Stamford Land profit up 29% on tax credit

THANKS to a deferred tax credit of $14.82 million, Stamford Land Corporation saw a 28.7 per cent rise in net profit to $42.94 million for the financial year ended March 31.

Stamford said the deferred tax credit arose from recognition of unrecorded tax losses carried forward as ‘the anticipated future taxable profit will allow the deferred tax assets to be recovered’.

Revenue for the year dipped 7.3 per cent to $276.1 million and pre-tax profit fell 14.6 per cent to $28.5 million as the group had a lower inventory of completed residential properties for sale compared with last year.

Earnings per share rose to 4.97 cents from 3.86 cents.

Its hotel segment achieved a 17 per cent increase in revenue to $232.2 million due to better occupancy and room rates and translation of revenue denominated in Australian dollars and New Zealand dollars into Singapore dollars at higher exchange rates.

The trading segment posted a 22.6 per cent growth in revenue to $14.82 million due to higher contribution from the group’s travel and interior decoration companies.

But growth in these segments was offset by a 66.8 per cent slump in revenue in the property development and investment segment to $28.96 million as fewer units of Stamford Marque remained for sale.

Stamford Land is optimistic about the outlook for the hotel industry in Australia in view of limited new hotel rooms coming on stream, likely further improvements in revenue per available room, and continued strength in the Australian dollar.

‘The group expects positive results from its hotel owning & management segment in the next reporting period and the next 12 months,’ it said.

On the residential front, Stamford Land said its Stamford Residences Auckland is expected to be completed in October this year and it will recognise income from the sale of this project accordingly.

It has pre-sold over 70 per cent of the Stamford Residences and Reynell Terraces, Sydney, which is scheduled for completion in August 2011.

‘The trading segment is expected to further improve on its performance on the back of the strong Singapore economy,’ it added.

Stamford Land has proposed a final dividend of 1.5 cents per share and a special dividend of one cent per share. It paid out an interim dividend of 1.5 cents per share on March 12.

Shares in Stamford Land closed trading yesterday at 67 cents, down one cent.

Source : Business Times – 30 May 2008

Renovation costs to get tax relief

BUSINESSES can now claim new deductions on capital spending, thanks to a new tax incentive introduced by the Inland Revenue Authority of Singapore (IRAS) after it was approached by the Pro-Enterprise Panel (PEP).

Just about all businesses spend on fixtures and fittings, either to refurbish the premises for a fresher look or when starting operations.

But before Feb 16 this year there was no tax relief on these expenses. Fixtures and fittings did not qualify for an allowance because they related to the setting in which the business was conducted, and not the provision of plant or machinery.

Now a new incentive, which will be available for five years, grants a tax allowance on qualifying expenditure on renovation and refurbishment for the purposes of trade, business or profession, except expenses relating to structural works and expansion of space.

The expense has to be written off over three years on a straight-line basis, subject to a cap of $150,000 every three years.

With the change, businesses – particularly those in the service sector – will save tax and improve their bottom line. The revision came after two companies approached PEP because they could not claim tax deductions on immovable items or renovation expenses.

PEP approached Iras with the objective of supporting a reduction in business costs.

According to PEP, businesses – especially small and medium enterprises – felt tax relief should be offered, since the government’s intent is to help business cut costs.

One of the companies that appealed to PEP told it: ‘Most commercial (retail) lease terms are for a period of three years only, after which, if we vacate the premises, we will have to restore the premises to its original condition.

‘In other words, the benefit of the enhancement of the property does not get translated to the retailer and worse still, tenants will incur renovation costs twice, and not be able to claim capital allowances.’

The Pro-Enterprise Panel (PEP) was established in 2000 to actively solicit feedback from businesses on how government rules and regulations can be improved to create a more pro-enterprise environment in Singapore. The PEP is chaired by the Head of Civil Service, Peter Ho, and comprises mainly business leaders from the private sector.

Source : Business Times – 20 May 2008

R&D carrot may be ideal diet for some outfits

Estate duty abolition may also help banks and push up property prices.

It was a Budget that failed to excite the stock market very much, but analysts said that some of the initiatives announced could benefit research-intensive firms and companies in the healthcare, technology, finance and property sectors – mostly in the longer term.

Shrugging off Friday’s Budget announcement, the benchmark Straits Times Index fell 5.34 points – or 0.2 per cent – to close at 3,083.3 points yesterday.

