SINGAPORE: Following Singapore's buoyant economic performance last year, pundits are expecting a "generous" Budget and their wish lists include cuts in personal tax rates, the abolishment of estate duty, rebates to offset the higher costs of living, and more money from employers to support the greying workforce.
Budget Day will fall on Feb 15, the Parliamentary Clerk announced yesterday.
Citigroup economist Kit Wei Zheng believes that the "bulging Government coffers" suggest "ample fiscal space" to tackle the soaring rate of inflation, which hit a 25-year high late last year.
He said that the Government's fiscal 2007 Budget assumptions were "overly conservative, under-estimating revenue and overestimating expenditures". Instead of a primary fiscal deficit of $640 million projected, Singapore posted a primary fiscal surplus of $8.6 billion in the first half of the year.
"On hindsight, the 2-percentage-point hike in the Goods and Services Tax may have been unnecessary, or could have been delayed or staggered," he said.
Expecting the Government to cut personal tax rate for high earners, which would "go some way" in maintaining Singapore's edge as an attractive place for top global talent, Mr Zheng said there could also "be a case for larger cuts in the lower and middle-income brackets", who had been hit by economic restructuring between 2002 and 2006.
He also expects the employers' CPF contribution rate to be restored to 16 per cent, a move that would raise the inflow of funds "to offset the erosion in purchasing power of CPF savings from higher inflation".
The corporate tax rate stands at 18 per cent and Ernst and Young's head of tax Pok Soy Yoong and corporate tax partner Ang Lea Lea urged the Government to refresh the tax incentives regime beyond merely lowering the tax rate.
Already low tax rates are "fast eroding the perceived effectiveness of many of these incentives in the minds of the investors". They said: "When the tax savings is at most 3 per cent, the investor would wonder what the fuss is all about."
Mr David Sandison, Pricewaterhouse-Coopers' tax partner in Singapore, said: "What is really needed is some enhanced fiscal support for employer-sponsored pension schemes".
These would "not only help fill the increasingly widening pension gap, but also go hand-in-hand with Singapore's aim to be king of wealth management in Asia", he said. — TODAY/ar