Identifier
Created
Classification
Origin
06SINGAPORE792
2006-03-14 06:34:00
UNCLASSIFIED
Embassy Singapore
Cable title:
SINGAPORE'S FY2006 BUDGET PRIMES PUMP FOR GENERAL
how-toVZCZCXRO7664 RR RUEHCHI RUEHDT RUEHHM RUEHNH DE RUEHGP #0792/01 0730634 ZNR UUUUU ZZH R 140634Z MAR 06 FM AMEMBASSY SINGAPORE TO RUEHC/SECSTATE WASHDC 9147 INFO RUCPDOC/DEPT OF COMMERCE WASHDC RUEATRS/DEPT OF TREASURY WASHDC RUCNASE/ASEAN MEMBER COLLECTIVE
UNCLAS SECTION 01 OF 03 SINGAPORE 000792
SIPDIS
SIPDIS
E.O. 12958: N/A
TAGS: ECON EFIN ELAB EINV PGOV SOCI KTDB SN
SUBJECT: SINGAPORE'S FY2006 BUDGET PRIMES PUMP FOR GENERAL
ELECTION
UNCLAS SECTION 01 OF 03 SINGAPORE 000792
SIPDIS
SIPDIS
E.O. 12958: N/A
TAGS: ECON EFIN ELAB EINV PGOV SOCI KTDB SN
SUBJECT: SINGAPORE'S FY2006 BUDGET PRIMES PUMP FOR GENERAL
ELECTION
1. Summary. With an eye on anticipated but still not officially
announced general elections, Singapore's FY2006 budget offers a
S$2.6 billion (US$1.6 billion) "Progress Package" targeting
primarily lower income groups. The budget also includes the
usual array of fiscal incentives for specific industries,
including financial services, maritime, and logistics as well
sectors dependent on R&D and intellectual property. For the
fifth consecutive year, the government will run a primary deficit
(fiscal deficit minus interest payments and special transfers);
most analysts agree, however, that the government's revenue
assumptions are conservative and that its forecasted "largest
deficit in 20 years" of S$2.9 billion (US$1.8 billion) is
overstated (Singapore does not, for example, include revenues
from land sales -- projected to reach S$4 billion or US$2.5
billion in FY2006 -- or certain investment income from the
Monetary Authority.) As in previous budgets, defense (32.8%) and
education (22.8%) are the largest components of government
spending.
Detailed information concerning Singapore's FY2006 budget can be
found at:
End Summary.
(Note: Exchange Rate - US$1 = S$1.63)
Election Sweeteners
--------------
2. Singapore's FY2006 budget (April 1, 2006 - March 31, 2007),
approved by Parliament March 9, appears tailor-made for an
election year. The government has yet to officially announce a
date for general elections, but the combination of the budget's
"Progress Package" that extends a lending hand to low income
earners, and daily reporting of party platforms and speculation
about voter precinct redistricting in the government-controlled
media evidence imminent elections. The Progress Package, part of
a larger "special transfer" of S$3.6 billion (US$2.2 billion),
includes a S$1.4 billion (US$860 million) "growth dividend" for
all citizens, specific bonuses for workers aged 40 and above and
earning up to S$1,500 (US$920) per month, and a one-time payment
to individuals who have or are currently performing national
service (the majority of Singapore's adult male citizens).
3. This represents the government's greatest largesse since it
allocated S$5.27 billion (US$3.2 billion) during the 2002
economic downturn. In the run-up to the last general election in
2001, the government provided a similar, albeit more modest,
package worth S$1.81 billion (US$1.1 billion). Many analysts
believe that, currying favor with voters aside, this year's
budget reflects a growing concern about Singapore's widening
income gap. According to government estimates, household incomes
of Singapore's bottom 20 percent declined by an average 3.2%
annually from 1998-2003; that of the top 20 percent increased
2.2% annually during the same period (for more information
concerning trends in household income and expenditures, see
).
Fiscal Incentives
--------------
4. The FY2006 budget provides a number of fiscal incentives for
industry, including:
-- Enhancing Manufacturing, Financial, Maritime, and Logistics
Services
A wide range of incentives for these sectors include General
Services Tax (GST) exemptions for certain tools used in
manufacturing goods for export; and tax concessions and
exemptions targeting asset management, capital markets, treasury
activities, ship financing and management, warehousing, and third-
party logistics providers. Tax concessions will similarly be
extended to the industrial design, and interactive and digital
media industries.
