Government spending in Singapore has reached dangerous levels. While stimulus by the government is a great measure to fuel the economy when needed. Eventually it could become a problem for the economy. After all, government spending without revenue growth is not a pleasant economic scenario. The Singaporean government must control its temptation to spend more by making judicious cuts and ensuring that revenue keeps flowing. After the Budget 2017 Parliament debate, Finance Minister Heng Swee Keat had the same to say. He focus on the challenges of Singapore’s fiscal situation which is expecting to become more challenging after 2020.

He said that the end of the decade will bring more challenges to the economy and the government needs to spend as effectively and prudently as possible while ensuring that revenues are sustainable and fair. Since FY2015, Singapore’s fiscal situation is in imbalance as spending tops revenue. Heng said that by raising the Goods and Services Tax and increasing the duties on tobacco, liquor and betting, the government has prepared early for the problems. He said that a progressive change in property taxes and Net Investment Returns (NIR) system will help in keeping Singaporean fiscal in place till the end of this decade.

The challenges and prevention

However, this is not the only issue that Singapore must face. The economy is quickly maturing and with an ageing population, government spending may increase too. Singaporean infrastructure also demands upgrades. Heng noted that the real fiscal health of the country will depend on the 2020s. The government is trying to adjust for receiving a better fiscal report in the next decade. For this, they have introduced a Block Budget Framework in the ministries. Medium term budget caps make the ministries take effective and prudent spending decisions which helps in cutting excessive government spending.

Keeping resources free

The budget caps are also subject to 2% downward adjustment which helps in keeping resources free for the highest priority spends. Such priority spending is another good way to make sure that expenditures never outpace the revenue while doing the most important jobs first. A similar task is being done by the government on project level where infrastructure projects are being scrutinized individually so that adequate cuts can be made. Moreover, subsidies are being redesigned to reach a highly specific target group. 

Heng hinted on revision of tax rates as well as application of new taxes to keep growing the revenue. Though he mention that tax system would be kept progressive and fair, recent tax raises already affect many groups. The ECA, for example, is complaining about paying property tax and maintenance for vacant houses which is eating away on property owners’ money. Singapore needs to maintain a healthy revenue cycle by ensuring that the economic growth does not lose steam. Otherwise, raising taxes will only burden the citizens.


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