Singapore’s personal income tax regime is already one of the most competitive in the world. Even when compared to Hong Kong with its low standard PIT rate of 15%, most individuals remain better off in Singapore as our marginal tax rates are lower and more progressive. The Government will continue to monitor the effective tax burden of Singapore tax residents and ensure that Singapore remains a compelling place to attract and keep talent, including those at the top end.

To help Singaporeans cope with the economic downturn, as announced in Budget 2009, the Government will give a 20% PIT rebate capped at S$2,000, for income earned in 2008.

The Government will continue to ensure a competitive tax regime to reward the success and enterprise of our companies. In Budget 2007, it cut the headline corporate tax rate from 20% to 18% and expanded the Partial Tax Exemption regime to provide a lower effective tax rate for small and medium enterprises. In Budget 2008, the Government introduced tax incentives to encourage innovation and entrepreneurship, as well as a special allowance for fixtures and fittings which benefit F&B and retail companies in particular.

In Budget 2009, the Government has made a further 1% cut in CIT from 18% to 17%.

• At least 30% on commercial properties
• Landlords should pass on cost savings to tenants

In addition to a property tax rebate of S$100 announced in the GST Offset Package to be given in 2009, Budget 2009 announced a 40% property tax rebate for commercial, industrial and owner-occupied residential properties for 2009. At the same time, the Government also urged landlords to pass on the benefits of the rebates to their tenants.

Taxpayers who face difficulties in the payment of income tax can approach IRAS to review the payment plans.

To enable businesses to make best use of all their sources of funds to meet their financing needs in Singapore during this time of credit tightness, the Government, in Budget 2009, temporarily expanded the scope of the Foreign-Sourced Income Exemption scheme to cover all foreign-sourced income. The Government also temporarily lifted the conditions currently required for foreign-sourced income to be exempted from tax when remitted to Singapore. With these temporary enhancements, businesses will be exempt from tax on the foreign-sourced income that they remit between 22 January 2009 to 21 January 2010 (both dates inclusive), provided that the remitted income is earned on or before 21 January 2009.

As part of Budget 2009, the Government introduced a Jobs Credit Scheme to encourage our businesses to preserve jobs in the downturn. Under this scheme, employers will receive a 12% cash grant on the first $2,500 of each month’s wages for each employee on their CPF payroll. It provides a significant incentive for companies to retain existing workers, and where their business warrants, to employ new workers.

• Provide subsidies for Singaporeans who wish to take up part-time courses
• Help employers offset the costs incurred when employees go on leave or attend training
• Extend SPUR to more sectors

The Government enhanced the Skills Programme for Upgrading and Resilience (SPUR) in order to better help Singaporeans upgrade their skills so that they can stay employed or seek re-employment. Under SPUR, employers who send workers for training in certified courses will receive enhanced course fee subsidies and higher absentee payroll. This helps employers manage excess manpower and reduce retrenchment.

The following enhancements were made to SPUR to help PMETs re-train:

• Course fee subsidies for PMET-level courses that are eligible for SPUR will be increased from 80% to 90%, the same subsidy level as rank-and-file level courses. This includes all Specialist and Advanced Diplomas offered by the polytechnics.
• Selected tertiary courses at UniSIM and the three publicly funded universities will be included under SPUR.

There are currently more than 1,000 courses offered under SPUR. These cover a wide range of industries and sectors for both Rank-and-File and PMETs. Some of the sectors include: creative, community and social services, finance, landscape, process manufacturing, tourism and education services.

WDA will also consider SPUR funding for in-house training on a case-by-case basis as long as the courses meet SPUR objectives and enhance the employability of employees. Employers who are keen to seek SPUR funding for their in-house courses can approach WDA who will assess their request.

WDA constantly monitors and reviews the manpower and skills supply and demand across the different sectors and if the need arises, WDA will provide more training opportunities in these growth sectors.

For YA 2009 and YA 2010, businesses can now carry-back their qualifying deductions arising from the current YA up to a limit of $200,000 to offset their assessable income of the immediate three preceding YAs. This is an increase from the previous cap of S$100,000. This will enable SMEs, especially those affected by the current economic downturn, to obtain more cash flow relief through a cash refund of taxes paid in earlier years.

To encourage banks to lend to businesses, the government introduced a Special Risk-Sharing Initiative (SRI) to share more risk with banks on their loans and encourage lending to mid-sized and larger enterprises, as well as trading companies.

