... how much did the previous "budget" in 2007 helped
Singaporeans?
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S'pore budget to cushion impact of slower growth: analysts
Wed, Feb 13, 2008
AFP
THE Government is expected to cut personal income taxes and
announce a financial package to cushion the impact of rising prices
and slowing economic growth in its 2008 budget, analysts said.
Finance Minister Tharman Shanmugaratnam is likely to announce
Friday an 'inflation offset package' aimed at helping primarily the
poor and elderly cope with rising living costs, they said.
'This year's budget will be closely watched,' Citigroup
economist Kit Wei Zheng said.
Singapore, South-east Asia's most advanced economy, grew 7.5 per
cent last year. The stock market sizzled to record highs and
companies reported robust earnings.
But with some economists saying the United States is in a
recession, the government forecasts Singapore's trade-reliant
economy to expand at a slower clip of 4.5 per cent to 6.5 per cent
this year.
While salaries increased and a record number of workers were
employed last year, many Singaporeans and foreign residents saw
their purchasing power eroded as soaring crude oil prices drove up
the costs of food and other items.
Prime Minister Lee Hsien Loong was quoted earlier this month as
saying inflation could exceed five per cent this year, compared
with 2.1 per cent in 2007.
'Against a backdrop of intensified downside risks to growth and
sharply higher inflation, the thrust of the budget will be to
aggressively tackle issues related to costs of living and business
competitiveness,' Mr Kit said.
'Given buoyant government revenues, we expect a generous budget,
with large transfers and rebates to offset higher costs of living,
possible cuts in income tax rates and other measures to lower
business costs.'
The government is expected to end the financial year with a
surplus instead of a deficit, which it had earlier projected,
analysts said.
Hoe Woei Chen, an economist with United Overseas Bank (UOB),
expects a personal income tax rate cut to 18 per cent from 20 per
cent.
She also expects a large part of the budget to address 'the
widening income gap' and to help lower-income groups and the
elderly.
'Because of the strong economic growth last year, the government
has plenty of room for manoeuvre,' Mr Hoe told reporters.
Hand-outs & top-ups
'We expect some cash handouts and rebates and the usual
top-ups.'
Mr Kit, of Citgroup, expects the 'inflation offset package'to be
an extension of the four billion Singapore dollars in cash
handouts, savings top-ups and rebates the government gave last year
to temper the impact of a rise in the goods and services tax.
The tax increased by two percentage points to seven per
cent.
A bigger portion of this year's package could be in cash in a
bid to spur domestic spending and mitigate the impact of an export
slowdown, he added.
With inflation hurting family budgets, the prime minister said
the increase in prices was a global trend and he suggested
Singaporeans find ways to cut costs.
The budget was expected to help businesses, with UOB's Hoe
saying small and medium enterprises could see some tax
incentives.
Firms hit by soaring office rents were also likely to get some
rebates, said economist Song Seng Wun of CIMB-GK Research.
Corporate tax cut
Another cut in corporate income taxes may be possible, especially
after regional rival Hong Kong in October reduced its rate by one
per centage point to 16.5 per cent, said Kit, of Citigroup.
Singapore's rate stands at 18 per cent.
Accounting firm Ernst and Young said the government should ease
rules governing tax exemptions for profits of company branches in
foreign countries, on foreign service income and foreign dividends.
-- AFP