Singapore Budget 2009 Speech by Finance Minister Tharman Shanmugaratnam

RESILIENCE PACKAGE

The Resilience Package of $20.5 billion for FY2009 will have five components:

• First, jobs for Singaporeans. We will spend $5.1 billion to help preserve jobs.


• Second, stimulating bank lending. We expect to extend $5.8 billion in government capital for a Special Risk-Sharing Initiative (SRI). Of this, a small fraction is likely to be eventually expended on provisions for loan losses.


• Third, enhancing business cash-flow and competitiveness. We will implement tax measures and grants for businesses that will cost $2.6 billion.


• Fourth, supporting families. We will spend $2.6 billion to support Singaporean households this year. This is on top of the benefits they will derive from the measures to preserve jobs.


• Fifth, building a home for the future. We will spend $4.4 billion on developing first class infrastructure for the island and on expanded provisions for education and healthcare.

JOBS FOR SINGAPOREANS

• Jobs Credit
  To sustain jobs for Singaporeans, we will introduce a Jobs Credit which will encourage our businesses to preserve jobs as much as is possible in the downturn.
  
  The Jobs Credit that an employer receives will comprise 12% of the first $2,500 of the wages of each employee who is on the CPF payroll. It will be given in four quarterly payments, with each payment being based on the workers who are with the employer at the time. This will therefore provide incentive for employers to retain their local workers. For example, for a worker whose wage is $2,500, an employer will get $900 a quarter, or $300 a month


• Re-skilling: SPUR for workers and professionals
  We have to step up training across all levels of the workforce, including our PMETs (professionals, managers, executives and technicians). To cater to the needs of PMETs, WDA aims to double the number of Professional Conversion Programmes over the coming year, from 23 currently.
  
  We will make two more enhancements to SPUR to help PMETs re-train. SPUR currently provides course fee subsidies of 80% for PMET-level courses. We will be increasing the subsidy rate for PMET courses that are eligible for SPUR to 90%, the same subsidy level as rank-and-file level courses. This includes all Specialist and Advanced Diplomas offered by our polytechnics. Further, WDA will bring under SPUR, selected tertiary courses at UniSIM and our three publicly funded universities.


• WIS Special Payment to help with lower wages
  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. As an illustration, a 50-year old employee who has been working throughout 2008 and 2009, earning $1,000 a month, will receive $600 in WIS Special Payment, fully in cash. This will be on top of the $1,200 in WIS that he will receive for this year’s work.


• Government will hire more now
  In all, we expect a total of 18,000 public sector jobs to be made available over the next two years4. (This includes government-supported jobs outside of the Government in areas such as childcare, tertiary education, and restructured hospitals.)

STIMULATING BANK LENDING

• The New Bridging Loan Programme
  First, we will introduce a new Bridging Loan Programme (BLP), that will be substantially enhanced from the scheme introduced in November. The new BLP will cater to loans of up to $5 million (up from $500,000 currently), which will meet the working capital needs of most mid-sized firms, and also some of the larger ones. We will also increase the Government’s share of risk on these loans from 50% to 80%. Further, the new BLP will enable banks to set their own interest rates. This will allow higher-risk borrowers to still gain access to credit, even if it is at a higher interest rate. However, with the Government taking the bulk of the risk, I am sure that the banks will be fair and price their loans reasonably.


• Trade financing
  The current trade financing schemes are working well but face constraints because of the limited private insurance capacity and a reduced risk appetite in the industry. Mid-sized and large exporters have had difficulty obtaining loans on the scale they need. To address the situation, the Government will step in to share the risk for trade financing, including 75% for trade loans.

ENHANCING BUSINESS CASH-FLOW AND COMPETITIVENESS

• Easing business cash-flow
  I will provide a 40% property tax rebate for industrial and commercial properties for 2009.


• Loss carry-back
  I will increase the cap on losses that can be claimed against past taxable income to $200,000 from $100,000 currently. I will also allow businesses to claim losses against their preceding three years of taxable income, instead of just the immediate preceding year under the current scheme. In addition, IRAS will allow provisional claims for the tax refund to be based on estimated losses (instead of waiting for the finalisation of their chargeable income and tax assessments). This will allow businesses to obtain their refunds much earlier - by six to 18 months in most cases.


• Foreign-Sourced Income Exemption
  Over the years, many of our companies have internationalised their operations and earned a growing proportion of their income overseas. To help these companies, I will temporarily expand the scope of the Foreign-Sourced Income Exemption scheme which was introduced in 2003 to cover all foreign-sourced income. I will also temporarily lift the conditions that are currently required for foreign- sourced income to be exempted from tax when remitted to Singapore. With these temporary changes, they will be able to make the best use of all their sources of funds to meet business financing needs in Singapore at this time of credit tightness. All foreign incomes which have been earned before today will be exempted from tax when they are remitted, with immediate effect for one year.


• Transport-related taxes
  First, a 30% road tax rebate for goods vehicles, buses and taxis for one year. The rebate will take effect on 1 July 2009 and will yield savings of about $40 million for businesses. In addition, I will waive the special (diesel) tax for un-hired taxis for one year which will yield savings of about $6 million. MOT will work with the taxi operators and the taxi operator associations to have the savings passed on to taxi drivers. Second, I will extend the special tax exemption for CNG (Compressed Natural Gas) vehicles for two years till 31 December 2011. However, from January 2012, a CNG unit duty will be introduced at $0.20 per kg. With this further two-year extension of tax exemption, CNG vehicle owners would have time to adjust to the changes. The CNG duty rate of $0.20 per kg will be significantly below the equivalent duty that we currently levy on petrol.


• Further extension of the government fee freeze
  As a further short-term measure to help businesses, the Government will freeze government fees and charges with immediate effect, to the end of 2009. Like the fee freeze in 2008, it will be applied to all government-provided services (including all license fees).


• CIT cut from 18% to 17% for YA2010
  We will take a further step to sharpen our competitiveness. I have decided this year to reduce the corporate income tax from 18% to 17% effective from YA2010. This will cost us $400 million to $500 million a year over the medium term.

SUPPORTING FAMILIES

• Additional GST Credits
  I will therefore double the GST Credits that households will receive in 2009. Each household will get an additional payout of GST Credits, on top of the one that they will receive in July. To help households with their immediate needs, the additional GST Credits will be paid out on 1 March 2009.
  
  As before, more GST Credits will be given more to the low-income and the old. For example, a Singaporean retiree (aged 60 or above) living in a four-room HDB flat, will get an additional $400, or a total of $800 in GST Credits and Senior Citizens’ Bonuses in 2009.


• S&CC and rental rebates
  I will also provide an additional one month of S&CC rebates for those in one to three-room HDB flats, who will therefore receive a total of 3 to 4.5 months for this year. Those in larger flats will receive a total of one to two months of rebates.


• Tax assistance to households
  To help households which pay income tax, I will give a personal income tax rebate of 20% for tax residents for Year of Assessment 2009. This will provide immediate reduction in their tax payable for last year’s income. The rebate will be capped at $2,000.
  
  I will also provide a 40% property tax rebate for owner-occupied residential properties for 2009. Currently, those who own higher value homes or secondary residences have to pay income tax on the Net Annual Value of their residential property. I have decided to remove this tax on Net Annual Value with effect from Year of Assessment 2010.

More details of the speech on http://www.channelnewsasia.com/sgbudget09/speech.htm

Singapore Budget 2009,Singapore Budget 2009 Speech