As UOB Kay Hian predicted at the start of the day: ‘Concerns over a slower earnings growth and higher inflation will limit any euphoric market rally.’

But contrary to what was suggested by the market, some listed companies here will be better off due to the Budget, analysts said. Singapore’s bid to move up the R&D value chain could perhaps have the most impact, the analysts added.

OCBC Investment Research said that Biosensors International, LMA NV and ST Engineering could benefit as Singapore increases its yearly R&D spending to $7.5 billion, or 3 per cent of GDP, by 2010.

The firm also said that Venture Corporation and Chartered Semiconductor – both of which spent a substantial proportion of their operating expenses in R&D – stand to benefit in particular as the R&D tax deduction is increased from 100 per cent to 150 per cent and an R&D tax allowance of up to 50 per cent of the first $300,000 of taxable income is given.

‘Both Venture Corporation and Chartered Semiconductor spent a substantial proportion of their operating expenses in R&D,’ OCBC’s research unit said in a note yesterday. ‘Venture spent about $29.6 million on R&D in FY07, while Chartered spent about $159.8 million. We can expect both companies to see significant tax reductions in the coming years.’

UOB Kay Hian similarly identified Creative Technology, Venture Corp and Biosensors as listed companies that could gain from the R&D push.

Also expected to have a major impact is the abolition of estate duty, which analysts said could boost Singapore’s competitiveness as the region’s wealth management hub and attract more foreign investment.

‘We think the removal of estate duty is good news for the Singapore property market, as real estate is a natural choice for some of this money to be invested, especially with high inflation and negative real returns,’ said Lehman Brothers in a note yesterday.

The research firm noted that property prices generally gain in the 12 months following the removal of estate duty. The note said: ‘Malaysia abolished the estate duty in late 1991 and home prices rose 12 per cent on average in the ensuing 12 months. More recently, Hong Kong abolished the estate duty in early 2006 and property prices were up 6 per cent on average in the following 12 months. We think this could be more than coincidence.’

UOB Kay Hian, on the other hand, said that the clearest beneficiaries from the removal of estate duty would be financial institutions. The firm reiterated its ‘buy’ calls on DBS, OCBC and Hong Leong Finance in view of this.

UOB Kay Hian also said that listed medical plays such as Raffles Medical Group and Parkway Holdings will benefit from the government’s commitment to implementing means testing – which allows for a gradual shift of high-income patients from government hospitals to private hospitals.

However, there is a consensus among analysts that any boost from this Budget is expected to kick in only in the longer term.

‘The business-related Budget initiatives are part of the government’s ongoing efforts to transform the Singapore economy into a knowledge-based economy and grow the services sector, in our view,’ Deutsche Bank summed up in a note. ‘While positive in the long term, these moves are unlikely to have a tangible impact in the near term.’

Source : Business Times – 19 Feb 2008

Robust economy, property market lead to $6.4b surplus

THE Government racked up a Budget surplus of $6.45 billion last year, the highest since 1994, outdoing even the most bullish of market forecasts.

Unexpectedly strong economic growth and a runaway property market sent tax revenues surging, putting paid to an initial projection of a $700 million deficit.

But such a sizzling performance is not expected in the next financial year, with an $800 million deficit pencilled once handouts and changes announced in the Budget are accounted for.

Economists, who were predicting a surplus of between $4 billion and $5 billion, said they were caught out by higher-than-expected consumption and real estate-related tax collections.

They were also surprised by the size of ‘budget hongbaos’ that will be given out next year. ‘It’s a very generous Budget, with much more special transfers than last year,’ said United Overseas Bank (UOB) economist Ho Woei Chen.

Finance Minister Tharman Shanmugaratnam yesterday told Parliament the unexpected surplus came on the back of exceptionally strong economic growth.

‘We started the year expecting a growth rate of 4.5 to 6.5 per cent, which was also in line with market forecasts. With actual growth at 7.7 per cent, corporate and personal income taxes came in some $1 billion higher than projected.’

As anticipated, strong company profits sent income tax collections from businesses up 6.2 per cent to $9 billion despite a cut in the corporate tax rate from 20 per cent to 18 per cent.

Bigger wages and a tight job market sent personal income tax revenues up 18.1 per cent to $5.56 billion.

The strong economy also boosted goods and services tax (GST) revenues.

