Singapore’s budget ‘likely to detail ways to spur innovation, boost skills’

The CFE report also hinted that the tax system might be tweaked to make it more progressive and pro-growth – changes likely to be implemented over a few successive budgets.
After more than a year of consulting over 9,000 stakeholders, the 30-member CFE unveiled its recommendations last Thursday.
Its report outlines – in seven strategies – how Singapore should remain open and connected, help workers acquire skills for the future and build innovative companies making products and solutions for the world. The budget next Monday is expected to contain some details on how these strategies will be implemented. 
It will give more support to small and medium-sized enterprises, startups and workers keen on upgrading their skills, Maybank Kim Eng economists Chua Hak Bin and Lee Ju Ye said. OCBC economist Selena Ling agreed. 
“Given the growing skills and jobs mismatch in the Singapore economy, there will be greater focus on the acquisition of deeper skills that will help workers stay relevant in an age of rapid technological change.”
The emphasis on remaining open and connected means public infrastructure investment is also expected to remain strong, Chua and Lee said. This includes the upcoming port in Tuas, Kuala Lumpur-Singapore high-speed railroad and Changi Airport Terminal 5. However, social transfer schemes might take a pause this year after sharp increases in previous years, they said.
The CFE’s recommendation to review and refine the tax system might also be fleshed out this year and in subsequent budgets, economists said.
This comes as the government grapples with rising social spending and the need to earmark more funds to help workers cope with greater labour market uncertainty, Credit Suisse economist Michael Wan said. Citi economist Kit Wei Zheng said the CFE recommendations clearly hint at higher taxes. 
“While the current cyclical backdrop dictates that such measures would likely not be announced in budget 2017, changes (are possible) in the next five to 10 years, with the timing dependent on the electoral cycle.” Possible tweaks include raising the goods and services tax, while mitigating the impact on lower-income households through direct transfers.
Hikes in personal income tax rates – with larger increases for those in the higher income brackets – might also be implemented, Kit said. But to retain the incentive to work, increases in wealth or asset taxes could be preferred to income tax increases, he said.
“For example, property tax rates could increase, especially for investment properties. 
This could also be an argument to retain taxes related to property cooling measures,” Kit said.
Higher taxes on motor vehicles or on petrol are also possible, Chua and Lee said. Still, even as revenues need to be raised, “the CFE report reiterates that the underlying principle is that of a broad-based, progressive and fair system hat remains competitive and pro-growth”, Kit said.