Budget Objectives and Strategies of Singapore
1. How Singapore uses the Budget to achieve its objectives?
2. Identifying 2 main taxation based policies that might improve the lives of the people in Singapore
3. Identifying 2 main taxation based policies that might help in sustaining the competitiveness of Singapore among its neighbouring countries
4. Making a comparison study of the overall tax system of Singapore over the past years and now
5. Based on the analysis done, propose recommendations for the future budgets in view of improving the tax system in Singapore.
With the new tax structure proposed in Budget 2018, Singapore will enjoy healthy productivity growth. In addition to that, the Singapore economy will be picked up in the later part of the previous year (Sharkey 2015). The new Budget objective will be to see rise of Asia and ageing population in Singapore. Furthermore, the increasing need to get embraces with the introduction of technology.
The four main objectives of the Budget 2018 is to build a strong position in technology as well as creating an innovative economy (Yung 2016). The other objective is to build a smart as well as green and liveable city for the Singaporeans. They will be using the Budget as they can get access to caring as well as cohesive society. They will get ways to sustain in the near future. The Singapore Budget 2018 aims at bringing for the people innovative economy as well as quality environment and inclusive society. In order to achieve these objectives, the Budget 2018 will provide near term support measures for addressing the sector-specific needs at the time of catering it to the Committee on the Future Economy Strategies for the medium-term to long-term activities (Riccardi 2018).
The two taxation based policies that might improve the lives of the people in Singapore are Fiscal Policy and Tax Policy (Adachi 2018). By using fiscal policy, the people in Singapore can enjoy sustained as well as non-inflationary growth in economy. The long-term objective of this fiscal policy is to maintain a balance budget as well as focus mainly on the government expenditure.
The other taxation based polices is tax policy that plays an integral part of the fiscal policy. There are several objectives to this tax policy in Singapore and these are revenue raising as well as promotion of economic and social class (Smith et al. 2015).
Taxation-Based Policies to Improve Lives of People in Singapore
Research and Development had been treated as one of the significant component of Singapore’s policy of productivity driven economic growth (Smith et al. 2015). The two main taxation policies will be manage the worker dependence of foreign workers and this could be done by increasing the level of productivity of local workforce. The other one is to sustain Small and Medium sized enterprise and this can done through fostering entrepreneurial environment. Furthermore, by using these taxation policies, it will be easy to enhance the innovation capabilities of local enterprises as a whole. In addition to that, research and development enhanced tax reductions for the local R & D will be increased from the existing 150% to 250% in order to qualify R & D expenditure that will start from 2019 to 2025 (Riccardi 2016).
Singapore is a rich nation and along with other revenue-generating streams like exports, fees as well as charges and other receipts, it is noted that the taxes are collected every years and are used for developing the country (Singapore) into a vibrant economy. Efforts are made to think of Singapore as a place where every foreign entrepreneur as well as company wants to be a part of for investing purpose (Smith et al. 2015).
Figure: Overall tax system of Singapore from 2010 to 2018
(Source: Vu 2016)
The government had actually spend more than 46.3% of what is actually collected from the individuals in form of tax for maintaining security as well as external relations. In addition to that, government even spent more than 45.7% on social developments as well as rest for the administrative purposes. It is the responsibility of the Inland Revenue Authority of Singapore to collect the personal income tax, property tax, betting taxes as well as corporate tax stamp duty. There are different other government agencies who gets involved in the collecting the rest of the taxes from the public (Smith et al. 2015).
Goods and service tax- This tax was introduced in the year 1994 at 3%. The reason behind introducing the tax was to boost the level of competitiveness in Singapore as it will help in allowing cuts in individual as well as corporate income taxes. In addition to that, this tax would help in preparing for an ageing population and even avoid excessive tax burden laid on the working population as a whole. The reaction to this introduced tax was lead to booming economy as well as generous offset measures as it help in cooling the anger over the move (Tan and Ho 2015).