-- R&D Investment
The government will allocate S$5 billion (US$3.1 billion) over
the next five years to establish an R&D Trust Fund. The Fund is
part of a strategic goal to increase Singapore's R&D gross
expenditure, from 2.3% of GDP in 2004 to 3% by 2010.
-- Education
As part of its ongoing efforts to develop Singapore into an
education hub, the FY2006 budget aims to increase funding of
public universities from S$1.24 billion (US$800 million) to S$1.9
billion (US$1.2 billion) annually by 2010, equivalent to about 1%
of GDP.
SINGAPORE 00000792 002 OF 003
-- Tax Competitiveness
In addition to a further one percentage-point reduction this year
in the personal income tax rate, bringing it in line with the
corporate income tax rate of 20%, the budget calls for fine-
tuning tax exemptions for foreign-sourced income tax, stock
options, share-based compensation, and incentives for limited
liability partnerships.
Budget Deficit
--------------
5. The government is projecting a S$2.86 billion (US$1.8
billion) deficit in FY2006, equivalent to 1.6% of 2005 nominal
GDP:
FY2006 FY2005 (%) Change over
Budget Revised FY2005 Revised
-------------- -------------- --------------
(S$ billion)
Revenue 28.96 27.48 5.4
Expenditure 30.62 28.85 6.1
-------------- --------------
Primary Deficit (1.66) (1.37)
Less: Special Transfers 3.59 0.87 310.2
Add: Net Investment 2.39 2.67 (10.6)
Income
Surplus/(Deficit) (2.86) 0.43
Revenues
--------------
6. The government's projected operating revenue of S$28.96
billion (US$17.8 billion) assumes real GDP growth in 2006 of 4-
6%; tax revenue will account for approximately 90% of the total.
Tax revenue as a percentage of GDP has fallen from 13.6% in 2004
to 12.2% in 2005. Contributions from GST have increased in
proportion to total operating revenue from 8.3% in 2002 to 13.5%
in 2005. For the first time in five years, the government did
not increase tobacco and alcohol duties.
Table: Estimated Tax Revenue for FY 2006
--------------
(S$ billion)
Budget % Revised %
FY2006 Share FY2005 Share
-------------- -------------- -------------- --------------
Direct Tax 14.17 56.1 13.26 55.8
Corporate 7.68 30.4 7.10 29.9
Personal 4.60 18.2 4.30 18.1
Assets 1.89 7.5 1.86 7.8
Indirect Tax 11.10 43.9 10.52 44.2
Goods & Services Tax 3.75 14.8 3.60 15.1
Customs & Excise Tax 2.01 8.0 2.02 8.4
Motor Vehicle Tax 1.78 7.0 1.47 6.2
Betting Tax 1.50 5.9 1.49 6.3
Others 2.06 8.2 1.94 8.2
Total 25.80 100.0 23.78 100.0
Expenditures
--------------
7. Total expenditures for FY2006 are estimated to increase 6.1%
over FY2005 to S$30.6 billion (US$18.8 billion). Spending is
equivalent to 16% of nominal 2005 GDP, in line with official
guidelines to keep expenditures below 20% of GDP. Major
allocations go to defense (32.8% of total expenditures or 5.2% of
2005 nominal GDP),education (22.8% or 3.6% of GDP),home affairs
(7.9% or 1.2% of GDP),health (6.6% or 1.0% of GDP),and
transport (6.0% or 0.9% of GDP).
