Review of Singapore’s Budget: 2009 – 2017

The government of Singapore is set to announce its budget plans for 2018 on Monday, 19 Feb 2018. While many media outlets have been speculating what we could expect to hear from Minister Heng Sweet Keat next week, few have covered what actually has been happening with the government spending for the last few years. Often, looking back into the past can shed insights on what could (and should) happen in the future. Here, we attempt to distill a few major trends we observed about the government’s budget since 2009, and assess what it could possible mean for what is in store for the next few years.

Government income increasingly more dependent on consumer taxes

The Singapore government’s budget has been becoming increasingly more reliant on taxes from consumers than on taxes from corporates. For instance, the government’s operating revenue has increased by about 7.3% per year from S$40bn to S$69bn between 2009 and 2017, while various taxes on consumers have grown at a faster pace.

 

For instance, taxes on corporates (including corporate income tax, statutory boards’ contributions and stamp duty) have gone from comprising 31% of government revenue in 2009 to comprising just 24% of government revenue in 2017, growing at a slow pace of 4.5% per year. In contrast, taxes from consumers have increased from being 57% of government revenue in 2009 to 62% in 2017. Not only that, even “Other Taxes” have increased from 6% of government income to 9% in just 8 years, partly driven by water tax hike.

By reducing the financial burden on corporates, the government may have been attempting to help businesses stay profitable in face of global competition and attract foreign companies to relocate to Singapore. However, this strategy that may not be so effective anymore as multinational corporations move their headquarters back to the US after it lowered its corporate tax rate in 2018.

Government expenditure more focused on social safety & technology, but not education

Overall, the Singaporean government’s expenditure has increased by about 7.6% per year since 2009 to 2017 from S$42bn to S$75bn, slightly faster than its revenue growth rate of 7.3%. The main drivers of this growth has been health development (14.5% per year), environment and water resources development (14.2% per year), national development (9.8% per year) and transportation development (9.4% per year).

Since 2009, the government has been shifting its budget away from security & external relations to invest in its social infrastructures. For instance, security and external relations represented 34% of government’s budget in 2009. By 2017, this portion had declined to 27%. This decline was almost entirely offset by social development, whose proportion increased from 43% in 2009 to 50% in 2017.

What’s particularly interesting about this growth in social development expenditure is how the government has increased its spending massively for health from 9% in 2009 of budget to 14% of budget in 2017. This reflects the aging population in Singapore, and the government’s conscious effort to provide necessary care for the elderly. However, the government has also been decreasing the portion of its budget being allocated into education, which grew by only 5.1% per year and represents 17% of its budget in 2017 compared to 21% in 2009.

 

Singapore has been slowing down its investment in economic developments. For instance, its economic development expenditure grew by 7.3% per year from 2009 to 2017, which is slightly lower than the 7.6% for its total expenditure. In fact, most of economic development expenditures declined in 2017. One exception was economic development expense in info-communications and media development, which actually increased by 9% in 2017, though it still only represents 0.9% of total budget.

Investment income fueling investments in economy

Savvy readers may have noticed that the government’s total expenditure exceeds its total operating revenue. In fact, 2017 will be Singapore’s 3rd consecutive year of running primary deficit where it spends more than what it is collecting in taxes and fees. The missing data point here is the government’s massive investment income, which has been exceeding S$14bn since 2016. From the data points featured below, it’s quite apparent that the government’s investment income has been allowing the country to invest in its economy, provide special transfers for social safety programs, and build a budget surplus for the future.

What could we expect in 2018?

There has been much talk of a potential tax hike in 2018. Given the trend we observed since 2009, it seems that some form of hike in tax on consumers is inevitable, be it a hike in GST or sin tax. However, given the prowess of its investment income profile, such a move seems hardly necessary just yet. For instance, vast majority of the S$14bn in net investment returns contribution actually comprises of very stable sources of income like interest and dividends, which are practically guaranteed. As such, it seems Singapore should still be able to increase its expenditures without running into a total deficit.