Taxation-Based Policies to Sustain Competitiveness of Singapore
Personal Income tax- This tax was introduced in the year 1948 at 30%. This hike was done in the budget 2015. The reason behind introducing this tax was to generate more revenue for the betterment of the individual and give higher standard of living (Smith et al. 2015).
Corporate Income tax- This tax was introduced in the year 1948 at 40%. The reason behind introducing this tax was due to need for money for balancing the budget as well as introducing a steady and equitable form of taxation for future revenue (Tan and Ho 2015).
The Corporate Tax rate in Singapore stood at 17% and averaged at 20.21 % from the year 1997 to 2018 that had reached the level of 26% in the year 1998 and recorded a low of 17% in the year 2010.
In Singapore, it is noted that the Corporate Income tax rate is one of the tax that had been collected from companies. In addition to that, it is the amount that is based on the net income any business can generate at the time of performing the business activity during one business year. Furthermore, the benchmark that is used to refer to the highest rate for the corporate income. However, the revenue from the corporate tax rate can be treated as one of the major source of income for the government of Singapore (Smith et al. 2015).
From the above analysis, it is proposed to bring improvement in the tax system in Singapore where Singapore Budget would be a strategic as well as integrated plan for positioning the country attain success in the future financial years. It is recommended to have a tax system that is progressive that taxes high income earners equally as that of low-income earners. There should be fair distribution of tax policy that will be fair for both (rich and poor). Based on the strategies, there is a need for Singapore to grow its revenue base for financing rising healthcare as well as infrastructure expenditures and in doing so it had to go through the pro-growth and progressive stages at first place (Tan and Ho 2015). The tax system should be sustainable as such so that the individual can get better out facilities. It should even help profitable companies where they can pay more income taxes as well as continues to reward for the effort of the individuals as well as enterprises as a whole. In order to increase the tax revenue base, it is recommended to bring changes to the tax system that is made to the largest tax revenue sources. In addition to that, the top three contributors of government operating revenue takes into account corporate income tax as well as goods and service tax and personal income tax. These three government operating revenue for 20% in case of corporate income tax, 16% in case of goods and service tax, 15% in case of personal income tax. Most of the companies actually need to pay very much lower effective tax rates because of the partial tax exemption regime as introduced in the year 2002. This actually helped the companies in dealing with the rising business costs. From the year 2018, it had been noted that the regime is being enhanced as it allow companies for paying normal corporate tax rate for claiming maximum exemption. It overall had comprised 75$ exemption on the first $10,000 as well as further 50% exemption on the rest (Smith et al. 2015).
Reference List
Adachi, Y., 2018. Redistribution Effects of Income Taxation and Insurance Contributions. In The Economics of Tax and Social Security in Japan (pp. 21-64). Springer, Singapore.
Riccardi, L., 2016. Singapore vs Shanghai. In Investing in China through Free Trade Zones (pp. 45-62). Springer, Berlin, Heidelberg.
Riccardi, L., 2018. Introduction to Taxation. In Introduction to Chinese Fiscal System (pp. 1-5). Springer, Singapore.
Sharkey, N., 2015. Coming to Australia: Cross border and Australian income tax complexities with a focus on dual residence and DTAs and those from China, Singapore and Hong Kong-Part 1. Brief, 42(10), p.10.
Smith, C.J., Donaldson, J.A., Mudaliar, S., Md Kadir, M. and Yeoh, L.K., 2015. A handbook on inequality, poverty and unmet social needs in Singapore.
Tan, B.S. and Ho, Y.K., 2015. Singapore as an accountancy hub-a Porter’s Diamond perspective. International Journal of Business Competition and Growth, 4(1-2), pp.44-56.
Vu, D.C., 2016. The Impacts of Interest Rates and Taxations on Boosting Maritime Industry in Singapore.
Yung, B., 2016. Justice and taxation: From GST to Hong Kong tax system. In Ethical Dilemmas in Public Policy (pp. 183-195). Springer, Singapore.
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