Table: FY2006 Expenditure by Sector and Ministry
-------------- ---
(S$ billion)
% % Change
FY2006 Share from FY2005
-------------- -------------- --------------
TOTAL EXPENDITURE 30.6 100.0 6.1
Social Development 12.8 41.8 8.1
SINGAPORE 00000792 003 OF 003
Education 7.0 22.8 14.1
Health 2.0 6.6 11.5
National Development 1.2 4.1 -8.3
Environment 1.1 3.4 -11.9
Community Development 1.0 3.4 9.5
& Sports
Information, Communications 0.5 1.6 11.4
& the Arts
Security/External Relations 12.8 41.8 8.1
Defense 10.1 32.8 8.5
Home Affairs 2.4 7.9 6.4
Foreign Affairs 0.3 1.1 7.0
Economic Development 3.8 12.3 3.0
Transport 1.8 6.0 -2.1
Trade & Industry 1.6 5.3 6.5
Manpower 0.3 0.8 17.4
Info-Communications 0.1 0.2 24.4
Technology
Government Administration 1.2 4.0 -16.6
Finance 0.6 1.9 -22.0
Organs of State 0.2 0.8 1.1
Prime Minister's Office 0.2 0.7 12.1
Law 0.2 0.7 -34.8
HERBOLD
SIPDIS
SIPDIS
E.O. 12958: N/A
TAGS: ECON EFIN ELAB EINV PGOV SOCI KTDB SN
SUBJECT: SINGAPORE'S FY2006 BUDGET PRIMES PUMP FOR GENERAL
ELECTION
1. Summary. With an eye on anticipated but still not officially
announced general elections, Singapore's FY2006 budget offers a
S$2.6 billion (US$1.6 billion) "Progress Package" targeting
primarily lower income groups. The budget also includes the
usual array of fiscal incentives for specific industries,
including financial services, maritime, and logistics as well
sectors dependent on R&D and intellectual property. For the
fifth consecutive year, the government will run a primary deficit
(fiscal deficit minus interest payments and special transfers);
most analysts agree, however, that the government's revenue
assumptions are conservative and that its forecasted "largest
deficit in 20 years" of S$2.9 billion (US$1.8 billion) is
overstated (Singapore does not, for example, include revenues
from land sales -- projected to reach S$4 billion or US$2.5
billion in FY2006 -- or certain investment income from the
Monetary Authority.) As in previous budgets, defense (32.8%) and
education (22.8%) are the largest components of government
spending.
Detailed information concerning Singapore's FY2006 budget can be
found at:
End Summary.
(Note: Exchange Rate - US$1 = S$1.63)
Election Sweeteners
--------------
2. Singapore's FY2006 budget (April 1, 2006 - March 31, 2007),
approved by Parliament March 9, appears tailor-made for an
election year. The government has yet to officially announce a
date for general elections, but the combination of the budget's
"Progress Package" that extends a lending hand to low income
earners, and daily reporting of party platforms and speculation
about voter precinct redistricting in the government-controlled
media evidence imminent elections. The Progress Package, part of
a larger "special transfer" of S$3.6 billion (US$2.2 billion),
includes a S$1.4 billion (US$860 million) "growth dividend" for
all citizens, specific bonuses for workers aged 40 and above and
earning up to S$1,500 (US$920) per month, and a one-time payment
to individuals who have or are currently performing national
service (the majority of Singapore's adult male citizens).
3. This represents the government's greatest largesse since it
allocated S$5.27 billion (US$3.2 billion) during the 2002
economic downturn. In the run-up to the last general election in
2001, the government provided a similar, albeit more modest,
package worth S$1.81 billion (US$1.1 billion). Many analysts
believe that, currying favor with voters aside, this year's
budget reflects a growing concern about Singapore's widening
income gap. According to government estimates, household incomes
of Singapore's bottom 20 percent declined by an average 3.2%
annually from 1998-2003; that of the top 20 percent increased
2.2% annually during the same period (for more information
concerning trends in household income and expenditures, see
).
Fiscal Incentives
--------------
4. The FY2006 budget provides a number of fiscal incentives for
industry, including:
-- Enhancing Manufacturing, Financial, Maritime, and Logistics
Services
A wide range of incentives for these sectors include General
Services Tax (GST) exemptions for certain tools used in
manufacturing goods for export; and tax concessions and
exemptions targeting asset management, capital markets, treasury
activities, ship financing and management, warehousing, and third-
party logistics providers. Tax concessions will similarly be
extended to the industrial design, and interactive and digital
media industries.
-- R&D Investment
The government will allocate S$5 billion (US$3.1 billion) over
the next five years to establish an R&D Trust Fund. The Fund is
part of a strategic goal to increase Singapore's R&D gross
expenditure, from 2.3% of GDP in 2004 to 3% by 2010.
-- Education
As part of its ongoing efforts to develop Singapore into an
education hub, the FY2006 budget aims to increase funding of
public universities from S$1.24 billion (US$800 million) to S$1.9
billion (US$1.2 billion) annually by 2010, equivalent to about 1%
of GDP.
