LiveS’pore enters new era with considerable strength: PM Wong in Budget round-up speech

Govt does not plan to impose rental caps as macro situation is stable, says PM Wong to WP’s Jamus Lim

The next question is also from a Workers’ Party MP – Associate Professor Jamus Lim (Sengkang GRC).

He raises the rent pressures faced by food and beverage establishments, saying that many owners hope for some form of a cap on year-to-year rent increases. He asks if this is a possibility in the future.

He also asks if the Government will consider relaxing the ratio of foreign to local workers in the F&B sector.

In response, PM Wong reiterates that at the macro level, rental rates have not spiked.

“There may be localised issues, localised shortages, or particular areas (being) very popular, these things can happen. I’m not saying they don’t. There will always be a distribution of rental increases, but overall, the situation remains stable,” he says.

The Government hence does not envisage imposing rental caps, particularly as the situation remains stable at the macro level, he adds.

He cites experiences from other jurisdictions where rental caps have not had positive outcomes due to inadvertent consequences.

He later adds that the Government will consider and study other appropriate interventions if there are specific situations that require them.

On the foreign worker quota, he says that it is hard to carve out the policy for the F&B sector from other service industries, as it will be difficult to monitor and enforce.

But there are other ways the Government will extend flexibilities to businesses, such as where they can source their workers from, he adds.

ST PHOTO: LIM YAOHUI

BEPS top-up tax offers revenue boost, but competitive pressures will drive up spending: PM Wong

WP’s Sylvia Lim (Aljunied GRC) seeks clarification from PM Wong on what he said about BEPS, and whether Singapore is expecting an upside in the next few years due to the BEPS top-up taxes.

PM Wong had said earlier that structural revenue increases are expected for the 2027 financial year when the first collections from the BEPS top-up taxes come in. Based on strong corporate tax collection so far, the initial sense is that this top-up could give revenues a significant boost.

“From what I recall in past debates, (PM Wong) was more cautious,” she says. “He said that we also have to consider the incentives that we need to give to businesses, and in the end, it might not be a net positive.”

She asks if PM Wong has changed his view on this.

In response, he says the Government was not more cautious in the initial years.

There were two pillars, PM Wong says, the first targeted at hub economies where there was a move to shift profits away from them, and the second, a minimum tax rate across the board that would give revenue.

There was concern about revenue loss under the first pillar, and at the time of pillar two, there was no certainty on its implementation, he adds.

“Today, pillar one has not taken off, so the downside risk has come down… at least for now,” he says. “It may be resurrected later on, but pillar one has not been implemented. It's not on the agenda for now.”

As for pillar two, because of its broad-based consensus, various jurisdictions have been implementing their versions of a domestic top-up tax, PM Wong says, which will certainly provide revenue upsides, but “does not change our broader assessment”.

He goes on to elaborate that even with the revenue upsides, the Government will have to spend more and find ways to strengthen Singapore’s investment promotion toolkit.

This is because even with the minimum corporate tax of 15 per cent, which was supposed to give Governments more negotiating power over multinational enterprises, PM Wong acknowledges that they still have considerable negotiating power.

“Governments everywhere want to attract these strategic investments to their own countries, and they are continuing notwithstanding a minimum corporate tax of 15 per cent to offer other generous incentives, which are supposed which are considered BEPS compliant,” he adds.

PM Wong paints a picture of the competitive landscapes, as other governments are spending more, and offering different incentives.

“The revenue upside is more assured in terms of the domestic pop-up tax, but at the same time, we are very likely to also have to spend more on the economic front to stay competitive,” he adds.

PM Wong says he sees the value in getting ministries to put out more information, reiterates pledge to do so

WP chief Pritam Singh (Aljunied GRC) is the first to rise to seek clarifications from PM Wong, and addresses his pledge that government agencies provide more information to the public.

Mr Singh says this is warmly welcomed, and raises an example of such accountability, pointing to a chart on government spending on research that he says does not have a breakdown of the spending areas.

