E.1. Budget 2017 is an investment in our economic transformation and social resilience. We will continue to invest in security measures to keep Singaporeans safe, and in infrastructure to support economic growth and improve quality of life.
E.2. We have been able to commit to these medium-term investments, because we have a sustainable fiscal system. Previous generations planned ahead and set aside savings when our economy was growing rapidly. We now benefit from the returns on our reserves.
E.3. At the same time, our pro-growth and progressive tax system has given us a steady revenue stream. Together, these have allowed us to fund new priorities without cutting back in essential areas.
E.4. In the coming years, we expect expenditure needs to rise rapidly, particularly in healthcare and infrastructure.
E.5. Over the last five years, our annual healthcare spending has more than doubled to around $10 billion in FY2016 as we enhanced subsidies, and expanded healthcare services. Healthcare spending will continue to rise as our population ages.
E.6. We will also continue to enhance our public transport infrastructure, almost doubling the MRT network by 2030. This will put 8 in 10 households within a 10-minute walk of a rail station. This alone is expected to cost the Government more than $20 billion over the next five years.
E.7. The new Changi Terminal 5 is another critical national infrastructure that will cost tens of billions of dollars. Changi Airport is our gateway to the world. By enhancing our connectivity, we expand opportunities for our people.
E.8. In the longer term, we must also prepare to upgrade and renew existing infrastructure, to keep Singapore a good home. As these projects are costly, we have to plan ahead.
E.9. With our spending needs increasing, the Government must continue to spend judiciously, emphasise value-for-money and drive innovation in delivery. We can do better – and more – with less.
E.10. We will apply a permanent 2% downward adjustment to the budget caps of all Ministries and Organs of State from FY2017 onwards, to emphasise the need to stay prudent and effective. For four ministries that are serving security needs, or significantly expanding their services – namely Home Affairs, Defence, Health and Transport – the 2% adjustment will be phased in over FY2017 and FY2018.
E.11. Some of the funds will be used for cross-agency projects that deliver value to citizens and businesses. Examples include initiatives by the Municipal Services Office.
E.12. Madam Speaker, apart from managing our resources prudently, we must grow our revenues to finance our growing expenditures.
E.13. Growing our economy is the first and most important step to increasing our revenues sustainably. We need to achieve this growth by implementing the strategies set out in the CFE.
E.14. Next, we need to strengthen our revenue base in a pro-growth and progressive manner. Over the past five years, we have revised our tax structure as well as the Net Investment Returns framework to ensure that we have sufficient revenue for our increased spending needs till 2020.
E.15. Like all Finance Ministers before me, it is my duty to take the long view. Our domestic needs will grow over time, and the global environment will shift. We must study the implications and prepare our options early.
E.16. One international development affecting tax systems worldwide is the Base Erosion and Profit Shifting, or BEPS, project. The BEPS project seeks to ensure that companies are taxed where substantive economic activities are performed. Singapore supports this principle. We are, in consultation with businesses, refining our schemes and implementing the relevant standards.
E.17. Countries, large and small, are also reviewing their corporate tax regimes to keep them competitive. With increasing digital transactions and cross-border trade, some countries have taken steps to adjust their GST system, to ensure a level playing field between their local businesses which are GST-registered, and foreign-based ones which are not. We are studying how we can do likewise.
E.18. Domestically, we will also face rising expenditures over the longer term, as we invest more in healthcare and infrastructure. We will have to raise revenues through new taxes or raise tax rates. We are studying the options carefully. We must make these decisions in good time, to ensure that our future generations remain on a sustainable fiscal footing. As the Chinese idiom goes, 未雨綢繆, let us thatch the roof before it rains.
E.19. Finally, let me move on to the remaining tax measures in this Budget.
E.20. I will extend and strengthen tax incentives to enhance our business competitiveness, such as in the financial and global trading sectors. The details are in the Annex. (Refer to Annex A-5).
E.21. I shall introduce refinements to vehicle taxes for motorcycles. Today, all motorcycles incur the same Additional Registration Fee, or ARF, at 15% of their Open Market Value (OMV). A small but rising number of buyers are buying expensive motorcycles – their motorcycles have OMVs similar to those of small cars. Just as we introduced tiers to the ARF for cars in 2013 to improve progressivity, I will introduce two more tiers for more expensive motorcycles. The ARF for motorcycles with OMV up to $5,000 will remain at the current 15%. The next $5,000 of motorcycle OMV will be subject to an ARF rate of 50%. The remaining motorcycle OMV beyond $10,000 will be subject to an ARF rate of 100%.
E.22. Based on today’s registration trends, we expect that more than half of new motorcycle buyers will continue to pay the current ARF rate of 15%.
E.23. The tiered ARF will apply to motorcycles registered with COEs obtained from the second February COE bidding exercise onwards. Details are in the Annex. (Refer to Annex A5).
E.24. As a complementary measure, the Ministry of Transport will cease the contribution of motorcycle COE quota to open category COE quota. This will help address the gradual decline in motorcycle population, as very few open category COEs have been used to register motorcycles.
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