SINGAPORE 00000792 002 OF 003
-- Tax Competitiveness
In addition to a further one percentage-point reduction this year
in the personal income tax rate, bringing it in line with the
corporate income tax rate of 20%, the budget calls for fine-
tuning tax exemptions for foreign-sourced income tax, stock
options, share-based compensation, and incentives for limited
liability partnerships.
Budget Deficit
--------------
5. The government is projecting a S$2.86 billion (US$1.8
billion) deficit in FY2006, equivalent to 1.6% of 2005 nominal
GDP:
FY2006 FY2005 (%) Change over
Budget Revised FY2005 Revised
-------------- -------------- --------------
(S$ billion)
Revenue 28.96 27.48 5.4
Expenditure 30.62 28.85 6.1
-------------- --------------
Primary Deficit (1.66) (1.37)
Less: Special Transfers 3.59 0.87 310.2
Add: Net Investment 2.39 2.67 (10.6)
Income
Surplus/(Deficit) (2.86) 0.43
Revenues
--------------
6. The government's projected operating revenue of S$28.96
billion (US$17.8 billion) assumes real GDP growth in 2006 of 4-
6%; tax revenue will account for approximately 90% of the total.
Tax revenue as a percentage of GDP has fallen from 13.6% in 2004
to 12.2% in 2005. Contributions from GST have increased in
proportion to total operating revenue from 8.3% in 2002 to 13.5%
in 2005. For the first time in five years, the government did
not increase tobacco and alcohol duties.
Table: Estimated Tax Revenue for FY 2006
--------------
(S$ billion)
Budget % Revised %
FY2006 Share FY2005 Share
-------------- -------------- -------------- --------------
Direct Tax 14.17 56.1 13.26 55.8
Corporate 7.68 30.4 7.10 29.9
Personal 4.60 18.2 4.30 18.1
Assets 1.89 7.5 1.86 7.8
Indirect Tax 11.10 43.9 10.52 44.2
Goods & Services Tax 3.75 14.8 3.60 15.1
Customs & Excise Tax 2.01 8.0 2.02 8.4
Motor Vehicle Tax 1.78 7.0 1.47 6.2
Betting Tax 1.50 5.9 1.49 6.3
Others 2.06 8.2 1.94 8.2
Total 25.80 100.0 23.78 100.0
Expenditures
--------------
7. Total expenditures for FY2006 are estimated to increase 6.1%
over FY2005 to S$30.6 billion (US$18.8 billion). Spending is
equivalent to 16% of nominal 2005 GDP, in line with official
guidelines to keep expenditures below 20% of GDP. Major
allocations go to defense (32.8% of total expenditures or 5.2% of
2005 nominal GDP),education (22.8% or 3.6% of GDP),home affairs
(7.9% or 1.2% of GDP),health (6.6% or 1.0% of GDP),and
transport (6.0% or 0.9% of GDP).
Table: FY2006 Expenditure by Sector and Ministry
-------------- ---
(S$ billion)
% % Change
FY2006 Share from FY2005
-------------- -------------- --------------
TOTAL EXPENDITURE 30.6 100.0 6.1
Social Development 12.8 41.8 8.1
SINGAPORE 00000792 003 OF 003
Education 7.0 22.8 14.1
Health 2.0 6.6 11.5
National Development 1.2 4.1 -8.3
Environment 1.1 3.4 -11.9
Community Development 1.0 3.4 9.5
& Sports
Information, Communications 0.5 1.6 11.4
& the Arts
Security/External Relations 12.8 41.8 8.1
Defense 10.1 32.8 8.5
Home Affairs 2.4 7.9 6.4
Foreign Affairs 0.3 1.1 7.0
Economic Development 3.8 12.3 3.0
Transport 1.8 6.0 -2.1
Trade & Industry 1.6 5.3 6.5
Manpower 0.3 0.8 17.4
Info-Communications 0.1 0.2 24.4
Technology
Government Administration 1.2 4.0 -16.6
Finance 0.6 1.9 -22.0
Organs of State 0.2 0.8 1.1
Prime Minister's Office 0.2 0.7 12.1
Law 0.2 0.7 -34.8
HERBOLD