In 2017, Singapore dramatically increased its expenditure on various social infrastructures like its healthcare system and water management systems, a move that we predicted last year. This trend should continue given Singapore’s increasingly aging population. However, Singapore could also benefit from investing more heavily into long-term growth initiatives. Instead of reducing its emphasis on education expenditure, Singapore can definitely be more aggressive in upgrading its population’s competitiveness. For instance, subsidising degrees and training programs for technical skills that are high in demand is just one of the potential tactics that could help increase the productivity of its labor force in the long run. Lastly, given the government’s professed interest in developing a booming hub for startups and technology companies, it could consider allocating a lot more than 2% of its budget on its info-communication development.

 

 

 * Article contributed by Value Penguin.

 

 

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12 Responses to “Review of Singapore’s Budget: 2009 – 2017”

  • patriot of Temesak:

    NOT Surprise that Propaganda and Lies…COMMAND the largest Budget

    80% of that BUDGET should go to Health & Welfare for the sheep..Oops!! People lah!!!

    But…sadly the sheep prefer Propaganda than Health & Welfare, makes them feel GOOD living in a 1st in everything BUT STupid in the eyes of the world!!!

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  • LIONS:

    Healthcare subsidies?
    Really?
    Who get subsidised truly?
    Go ASK FORMER MOH MINI$TER COW.
    he paid a whopping $8 for a major surgery!

    What about you n me?
    We,peasants,are SUBSIDISING THE RICH LIKE OUR MINISTERS.

    Chronic diseases need long term medication.
    And,MEDICINES COMPANIES PRICED MEDICINES BASED ON GDP OF PARTICULAR NATION.
    SO,POOR JOBLESS SGS PAY SAME PRICE AS THE RICH?

    THIS IS $ingapore spelt with capital$???

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  • oxygen:

    THE ARTICLE IS FLAWED of two major points – the special transfer include items of “hollow log” accounting. These are expenses written off – but money not spent at all. For example, the Pioneer Generation Package which is allocated over multi-periods extending to decades but allocated as expense in the year 2016 budget statement. There might be other transfers too which I am not familiar with until further research.

    The next item of doubt is investment income which “Value Penguin” stated as stable interest and dividend income and claims to be reliable. This is a sweeping assumption – until substantiated of its source origination. The investment income of over $14 billion in 2016 and 2017 could have NON-RECURRENT income from the sales of investment assets to supplement interest income. You can’t continually sell of investments without depleting future dividend income stream. Value Penguin have not explored the details breakdown of “investment income” from both years and why there was an apparent huge jump from financial year 2015 prior. Economy and global economy which yields and support the dividend income were lousy in 2016 and only marginally better in 2017 – there is no reason for dividend income to jump by such a huge increment in FY 2016 and FY 2017.

    Given these two major flawed analysis of budget in years past, the conclusion so thus derived must also be A SUSPECT of its conclusion.
    Corporate tax is the biggest revenue generator followed by GST.

    https://www.bloomberg.com/news/articles/2018-01-11/singapore-has-more-tax-options-than-a-gst-hike-in-2018-budget

    The gains in e-commerce undercut revenue collection from GST. GDP gain is from very narrow sector and unlikely to be stronger than in year preceding. There is certainly erosion of corporate tax base forward which the Govt must address of tax changes NOW to compensate and not wait for fall-off the cliff of corporate tax receipt as US changes its tax regime.

    So on balance – contrary to PAPpys 2015 election denial – THERE WILL BE INCREASE IN GST in this 2018 and 2019 budget year – perhaps 2% in this year budget and another 1% to 2% in the year succeeding.

    PAPpys are using dancing girls of significant social media influence and boys of similar background to soft-sell its budget agenda via INSTAGRAM social media.