While a rise was factored in, given last July’s GST hike from 5 per cent to 7 per cent, the final figure was $1.2 billion higher than initial estimates. This, said Mr Tharman, was due mostly to higher consumption.

He added that the rate hike raised $1.4 billion in revenues, matching the size of benefits paid out in the year through the GST Offset Package and Workfare.

Economists said a buoyant economy enabled retailers to raise prices to pass on the GST hike. The higher prices, in turn, translated into more GST paid.

But the biggest surprise came from the red-hot property market, said Mr Tharman. Stamp duty rose to a record $3.8 billion, $2.3 billion higher than expected. Other property -related revenues also clocked in $1.1 billion above projections.

‘These were large gains, out of the ordinary, and which we cannot expect to see very often,’ he said.

UOB’s Ms Ho noted that net investment income contributions seemed low at $2.3 billion, given buoyant markets last year. ‘It’s the lowest since Sars-hit 2003.’

Mr Tharman said the Government is amending the Constitutional framework to let it draw on more investment income from its reserves. This would allow it to further enhance tax competitiveness.

A Bill will go before Parliament later this year.

In the year ahead, operating revenues are predicted to inch up 0.5 per cent. Spending will rise 12.5 per cent and special transfers will more than double.

Citigroup economist Chua Hak Bin said the estimates are very conservative as in previous years. ‘We could see another surplus next year.’

Source : Straits Times – 16 Feb 2008

Estate Duty R.I.P.

Death tax removal makes S’pore an attractive place for wealth to be built up, says Tharman

IN A LONG awaited move, the Government yesterday read the last rites for the death tax here.

The tax, known as estate duty, had been imposed if the assets of a person who died exceeded certain limits.

It was abolished with immediate effect yesterday.

The Government believes the move will boost the wealth management industry by encouraging both foreigners and Singaporeans to base their assets here.
 
Although the move had been keenly awaited, it drew gasps of surprise when announced by Finance Minister Tharman Shanmugaratnam in Parliament yesterday.

Calls to abolish the tax had grown more frequent in recent years as growing affluence meant that even the middle classes were caught by it.

A key grouse was that the exemption limits were lopsided. An estate could, for example, own up to $9 million worth of residential property and not pay the duty.

But everything above $600,000 in cash, shares and other non-residential assets was subject to the duty.

Mr Tharman said the exemption limits tended to ‘affect the middle- and upper-middle-income estates disproportionately compared to wealthier ones’.

The intended target of the tax – the super rich – had been able to set up trusts and other legal arrangements that allow them to minimise the duty.

Estate duty was taxed at 5 per cent on the first $12 million of applicable assets and 10 per cent on amounts above. Assets of $1 million, for example, incurred duty of $50,000.

The duty had been whittled down considerably over the years. In 1984, the top rate was a hefty 60 per cent.

Mr Tharman said that removing the duty was not just a practical and expedient measure but also in Singapore’s collective interest.

‘If we make Singapore an attractive place for wealth to be invested and built up, whether by Singaporeans or foreigners who bring their assets here, it will benefit our whole economy and society, not just the individuals who build up their wealth.’

This will be a boost to the wealth management industry here, said KPMG Tax Services executive director Ooi Boon Jin. ‘It will encourage the inflow of foreign talent. People will bring money here, sink their roots here and invest here,’ he added.

On average, the Government collected about $75 million a year in estate duty.

Mr Tharman is encouraging people with accumulated wealth to think of how they can use the savings from the scrapping of the tax to make a contribution to society.

Already, one foreigner living here is making such plans after learning of the move.

Mr Iain Ewing, 62, founder of management training consultancy Ewing Communications, plans to channel half of the estate duty savings to fund university scholarships and other causes. The rest will go to his son, Tejas, 27.

Mr Ewing, a Canadian with permanent residence here, has worked here for 23 years and expects the savings to be millions of dollars.

Two likely recipients are Singapore Polytechnic – where he previously worked as a media producer – and his alma mater, the University of British Columbia in Canada.

‘It’s great that some of my money can do more for other people after I’ve gone,’ he added.

Source : Straits Times – 16 Feb 2008

Estate duty removal: A plus for wealth management sector

Removal of estate duty enhances Singapore’s appeal as wealth management centre

THE scrapping of the estate or death duty comes as no surprise. It is yet one more flourish in a series of moves designed to boost Singapore’s attractiveness as a wealth management centre – and it is long overdue. Financial advisers and Singaporeans alike will heave a collective sigh of relief.

