The winners and losers of Budget 2018 (updated with GoBearTV episode 13)
Budget 2018 was announced on 19th February, and the impact is likely to be long-reaching. How does this affect Singaporeans? For GoBearTV's new segment, Singaporeans Have Their Say, we asked Singaporeans how they really feel about the changes
Apart from the first Goods and Services Tax (GST) hike, we’re also seeing this applied to digital services for the first time.
On the upside, there’s more support for Singapore’s aging population. In short, the main beneficiaries of Budget 2018 are:
- Singles looking to buy resale flats
- Singapore’s senior citizens
- Businesses reliant on foreign labour
- Singaporean employees earning under $4,000 per month
As an aside to all this, there’s one other bonus:
All Singaporeans aged 21 or above will receive a one-off “hong pao” of between $100 to $300. This is to celebrate Singapore’s strong economic performance this year, which surpassed even a predicted high of 3.5 per cent growth (actual growth was 3.6 per cent, largely borne by the manufacturing sector).
The amount is based on your income level. The pay-out is $300 for those earning between $28,000 or below per annum, $200 for those earning $28,001 to $100,000 per annum, and $100 for anyone earning more than that. This doesn’t really have any long-term effect, but maybe it will make up for all those hong-paos you had to give out this year!
The winners of Budget 2018
1. Singles looking to buy resale flats
Single Singaporeans will now benefit from the Proximity Housing Grant (PHG), when they buy resale flats. The original PHG provided a grant of $20,000 to families who lived near* their parents, and did not apply to singles buying flats.
But from now on, the PHG will provide a grant of $10,000, for singles who buy a flat near their parents. In addition, singles who buy a resale flat to live with their parents will get a PHG of $15,000. This is up from the original grant of $10,000.
Families who buy a resale flat near their parents still get the usual $20,000 grant. However, if they buy a resale flat to live with their parents, their PHG increases from $20,000 to $30,000.
By raising the PHG for people living with their parents, the government is also encouraging better care for seniors, which leads us to the next point.
*Also as part of Budget 2018, the definition of “near” is now defined as “within four kilometres”.
2. Singapore’s senior citizens
Community Networks for Seniors is a form of community care, which gets the public to pool its resources to help older Singaporeans. It involves consolidating and co-ordinating the efforts of many different organisations, which share same general goal of providing for the elderly. This initiative is being expanded, and will be nationwide by 2020.
In addition, services for the elderly will now be consolidated under the Ministry of Health (previously, some help schemes were under different ministries). This will make applications for aid faster and easier.
The existing Community Silver Trust, and Seniors’ Mobility and Enabling Fund, will be topped up to $300 million and $100 million respectively. A further $150 million has been set aside to provide transport, to eldercare and dialysis centres.
In addition, donations to recognised charities (Institutions of Public Charter) will continue to grant 250 per cent tax deductions, until December 31st, 2021. This means that, for every $1 donated to a registered charity, $2.50 will be deducted from your taxes.
Many of these charities go toward helping the elderly, in addition to other causes. On a related note, the concessionary rate for the Foreign Domestic Workers’ levy ($60) will continue to apply to homes with a senior citizen (the non-concessionary rate has been raised to $300 per month). However, the qualifying age to get this concession has been raised to 67 instead of 65.
3. Businesses reliant on foreign labour
Businesses were worried about the hikes in levy rates, especially given that 2014 to 2016 were difficult years for some. They’ll be glad to see another deferment, which will give them time to recover from the recent slump.
There will be no increase in foreign worker levies, for the Marine and Process sector. For this specific sector, increases in levies will be deferred by another year (to June 2019). There is no increase in levy for S-Pass holders, or in other sectors. An exception to this is the construction industry, where levies for some workers (basic tier, R2 workers) will rise from $650 to $700, as announced in Budget 2015.
4. Singaporean employees earning under $4,000 per month
The Wage Credit Scheme co-funds the raises of Singaporean employees, up to a salary of $4,000 per month. This was initially created to encourage wage growth. Under Budget 2018, the scheme is being prolonged by three more years. The government will co-fund 20 per cent of raises in 2018, 15 per cent of raises in 2019, and 10 per cent of raises in 2020.
The losers of Budget 2018
Although the impact is not immediate, Budget 2018 will raise the financial burdens on both businesses and consumers. This includes:
- Businesses who import services from non-localised suppliers
- B2C online services besides retail
- Some property buyers
- Shoppers, come 2021 to 2025
1. Businesses who import from non-localised suppliers
Business to Business (B2B) service imports will be subjected to a new e-tax, if the supplier has no establishment in Singapore.
Simply put, if a business in Singapore imports (buys) a service from a business overseas, they will be required to pay GST on that service, as if they were the supplier. Note that this is specific to B2B services,– you won’t be taxed on, say, buying a pair of shoes from an ecommerce website.
Businesses that use imported services (such as real estate developers that import expertise from foreign businesses) are the ones that will end up paying GST on those services. There is a chance that these costs might be passed to you through raised prices.
However, this tax is easy to get around – the businesses just need to buy services from localised entities, which also do business in Singapore. Or even better, buy from other Singaporean businesses.
On a very large scale, this is good for all of us; it encourages the money to flow within our economy, rather than being paid out of it.
2. B2C online services, besides retail
Digital entertainment and streaming services will now be required to pay GST, if their global, annual turnover exceeds $1 million, and they make more than $100,000 a year from Singaporean subscribers.
That almost certainly includes Netflix.
You should also be ready to be charged GST on music streaming services, or video game services. You could very well end up paying GST on, say, a Steam download for a video game.
3. Some property buyers
The Buyers Stamp Duty (BSD) on private properties has been raised, on properties with a valuation of more than $1 million. This is the new BSD rate:
Say you buy a residential house valued at $1.5 million. The tax will be:
- First $180,000 = $1,800
- Next $180,000 = $3,600
- Next $640,000 = $19,200
- Amount exceeding $1,000,000 (in this case, $500,000) = $20,000
The BSD is thus $44,600.
This is, however, a non-issue for the 80+ per cent of Singaporeans who reside in HDB flats. Unless, of course, you intend to buy a HDB that costs more than $1 million, which exists.
There will be a GST rate hike, from seven to nine per cent. This will take place sometime between 2021 to 2025. There’s nothing much to say here, other than things will get more expensive.
The earlier mentioned ang pows, ranging from $100 to $300, might be construed as a way to offset the future GST cost.
However, it can only go so far to soften the future impact. Who knows, there might be additional payouts in the future to further help you with the overall cost.
There will be a 10 per cent excise duty on all tobacco products. This translates to a tax of about 42.7 cents for every gram, or part thereof, of a cigarette stick. This is up from 38.8 cents. All other types of tobacco, whether in the form of cigarettes or not, will carry an excise duty of $427 per kilogram (up from $388).