    That is BAD NEWS intended to be sold as slippery soapy detergents of sweetness. These budget ambassadors & ambassadress are economic and accounting morons way out of depth of national budget complexity details who might as well give us a sexy entertainment dance routine online than explaining the economic justification of budget decision/process.

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  • karma:

    米重&渣粹sureMakan tax
    Do not even said u pigs look after pupils,return All our cPeeF and u pigs can go fucking
    Knnbccb

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  • oxygen:

    ME THINKS PAPpys could do a better job of marketing “hard sell” new tax imposition in this coming budget by hiring the working girls from Geylang to give us (daily) some dance show at MRT station wearing only G-string between now and budget statement date of late February.

    Those still horny old uncles – given these entertainment treat – might be happier paying an additional 2% to 3% GST increase after that.

    HILARIOUS!!

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  • Learn from KJ:

    This is taking the official budget without looking deep inside.
    Please learn from KJ. KJ gives really deep insight into all the official and not so official budgets.

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  • opposition dude:

    I’m very surprised defence is third last in the third picture. Perhaps all those years of just blindly buying whatever is the latest in defence technology finally broke the bank.

    And this government is really useless, GST at 7% and all other taxes and they still run a deficit? Must be due to all the any old how signing off on vanity projects like $1 billion Bishan Park and all those failed AGO audits. Not to mention scholarships given to non Singaporeans.

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  • 70% misleading:

    opposition dude:
    I’m very surprised defence is third last in the third picture. Perhaps all those years of just blindly buying whatever is the latest in defence technology finally broke the bank.

    I am afraid those charts are very misleading without more data. Defence is third last NOT in terms of total expenditure. That x-axis is % increase.
    $1 million more for original $1 million is 100%. $1 billion more for original $10 billion is only 10%.

    The writer focused too much on % increase. Without giving the actual expenditure, the charts are very misleading.

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  • oxygen:

    @ 70% misleading.

    THIS ARTICLE FROM VALUE PENGUIN PRETENDS SOPHISTICATION but I too found it to be LARGELY MISLEADING too – just as you pointed out below.

    70% misleading: I am afraid those charts are very misleading without more data. Defence is third last NOT in terms of total expenditure. That x-axis is % increase.
    $1 million more for original $1 million is 100%. $1 billion more for original $10 billion is only 10%.

    The writer focused too much on % increase. Without giving the actual expenditure, the charts are very misleading.

    Apart from sweeping assertions – unsupported – it contains TOO MANY WINDY HAPPY CONTRADICTIONS which a naive peasants could be taken in for a run around of the block of fantasy tale. Let me show you the proof

    Value Penguin:Singapore has been slowing down its investment in economic developments

    and this

    Value Penguin: From the data points featured below, it’s quite apparent that the government’s investment income has been allowing the country to invest in its economy, provide special transfers for social safety programs, and build a budget surplus for the future.

    The budget surplus allegedly funded out of glowing investment income allowing the country to “invest in its economy” when the author asserted that “Singapore has been slowing down its investment in economic development”?

    And I am also mystified how the REDUCED investments over the years in economic development can somehow “guaranteed its growing interest and dividend income”

    and this to cap it all of wild assertions

    Value Penguin:For instance, vast majority of the S$14bn in net investment returns contribution actually comprises of very stable sources of income like interest and dividends, which are practically guaranteed

    Who guarantee?

    And this rubberized false associative linkage is mind boggling.

    Valuw Penguin: security and external relations represented 34% of government’s budget in 2009. By 2017, this portion had declined to 27%. This decline was almost entirely offset by social development, whose proportion increased from 43% in 2009 to 50% in 2017.

    Percentage offset is…

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  • oxygen:

    @ 70% misleading

    HERE IS ANOTHER MIND-SHAKING BEWILDERMENT hitting my face.

    Value Penguin: Singapore has been slowing down its investment in economic developments

    And this sub-heading emotional drivel read

    Value Penguin:Investment income fueling investments in economy

    Which of the above windy happy contradictions is REALITY? I can’t quite figure out as yet.