For wealth management, the scorecard looks good: No capital gains tax. No tax on interest and investment income, and on foreign sourced income. And now no estate duty.

In the past few years, individuals and lawyers have written columns on why estate duty should be abolished. One of the most convincing was by lawyer Goh Kok Yeow, published in The Business Times in 2002. Mr Goh, who advises on estate matters, called estate duty an ‘anachronism and unfair form of taxation’, from which the amount of collection was tiny.

Based on the inland Revenue Authority of Singapore’s annual report for FY2006/07, the number of cases assessed for estate duty has remained fairly steady at more than 1,300.

Collections, as Finance Minister Tharman Shanmugaratnam said in his Budget speech, averaged $70 million through the years. This would be less than half a per cent of the total tax collection of $22.8 billion in 2006/07.

The move should be a plus for the wealth management sector, even though foreigners have already enjoyed favourable tax treatment on their wealth for a few years. Certainly, it results in an even more simplified tax planning process – always a boon for those mulling a move to Singapore for work or as a primary residence.

Equitable wealth redistribution

But it is the issue of the equitable redistribution of wealth that is intriguing. Proponents of estate duty argue that it is a means to effect this redistribution. Inherited wealth, after all, was not earned. Mr Tharman alluded to this in his speech: ‘Estate duty,’ he said, ‘is a means to rebalance opportunities with each new generation and prevent wealth from being concentrated in fewer and fewer hands over time.’

Estate duty, he added, was relevant at a time when the bulk of wealth comprised land.

Today, financial assets are mobile and can easily be moved to the most tax-friendly locations. Singapore definitely qualifies as one.

But what of the redistribution of wealth? Mr Tharman encouraged individuals to give to society. Interestingly, the wealthiest tycoons in the US – Warren Buffett, in particular, Bill Gates and George Soros among other business luminaries – are lobbying the US government not to repeal the estate tax.

In 2001, 120 wealthy Americans published a petition in The New York Times arguing that a repeal would ‘enrich the heirs of America’s millionaires and billionaires while hurting families who struggle to make ends meet’. The billions of dollars of lost revenue will result in higher taxes on those less able to pay or in cutting benefits like Social Security and Medicare. Most of all, the petition said the repeal would hurt charities. ‘The estate tax exerts a powerful and positive effect on charitable giving. Repeal would have a devastating effect on public charities.’

In the US, under a 2001 law, estate tax is to be gradually reduced until 2010, when it is suspended for one year. Then in 2011, the tax returns in full force.

In Singapore, advisers believe the relatively modest rates of estate duty are unlikely to have played a big role in incentivising the wealthy to structure their assets for philanthropic giving. If that is so, charitable giving and philanthropy should flourish alongside the upward trajectory of wealth creation. That will be a win-win scenario for all.

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Guest comment, CEO Simon Cheong

‘The removal of estate duty clearly shows this Government is steadfast and determined to make Singapore a global wealth management centre attracting the high net worth community. Investment in transport and infrastructure to the tune of $50 billion to what is already a world-class transport system will give investors and Singaporeans confidence that Singapore is positioned for the long term for a 6.5 million population. This is absolutely a pro-growth Budget, indeed a tough-to-beat Budget.’

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Guest comment David Lawrence

‘I’m pleased the government has gone down the route of helping lower-income Singaporeans. In a lot of countries, there’s a widening gap between the wealthy/middle classes and the lower-income people. This causes a lot of social problems. I’m pleased Singapore is preserving social harmony (by addressing this issue). It’s a very difficult thing for the government to do. You don’t want to create dependency, but at the same time, you don’t want disharmony. The Singapore government is treading this difficult path, but so far they’ve done it really well.

‘The move to relocate government agencies out of the CBD and free up 20,000 sq metres for the private sector is better for the development of the Singapore economy, because office space is becoming too expensive for some companies. And although this is only a short-term supply problem, this action will address that situation until the new supply comes on-stream.

‘Delaying construction of a further $1 billion of public-sector projects will also provide some breather to the tight construction market, which is experiencing supply shortages and high costs. Contractors are now very choosy about the jobs they take because there’s a shortage of materials, staff, etc, caused mainly by the two integrated resort projects. It’s good that the government is delaying their projects till after the IRs are completed as that will help smoothen demand for contractors.’