More details on the SRI are available on the Singapore Budget website at
http://www.singaporebudget.gov.sg/key_initiatives/bank_lending.html

• Exempt GST on basic necessities such as sugar and rice
• Provide more GST Credits

Exempt GST on necessities
Providing GST exemption for basic necessities is one way to lower the cost of living for the lower income, but it is not the most effective way. The bulk of GST revenue from basic necessities comes from the higher income and foreigners. Should we exempt these taxes, we would be giving relief to those who actually do not need help. Hence, it is far more advisable to keep a single GST rate on all goods, and use part of the revenue collected to provide targeted assistance to low-income families, which is known as the GST Offset Package.

Provide more GST Credits (GSTC)
To help Singaporeans cope with the living costs, the Government doubled the 2009 GSTC and Senior Citizens’ Bonus for all Singaporeans.

In addition to doubling the GST Credits and Senior Citizens’ Bonus, the Government gave low-income workers a temporary Workfare Income Supplement (WIS) Special Payment further encourage them to stay employed. The WIS Special Payment will provide low-income workers with an additional 50% of the WIS payments that they will receive over the course of this year.

The Government also relaxed the WIS Special Payment work eligibility criteria to enable more low-wage workers, particularly those with less regular employment, to benefit.

HDB households will also receive an extra 0.5-1 months’ worth of Service & Conservancy Charges (S&CC) and an additional month of rental rebates. These are in addition to the rebates already being given out in 2009 as part of the 2007 GST Offset Package.

Employers will only earn Jobs Credits if they employ local workers. If these workers are retrenched, the businesses would not benefit from further Jobs Credits for them.

To prevent abuse of the Jobs Credit scheme in general, prior to each payout of the Jobs Credit, employers on the CPF Board’s database will be screened for unusual contribution adjustments or significant increases in CPF contributions. For such employers, the Government will conduct verifications and, if necessary, will withhold payment to these employers until verifications are completed. We will also conduct selective audit checks. Should any abuse be uncovered, employers could be disqualified from subsequent Jobs Credit payments and face legal prosecution.

Given the severity of the credit crunch, the Government needed to do more to avoid a situation where good and viable companies are unable to get the funding they need to stay afloat and grow. The Government has therefore decided to take on a significant share of the risks of bank lending, which would inevitably expose the Government to the risk of loan losses. We have set aside a reasonable budget to provide for potential loan losses.

Under the SRI, Government takes up to an 80% share of the risk. We believe that the share of the risk borne by the banks is sufficient to incentivise the banks to exercise due diligence in their assessment of loan applications. In addition, the Government will continue to have regular exchanges with the banks and monitor the progress of their lending under the schemes.

The Government must only draw on past reserves in exceptional circumstances, and be able to satisfy the President of why it is critical to do so. The present situation justifies a draw on past reserves. The current global financial and economic crisis is the type of severe contingency that our reserves have been accumulated for. The two major measures that will be funded from past reserves (SRI and Jobs Credit) are of a temporary nature, and will not be built into on-going government programmes.

The income tax rebate is to recognize the contribution of taxpayers, but it comes with a cap so that more benefits can go towards the middle-income.

While the lower-income may not stand to benefit from the tax rebate, they get the highest payout of Growth Dividends, GST Credits and Workfare Income Supplements, and receive the most benefits when seen as a percentage of household income.

A retrospectively applied CIT cut is in fact equivalent to a
CIT rebate.

To put things in perspective, we are already providing substantial benefits to companies this year. The Jobs Credit alone is equivalent in cost to a 50% CIT rebate. Unlike the CIT rebate, the Jobs Credit also has a better chance of preserving jobs for Singaporeans.

One of the main aims of Budget 2009 was to help save jobs for Singaporeans. For example, the Jobs Credit is a macroeconomic injection to support the economy, but designed in a way that preserves the interests of all Singaporean workers – by supporting their jobs, their wages, and keeping their full CPF contribution intact.

In addition, Budget 2009 also announced the following measures to help Singaporeans through these challenging economic times:

• 20% PIT rebate
• Doubling of 2009 GST Credits and Senior Citizens’ Bonus
• Additional 0.5-1 months’ worth of Service & Conservancy Charges (S&CC), Utilities-Save (U-Save) and rental rebates.
• 40% Property Tax Rebates
• 50% WIS Special Payment
• Topped up Comcare funding to S$7 million
• Increased Public Assistance (PA) rate
• Increased funding for Self-Help Groups and Government-funded Voluntary Welfare Organisations (VWOs)

The Government did consider if a 2% GST would help Singaporeans cope better during the downturn. However, we decided against this as an across-the-board GST cut would benefit higher income households, who are more likely to just save the money. However, with the GST Credits we are able to give proportionately more to lower-income households. In fact, the additional GST Credits given to lower and middle income households are much higher than what they would have saved from a 2% GST cut. The 7% GST is also a valuable source of revenue that allows Government to fund additional social supports during the crisis. For instance, the revenue from GST is used to help pay for programmes for the low-income groups like the Workfare Income Supplement Scheme.