DPM Wong hands out goodies in Budget 2024 amidst early GE speculation

SINGAPORE:  On Friday (16 February), Deputy Prime Minister and Finance Minister Lawrence Wong announced the Singapore’s 2024 Budget in Parliament.

DPM Wong emphasized that this year’s budget addresses immediate concerns related to the cost of living for both households and businesses.

Simultaneously, the budget outlines strategies to enhance economic competitiveness, offer support to young families, and ensure the relevance of the workforce.

While reassuring the government’s dedication to providing increased support to households, it is challenging for Singaporeans not to view this year’s Budget announcement through the lens of an “Election Budget.”

Speculation about an early poll in 2024 adds a layer of significance to the budgetary decisions made.

FY2023 ends with $3.6B deficit; Plans for first surplus in 7 years in FY 2024

During his Budget 2024 address, Deputy Prime Minister Wong revealed that Singapore’s Fiscal Year 2023 incurred a deficit of $3.6 billion (0.5% of GDP), significantly higher than the initial estimate of S$0.4 billion.

This increase is primarily attributed to the introduction of the S$7.5 billion Majulah Package during the previous year’s National Day Rally.

In 2024, Wong aims to achieve a small surplus of $0.8 billion, equivalent to 0.1% of Singapore’s GDP, emphasizing a “balanced fiscal position.”

Anticipated operating revenue for Fiscal Year 2024 is S$108.6 billion, reflecting a 4.2% increase from the revised S$104.3 billion in Fiscal Year 2023.

This rise is driven by higher collections from goods and services tax (GST), asset taxes, personal income tax, and motor vehicle taxes.

Specifically, GST, which was raised to 8% from 7% at the beginning of 2023, is projected to generate S$19.4 billion in revenue in Fiscal Year 2024, marking an 18.5% increase from Fiscal Year 2023.

The most substantial surge is observed in asset taxes, expected to rise by 12.8% to S$6.7 billion.

This is attributed to property tax rate increases that came into effect on 1 January 2024, and higher property annual values.

Total expenditure is projected to reach S$111.8 billion, a 4.6% increase from the revised S$106.9 billion in Fiscal Year 2023.

This spending, constituting 15.5% of GDP, is predominantly led by the Ministry of Transport (MOT), with an expected increase of S$1.3 billion or 9.8% to S$14.2 billion for rail network development and air infrastructure upgrading.

The second-largest increment comes from healthcare, with spending slated to rise by S$800 million or 4.6% to S$18.8 billion.

This is attributed to new facilities such as Sembawang and Tampines North polyclinics, expanded capacity in the new Woodlands Health campus, and increased capacity in the long-term care sector.

Healthcare is a significant component of Singapore’s social spending, expected to account for 50.2% of total ministry expenditure at S$56.1 billion, reflecting a 5.6% increase from S$53.1 billion in Fiscal Year 2023.

The Ministry of Defence (MINDEF) retains the largest individual budget, at S$20.2 billion, marking a 2.5% increase or S$500 million, primarily due to inflation.

S$1.9 Billion boost to Assurance Package

DPM Wong’s Budget 2024 unveiled a series of noteworthy initiatives, foremost among them being a substantial S$1.9 billion augmentation to the GST Assurance Package.

This comprehensive enhancement entails several key components, such as providing an additional S$600 in Community Development Council vouchers for every Singaporean household.

Eligible Singaporeans will also benefit from a means-tested cash payment ranging from S$200 to S$400. Additionally, there will be supplementary rebates for U-Save and Service and Conservancy Charges.

S$1.3 billion to alleviate businesses facing escalating costs

In response to the mounting challenges businesses are encountering due to rising costs, a new S$1.3 billion Enterprise Support Package has been introduced, comprising three key components.

Companies are set to receive a 50% corporate income tax rebate, capped at S$40,000, for the Year of Assessment (YA) 2024. Even companies operating at a loss will benefit, ensuring they receive a minimum of S$2,000 in cash support, provided they have at least one local employee in 2023.

The Enterprise Financing Scheme undergoes enhancements, with the maximum working capital loan quantum permanently increased to S$500,000.

The SkillsFuture Enterprise Credit will be extended until 30 June 2025, granting companies an additional year to utilize any remaining credit.

Refundable Investment Credit to boost Singapore’s global competitiveness

To bolster Singapore’s competitiveness in the face of intensifying global investment competition, DPM Wong introduced the Refundable Investment Credit.

This incentive is designed to attract high-quality investments from companies engaged in “high-value and substantive” economic activities.