Source : Business Times – 16 Feb 2008

Analysts hail scrapping of estate duty

Move will boost S’pore’s economic competitiveness

ESTATE duty is finally dead. Tax consultants and financial advisers yesterday hailed the scrapping of the tax – denounced as ‘death duty’ by its opponents – saying that the move would boost the wealth management industry and Singapore’s overall economic competitiveness.

Eliminating the tax on a person’s assets at death puts Singapore on par with rival Hong Kong, which abolished estate duties two years ago, and would make Singapore a more attractive place in which to live, they said.

‘It’s been a long time coming,’ said Ooi Boon Jin, executive director of tax services at KPMG. ‘It’ll be a boost to the wealth management industry, and it’ll also encourage families to come and sink their roots here.’

Peter Tan, tax partner at PricewaterhouseCoopers Singapore, said that it was right for the government to remove the ‘archaic’ tax and ‘keep up with countries that have already seen the light’.

Other countries such as Malaysia, India, New Zealand and Australia have already done away with estate duties. But there are countries that still retain an inheritance tax, such as the US and the UK.

‘It’s a misconception that estate duty only applies to the super-wealthy. It applies to middle-income people as well,’ said Mr Ooi.

Here, estate duty was previously payable on all assets of an individual upon death, subject to various exemptions, including the first $9 million of residential property and the first $600,000 for non-residential assets. The tax rate was 5 per cent on the first $12 million of taxable assets and 10 per cent for assets in excess of $12 million.

‘If you had $600,000 in your Central Provident Fund (CPF) accounts, that would have soaked up your $600,000 exemption,’ said Mr Ooi. ‘Anything else outside CPF you left behind would be subject to estate duty.’

Finance Minister Tharman Shanmugaratnam yesterday said that Singapore’s estate duty – inherited from the British when the island was a colony – would be removed with immediate effect, including for people who died yesterday.

He acknowledged that Singaporeans who had built up their savings from a lifetime of work wanted to pass on their wealth to their families. Some people became liable for estate duty when their estates received large cash payouts from life insurance policies.

Roy Varghese, director of financial planning practice at financial advisory firm ipac Singapore, said: ‘Wealth redistribution should not be at the expense of those who accumulate assets legitimately and diligently.’

Critics of estate duty have long pointed out that the tax generates insignificant revenue for the government and that wealthy people can avoid it by transferring their assets into offshore trusts.

The Inland Revenue Authority of Singapore’s latest annual report for the fiscal year to last March-end shows that it collected just $98 million in estate duties, or 0.4 per cent of the total $22.9 billion in tax collections for that year.

In contrast, corporate income tax and personal income tax collections were $8.5 billion and $4.7 billion respectively.

Removing estate duty could also give a boost to the budding philanthropic sector in Singapore, as rich individuals who had already planned for estate duty may give the money to a worthy cause, said Terry Farris, Asia-Pacific head of philanthropy services at private bank UBS. ‘It may be an opportunity to give that directly to a philanthropic initiative.’

In his Budget speech, Mr Tharman also urged wealthy individuals to make a contribution to society.

With estate duty gone, the government’s remaining tax on individual wealth is property tax, which Mr Tharman said would stay. Unlike estate duty, property tax ‘does not affect our middle and upper-middle-income estates disproportionately compared to wealthier ones’, he said.

Source : Business Times – 16 Feb 2008

Estate duty to be removed

SINGAPORE will abolish estate duty, or taxes collected on wealth left behind after an individual’s death, Finance Minister Tharman Shanmugaratnam announced on Friday.

‘If we make Singapore an attractive place for wealth to be invested and built up, whether by Singaporeans or foreigners who bring their assets here, it will benefit our whole economy and society,’ he said in his budget speech in Parliament.

It will cost the government $75 million a year, he said.

Singapore inherited estate duty from the British. The rates originally were high – and until 1984, the top rate was 60 per cent.

The current rates are much lower – five per cent for the first $12 million of dutiable assets and 10 per cent thereafter.

On the removal of the estate duty from the tax regime, with immediate effect, Mr Shanmugaratnam said: ‘Estate duty is a means to rebalance opportunities with each new generation and prevent wealth from being concentrated in fewer and fewer hands over time.’

