Singapore’s Budget 2021, delivered by Deputy Prime Minister Heng Swee Keat in Parliament earlier this week, comes across as “falling short” and may add more burden to Singaporeans, said the Red Dot United (RDU) Party on Thursday (18 Feb).
In a statement, RDU said the Budget measures “do not go far enough” to address the challenges faced by Singaporeans and local businesses, stressing that the increase in taxes and duties will affect the livelihoods of the people.
“Unfortunately, Budget 2021 comes across as falling short. Its Household Support Package especially does little to alleviate the strain felt by middle-income families due to the rising cost of living,” it added.
During the Budget 2021 announcement, the government increased petrol duty rates by 15 cents per litre for premium petrol and 10 cents per litre for intermediate petrol.
Commenting on this, RDU said that the hike in petrol prices will “hurt” the livelihoods of many Singaporeans who work in ride-hailing services or delivery services, adding that the increased tax will cause a drop in their income.
“It [petrol tax] indirectly affects costs such as transportation and manufacturing and the increase in these costs can, in turn, affect the prices of a variety of goods and services, as producers may need to pass production costs on to consumers,” it added.
Mr Heng, who is also the Finance Minister, stated that the planned increase in the Goods and Services Tax (GST) will take place “sooner rather than later” between 2022 to 2025.
Instead of increasing the GST, RDU proposed increasing the Net Investment Return Contribution (NIRC) cap to 60 per cent and reviewing policies on other taxes and duties such as capital gains tax and estate duties.
“RDU proposes that the NIRC spending cap be increased to 60 per cent for most financial years, and to have a variable scale of increase from 100 per cent to 60 per cent for difficult years,” it noted.
RDU opined that the government will not need to draw from the nation’s past reserves if the variable scale of increase of 100 per cent was applied to the NIRC for 2020 and 2021 financial years.
The government also announced the extension of the Jobs Support Scheme (JSS), which helps employers retain employees by subsiding wages, for industries that continue to suffer due to the COVID-19 pandemic.
However, RDU observed that such schemes mainly benefit multinational corporations (MNCs) and government-linked companies (GLCs), rather than small and medium-sized businesses (SMEs) in Singapore.
“Despite all the support provided to businesses by the government-assisted financing schemes, loans to businesses came in flat at S$418.36 billion in November after a seven-month contraction streak.
“This suggests that the pandemic has made banks more reluctant to lend, especially to small and medium enterprises. Budget 2021 could have introduced policy measures to make lending to local companies (especially small and medium enterprises) more accessible,” it explained.
Noting that SMEs are still struggling to internationalise businesses, RDU suggested the government facilitates partnership opportunities between MNCs and SMEs.
“If partnership opportunities were facilitated between MNCs (or GLCs) and SMEs, then resources can be prioritised on where the most value could be added in the supply chain, while relying on the MNC partner to conduct market due diligence, hiring and developing local talents, as well as building capacity in overseas markets,” it noted.
RDU also proposed to set up an Export and Import (EXIM) bank to provide internalization finance, so that growth capital can be supplied to empower local trade organisations.
The EXIM bank should have a clearly-defined mandate, where the raison d’etre is one of facilitating the supply of capital and not of subsidising loans, said the political party.
“The government should not be utilising the national balance sheet for this purpose, absorbing risk from the commercial banking system without financial discipline.
“As such, EXIM bank would have to be commercially managed and obtain a fair return on its capital, even if it is funded with government equity,” it added.
Mr Heng had also revealed in his Budget 2021 speech that about 76,000 people have been placed into jobs, traineeships, attachments, and skills training opportunities as of end-December last year.
On this, RDU questioned the number of people who got jobs which matched their previous salaries with similar benefits.
“There is also a need to relook at the “train first, jobs later” model as it is equally possible to facilitate professional upgrading by using the reverse approach where Professionals, Managers, Executives & Technicians (PMETs) are matched to relevant jobs before they go through an OJT or part-time training programme,” it noted.
RDU chief Ravi Philemon highlighted that not all Singaporeans who have lost their jobs can settle for a lower salary, especially those who have young children and aged parents to support.
“Without the ability to match remuneration when reskilling and redeploying, there is the inherent consequence of forcing Singaporeans to settle for a lower-paying job and then supplementing with a second job to achieve parity with their original income.
“This would essentially create a culture of fear among the vast majority of professionals that losing their job means they would get left behind,” said Mr Ravi.
“Budget 2021 has therefore lost a prime opportunity to demonstrate how it could fuel the creation of more good jobs and careers – as opposed to any job opportunity,” he added.