Eligible activities span the establishment or expansion of manufacturing facilities to the initiation of new innovation, research, and development endeavors.

SkillsFuture level-up programme for mid-career workers

Aiming to enhance support for mid-career workers seeking to retrain and acquire new skills, a novel initiative, the SkillsFuture Level-Up Programme, will be launched specifically for Singaporeans aged 40 and above.

This comprehensive program encompasses a S$4,000 top-up in SkillsFuture Credit allocated for selected courses.

Furthermore, subsidies will be provided for pursuing a second full-time diploma, along with a monthly training allowance. This allowance is calculated as 50% of the worker’s average income over the past 12 months, capped at S$3,000, applicable to selected full-time courses.

Increase in local qualifying salary to S$1,600 effective 1 July 2024

Starting from 1 July, Singapore will implement a higher Local Qualifying Salary, representing the minimum remuneration that employers must pay local workers when hiring foreign workers.

The new rate for full-time workers will be elevated to S$1,600 from the current S$1,400.

Additionally, part-time workers will experience a rise in the minimum hourly rate to S$10.50, up from the current rate of S$9.

Supporting young families with housing initiatives

In a move to assist young couples awaiting their Build-To-Order flats, a financial support program will be introduced, allowing them to rent a public flat in the open market for one year.

This initiative falls under a newly established voucher scheme specifically designed for couples eligible for the existing Parenthood Provisional Housing Scheme, although specific details are yet to be disclosed.

Adjustments to the Central Provident Fund system

DPM Wong has unveiled a series of modifications to the CPF system slated to take effect next year. First and foremost, contribution rates for individuals aged between 55 and 65 will experience a further increase of 1.5 percentage points.

Additionally, the Enhanced Retirement Sum is set to be elevated to four times the Basic Retirement Sum, up from the current three times.

This adjustment aims to enable more seniors to fully commit their accumulated CPF savings, leading to higher payouts during retirement.

As part of these changes, the government plans to discontinue the Special Account for individuals aged 55 and above.

The funds held in this account will be transferred to the Retirement Account, up to the full retirement sum, where they will continue to accrue interest at the long-term rate. Any remaining funds will be allocated to the Ordinary Account, which carries a lower interest rate.

Personal income tax rebate

To address the cost of living concerns, DPM Wong has announced a new initiative for the Year of Assessment 2024. A 50% personal income tax rebate will be implemented, capped at S$200, representing a government expenditure of S$350 million.

In addition to the tax rebate, there will be a notable adjustment to the annual income threshold for dependent-related tax reliefs. Starting from the Year of Assessment 2025, the threshold will be raised to S$8,000, up from the current S$4,000.

Adjustments to property taxation and ABSD refund for seniors

DPM Wong has unveiled several changes to property tax regulations. Commencing January 1, 2025, homeowners will experience reduced property tax payments across each Annual Value band.

This adjustment is attributed to the elevation of Annual Value bands for owner-occupier residential property tax rates, aligning with prevailing property market trends.

In specific terms, the lower threshold for the Annual Value portion exempt from property tax will increase to S$12,000, up from the current S$8,000. Simultaneously, the highest band will be raised to over S$140,000, marking an increase from over S$100,000, with corresponding adjustments to the bands in between.

In a separate initiative, singles aged 55 and above looking to downgrade can now claim a refund on the Additional Buyer’s Stamp Duty (ABSD) paid for their replacement private property, provided it is of lower value and the first property is sold within six months.

Furthermore, housing developers will receive increased flexibility under the ABSD regime.

Residential developments achieving a minimum of 90% unit sales within five years of land acquisition will benefit from a lowered ABSD clawback rate.

In August last year, PM Lee announces plan to step down in favour of DPM Lawrence Wong

On 20 August last year, PM Lee revealed intentions to step down in favour of Deputy Prime Minister Lawrence Wong, potentially around the PAP’s 70th anniversary on 21 November 2024, although an exact timeline was not disclosed.

Previously expressing his wish “to step down before his 70th birthday in February 2022,” the unexpected challenges of the pandemic disrupted Lee’s plans.

Despite the absence of a clear timeline, PM Lee’s announcement suggests a likelihood of the General Election occurring next year, possibly before the party’s anniversary in November.

In response to the PAP’s dominant 2/3 majority in Parliament, Singapore’s political landscape has witnessed increased manoeuvring,  intensifying grassroots outreach efforts, and witnessing alternative parties forming political alliances — both formal and informal — to contest in the upcoming GE.