    National budgets are very complex animal to analyse and ANTICIPATORY budgets some time RUNS completely out of kilter of reality unfolding.

    To sweep aside the necessity to raise GST based on assumptions of

    - continued positive or at least benign economic environment &

    - investment income as “practically guaranteed” of availability to fuel investments in economy (if this is reality and not again another fiction of windy happy contradiction)

    IS – IN MY VIEW – SIMPLISTIC AND DANGEROUS of wild conclusions.

    As I write at this moment in challenge to this author’s flawed analysis and conclusions, I noticed these two evolving developments unfolding in global financial market – specifically the macro-economic issues of immense relevance to budget assumptions in particular reference to inflationary tendency impinging on the bond market. Here they are.

    10-year Treasury yield jumps to its highest level since 2014

    https://www.cnbc.com/2018/01/19/10-year-treasury-yield-jumps-to-its-highest-level-since-2014.html

    and this

    The bond market is about to do something that could spell trouble for stocks

    https://www.cnbc.com/2018/01/18/the-bond-market-is-about-to-do-something-that-could-spell-trouble-for-stocks.html

    Analysts warned of two disruptive consequences – the 10-year Treasury yield will edge higher throughout 2018 and also make for higher lending rates for corporations.

    Higher interest rates in US will spread to the rest of the world – this is strong compelling likelihood of outcome effects.

    That means SLOWER GLOBAL ECONOMY, smaller corporate earnings than expected, lower dividend income from investments and also likely investment assets downward repricing (write-off). Singapore could see smaller contribution to its “investment income” in its national budget than in FY 2016 and FY 2017.

    It is likely the Singapore government will adopt a far more conservative stance. No budget lolly this year just like 2017 BUT HIGHER TAXES AND GST.

    This VALUE PENGUIN writing is flawed of its analysis and LARGELY WRONG OF ITS CONCLUSIONS.

    They don’t know what the numbers mean.

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  • oxygen:

    THAT THE PAPpys are falling back and relying on the guys and gals of significant influence in the social media to do pre-budget spruiking WITHOUT VISION AND INSIGHT INTO THE ACTUAL CONTENTS of the next national budget should have given VALUE PENGUIN that residents in LEE-jiapore is about to receive a very hard caning this time.

    The foreboding signs are all written on the wall of ominous swings of the budgetary cane coming our way.

    The tax raising cane about to unleash is going to he very painful on our butts, so PAPpys are sending in the social media to supply the balm ointment rub on our butts before the cane finds its seething pain-causing destination.

    They even solicited a commercial market research entity to do some litmus tests of hypothethical – do the young opposes to higher taxes to pay for the increasing burden of funding the social costs needs of the elderly (the political message, content and relevance of this budget agenda is not lost on me).

    So it is strange that the writer from Value Penguin NOT PICKED up this cue of PAPpys soapy sell of a hard budget ahead and still thinks and concludes that

    Value Penguin: There has been much talk of a potential tax hike in 2018. Given the trend we observed since 2009, it seems that some form of hike in tax on consumers is inevitable, be it a hike in GST or sin tax. However, given the prowess of its investment income profile, such a move seems hardly necessary just yet.

    If Value Penguin is right, I must be living in a different planet from them, presumably I am DEAD WRONG of perspective and content.

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  • oxygen:

    VALUE PENGUIN SHOULD READ this public mockery of budget spruiking for its own informed awareness. The public mind is scathing of its feedback to PAPpy – it is shameful.

    Singapore sparks mockery with Instagram ‘influencers’ for budget

    https://sg.yahoo.com/news/singapore-sparks-mockery-instagram-influencers-budget-114937218.html

    THIS IS A GOOD EXAMPLE OF PAPpys endless meandering river of FAKE NEWS brainwashing of peasants.

    It is the PAPpys usual cheap, shallow and trashy pandering of a subject-matter of national importance.

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