“And I think there’s quite a lot of work to be done there. And I hope in this term of government we see a new approach from the PAP government,” he says.

PM Wong reiterates his pledge to provide more information.

“I see the value of getting ministries to put out more information, to share more about how their resources are being used and what outcomes they have achieved.”

He adds that he has committed to doing so in his speech, and hopefully, this will encourage Singaporeans to also look at the information and have a better understanding of what the Government has achieved.

“We are not complacent. We are always looking at ways to do better. We acknowledge that, but having the information to provide more informed debate is always something we would encourage.”

Next phase will not be easy, but Singapore enters new era with considerable strength: PM Wong

Economic headwinds remain and the geopolitical environment is becoming more contested, PM Wong says, wrapping up his speech and cautioning that the next phase will not be easy.

The major powers are competing more intensely. “They may say they are not asking others to choose sides, but in reality, they are using the full range of tools from economic leverage to regulatory controls and technology restrictions to advance their interests.”

Some pressures will be overt, and others may be subtle – seeking to influence opinions, shape narratives, or even sow division among Singapore’s people, he adds.

“We must be clear-eyed about these realities, but we have faced difficult external environments before.”

Singaporeans have navigated uncertainty, preserved the country’s sovereignty and independence and emerged stronger because they remain one united people and acted with resolve, he says.

“We enter this new era with considerable strength, a strong economy, a cohesive society, and sound public finances.”

These are not accidental achievements but are the result of decades of hard choices made by generations of Singaporeans, he says.

This Budget builds on that strong foundation, he adds.

“It is a collective commitment that we will do what it takes to thrive in a more demanding world, that we will stand together when pressures mount, and we will continue pushing forward to seize new opportunities on the horizon.”

The world may be more uncertain, but Singaporeans are prepared. “We are united and together, we will shape our own destiny and secure a brighter future for every Singaporean.”

He concludes his speech after about an hour.

ST PHOTO: GIN TAY

All ministries will provide clearer and more accessible information on major initiatives, says PM Wong

PM Wong says he will ask all ministries to provide clearer and more accessible information on major initiatives so that Singaporeans can better understand how public resources are used and what results they achieve.

Concluding his speech on a final point about accountability, PM Wong says he “agrees in principle” with comments from MPs like Mr Pritam Singh (Aljunied GRC) and Mr Yip Hon Weng (Yio Chu Kang) asking for more information to ensure fiscal accountability and value for money in government spending.

“We want to do that. We want to ensure that, and that's why we have been publishing the Singapore public sector outcomes review biannually since 2010 that sets out the key outcome indicators across major policy areas and allows the public to track our progress over time.”

The Government will continue to review the indicators in the report and ensure they are relevant and useful, he says. 

“It is not static. We continually look at refreshing and updating this document.”

‘Over-simplified and inaccurate’ to assume that a surplus means Govt is taking more and leaving households and businesses to bear deficit: PM Wong

To assume that a surplus means that the Government is taking more from the economy and leaving households and businesses to bear a deficit, is an over-simplified and inaccurate view of Singapore’s fiscal system, PM Wong says.

He is addressing the comments by MPs on what it means for Singapore to run a fiscal surplus. Some MPs had cheered this, while others had wondered if it meant problems with Singapore’s fiscal marksmanship.

PM Wong says Singapore’s revenue includes significant investment income from the past reserves, and not just taxes collected from businesses and households.

Excluding the Net Investment Returns Contribution component, which comes from the returns of investing Singapore’s reserves, expenditure exceeds revenue, he adds.

This means that money is being put back into the economy and not being drained from businesses and households, he says.

He notes that Budgets 2025 and 2026 have been “expansionary”, with significant support for businesses and households.

PM Wong says “the picture is clear” when one looks at those who pay taxes and those who benefit from the transfers.

For every dollar of tax paid by the top quintile, they receive 20 cents in benefits, while the middle quintile receives around $2 in benefits, and the bottom quintile, $7, he says.

