify for the
grant. About 40% of first-time buyers, or an estimated 6,000
households will benefit annually. The additional CPF Housing
Grant will cost the Government $75 million a year.
18. Sixth, the Government will give more to the lower-income
when it shares budget surpluses. The Government will do
this under the Progress Package.
Progress Package
19. PM Lee announced a Progress Package to share $2.6
billion worth of budget surpluses with all Singaporeans. While
the Package will benefit all Singaporeans, more benefits will
be given to those with lower incomes. PM Lee explained that
this was in line with the Government’s philosophy that
Singaporeans should progress together as one people. (See
Key Budget Initiatives 3 for details)
20. First, the Government will share the fruits of growth
with all Singaporeans through Growth Dividends. All adult
Singaporeans will get Growth Dividends ranging from $200 to
$800, with larger amounts going to those who have lower incomes
and stay in less expensive homes. The Government estimates
that close to half of adult Singaporeans will get the maximum
$800. The Growth Dividends will cost the Government $1.4 billion.
21. Second, the Government will reward low-wage workers
for work through Workfare Bonus. Those who earn $1,500
or less per month through regular work will receive Workfare
Bonuses ranging from $150 to $1,200 in two portions. In line
with the Workfare principle, they need to be working continuously
for at least six months in 2005 to qualify for the Workfare
Bonus in 2006, and for at least six months in 2006 to qualify
for the Workfare Bonus in 2007. The Workfare Bonus will cost
the Government $400 million.
22. Third, the Government will help lower-income households
with their living expenses through rebates. All HDB households
will get Utilities-Save (U-Save) rebates ranging from $60
to $200, with higher rebates for the smaller flat types. The
rebates will cost the Government $60 million. HDB households
will also continue to get rebates on up to 4 months of Service
& Conservancy Charges (S&CC) and up to 3 months of
rent.
23. Fourth, the Government will help the elderly meet
retirement and healthcare needs through CPF top-ups. Singaporeans
aged 50 and above will get CPF top-ups ranging from $100 to
$800 depending on their age and Annual Value of their homes.
Half of the amount will go into the CPF Special/Retirement
Account and the other half into the CPF Medisave Account.
The CPF top-ups will cost the Government $500 million. In
addition, the Government will top up the Eldercare Fund and
Medifund by $100 million each.
24. Fifth, the Government will set up Opportunity Funds
in all schools and community self-help groups, namely CDAC,
MENDAKI, SINDA and the Eurasian Association. Students
from lower-income families will have access to more enrichment
and learning opportunities, such as the purchase of computers
and overseas study trips. The Opportunity Funds will cost
the Government $50 million.
25. Sixth, the Government will recognise the contributions
of NSmen through the 40th Anniversary NS Bonus.
Singaporeans who are serving or who have served National Service
(NS) will receive NS Bonus of up to $400. The 40th
Anniversary NS Bonus will cost the Government $200 million.
In addition to this one-off NS Bonus, NSmen who complete their
Operationally Ready National Service (ORNS) training cycle
in future will receive an ORNS Completion Award of $300. NS
key appointment holders will get an additional $2,000 tax
relief over and above what they normally receive as NSmen.
26. The Growth Dividends, Workfare Bonus and 40th
Anniversary NS Bonus will be paid out on 1 May 2006. The CPF
top-ups will also be made on the same date. Singaporeans will
get a letter from the CPF Board in late March 2006 informing
them of the total amount they can expect under the Progress
Package. They have to sign up through ATMs, the Progress
Package website or hard copy forms to receive their Progress
Package.
27. For more details, please refer to the official Budget
2006 website: www.budget2006.gov.sg.
MINISTRY OF FINANCE
17 FEBRUARY 2006
Upgrading and
Restructing the Economy: Key Initiatives
Moving Forward
Together: Helping Low-Wage Workers
Sharing the Fruits
of Growth: Progress Package
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