“In other words, those who have benefited more, those who are better able to contribute, are the ones who generally pay more in taxes,” he adds, noting that this revenue is used to strengthen the social compact and provide greater support to those who need it most.

Singapore’s fiscal system is fair, progressive, and sustainable, he says, adding that it is “pro-worker, pro-enterprise, and pro-Singapore”.

ST PHOTO: LIM YAOHUI

PARF changes were immediately implemented to prevent a rush to market: PM Wong

On the topic of the timing of the implementation of the changes to the PARF rebate scheme, PM Wong says that this was done to “prevent a rush to market that has long been our practice for property and motor vehicle related taxes”.

He is addressing a question that Ms Diana Pang (Marine Parade-Braddell Heights GRC) raised during her Budget debate speech on the abruptness of the announcement.

PM Wong adds that the changes are announced and then applied immediately to ensure market stability and fairness.

He adds that a number of questions have been asked on the issue, and that the Ministry of Transport will address them separately.

Separately, he addresses suggestions raised by Mr Saktiandi Supaat (Bishan-Toa Payoh GRC) and Mr Louis Chua (Sengkang GRC) on the personal income tax regime.

He says that when taken together with progressive tax rates, tax relief and rebates, about one in three resident workers currently pays no personal income tax. Among those who do, eight in 10 have an effective tax rate of less than 6 per cent.

PM Wong adds that suggestions on personal income tax will be considered as part of regular fiscal reviews.

ST PHOTO: LIM YAOHUI
 

By 2027, MOF will publish new fiscal projections that extend to 2035

PM Wong notes that the Finance Ministry had earlier published medium-term fiscal projections up to 2030, with updated revenue and expenditure developments.

“These projections will need to be refreshed, so we will publish updated mediumterm projections extending to 2035 by next year,” he says.

But he cautions that in today's fast-changing world, assumptions can quickly become outdated.

“So the forward projections serve as a guide and will have to be continually updated. Ultimately, what matters most is maintaining fiscal discipline together with the agility and nimbleness to respond swiftly as circumstances change.”

The last time the Government released spending projections was in 2023 through a Finance Ministry occasional paper.

The ministry said then that rising healthcare costs would drive up government spending in the years ahead. Annual state expenditure would increase from about 18 per cent of GDP then to 20 per cent by 2030.

The paper also said then that total revenue collections were not enough to cover the projected increase, and tax changes – including those announced in Budget 2022 – would help to close the gap.

The tax announcements included the goods and service tax rate increase from 7 per cent to 9 per cent across 2023 and 2024, as well as changes to personal income tax, property tax and fees for those purchasing luxury cars.

Revenue adjustments will be made only to fund structural spending needs or to achieve policy objectives: PM Wong

The Government will make revenue adjustments only when necessary – to fund structural spending needs or achieve clear policy objectives, says PM Wong.

He was addressing Mr Shawn Loh’s (Jalan Besar GRC) suggestion that the Government commit to not making further revenue moves at this juncture.

As long as circumstances remain broadly stable and without major revenue moves, Singapore’s fiscal position during this term of government will remain healthy, says PM Wong.

There will already be no further goods and services tax increases until at least 2030, says PM Wong, adding that the tax system will continue to be reviewed regularly.

“Any tax change… any tax increase is a difficult decision,” PM Wong says. “We take them only after careful study and full consideration of the impact on households and businesses.”

Government spending expected to continue rising, future Budgets likely to exceed 20 per cent of GDP well before 2030

Government spending is likely to exceed 20 per cent of gross domestic product (GDP) well before 2030, PM Wong says.

For this Budget, spending is at 18.4 per cent of GDP – and this is now the largest Budget on record, he notes.

Earlier, the Finance Ministry had projected that government spending could reach 20 per cent of GDP by 2030 and now, looking at trends emerging since the Covid-19 pandemic, expenditure has been growing by an average of $10 billion every year, he says.

“We expect our needs to rise even more for the coming years in this term of Government.”