‘It was especially relevant at the time when the bulk of wealth comprised land that was passed down through the family. Today, however, wealth is being created in many more ways and by a wider group of entrepreneurs, many of whom start off with little.’

‘Wealth is also being managed today on a global basis. Proponents of removing estate duty have therefore argued that removing it would encourage wealthy individuals from all over Asia to bring their assets into Singapore, thus supporting the growth of the wealth management industry.’

‘Ordinary Singaporeans have also argued that having worked, paid taxes on their income and property, and built up their savings, they want to be able to pass it on to their families. Some are in fact liable for Estate Duty when their estates receive large life insurance payouts.’

The Minister said the current low exemption limit for non-residential assets, set at $600,000, compared to the higher limit of $9 million for residential properties in fact tends to affect the middle and upper-middle-income estates disproportionately compared to wealthier ones.

‘We have considered raising the $600,000 limit for non-residential assets so as to correct for this. However, this would further shrink what is already a narrow tax base and render the tax less effective,’ he said.

‘I have therefore decided to remove Estate Duty from our tax regime, with effect from today. It is not just a practical or expedient measure, but one that on balance will be in our collective interest.’

‘If we make Singapore an attractive place for wealth to be invested and built up, whether by Singaporeans or foreigners who bring their assets here, it will benefit our whole economy and society, not just the individuals who build up their wealth. It is not a zero sum game.’

He encouraged individuals who have accumulated wealth to think of how they can use it to make a contribution to society, and make full use of the enhanced incentives introduced last year to promote philanthropy.

This will benefit schools, universities and hospitals, and the growing range of charitable causes in Singapore.

With the removal of Estate Duty, he said the remaining tax on wealth would be property tax.

On why this should be retained, the minister said: ‘It is an efficient tax, set at a low rate in relation to the full value of the property, especially for owner-occupied homes. You cannot tax-plan it away. It also does not affect our middle and upper-middle-income estates disproportionately compared to wealthier ones.’

‘This is why most countries have some form of tax on property – including even Hong Kong, which like us does not have capital gains tax and has already done away with Estate Duty. Only Ireland does not have a tax on residential property, but the Irish have capital gains tax, inheritance tax and gift tax.’

Source : Straits Times – 15 Feb 2008

2007 Budget surplus expected to hit eight-year high

Figure forecast to reach between $4b and $5b on higher tax revenues.

THE Government is widely expected to report its largest Budget surplus since the dot.com boom, after a robust economy boosted tax collections last year.

Good corporate profits, strong wage growth and a rip-roaring property market are likely to mean that public revenues exceeded expenditures by between $4 billion and $5 billion, say economists.

This would give the Government considerable leeway to be extra generous with one-off financial aid measures to help the elderly and poor cope with escalating living costs, the experts said.

‘It’s going to surprise on the upside,’ said DBS Bank economist Irvin Seah, who is expecting an overall surplus of $4.28 billion for the fiscal year ending March 31.

‘Due to strong economic growth, tax collections will be higher than expected.’

Finance Minister Tharman Shanmugaratnam will be presenting the Budget to Parliament on Friday. The expected bumper surplus follows economic growth last year, likely to come in at 7.5 per cent.

The final figures for gross domestic product, or economic output, for last year will be announced tomorrow and are expected to reflect estimates published last month.

The Government has recorded, at best, a small surplus in recent years. The last time it achieved a bulging surplus was in 2000 at $4 billion and in 1999 at $4.9 billion.

Standard Chartered Bank (Stanchart) economist Alvin Liew noted that when a fiscal deficit of $690,000 was estimated a year ago, the Government was forecasting growth at 4 per cent to 6 per cent.

‘But actual growth has exceeded their expectations by more than 2 percentage points,’ he said.

CIMB-GK economist Song Seng Wun said the Government’s operating revenues probably jumped by 25 per cent from the previous year, instead of the official 5 per cent forecast.

Economists said personal income tax receipts rose as the strong economy lifted wages and created jobs. Average bonuses paid out to workers have hit a 17-year high, while the unemployment rate has come down to a 10-year low.

Businesses should also post much stronger earnings such that they will pay more taxes overall despite a cut in the corporate tax rate from 20 per cent to 18 per cent.

Citigroup economist Kit Wei Zheng estimates that combined income tax collections from companies and individuals, which make up almost half of all tax revenues, surged 20 per cent.

Stanchart’s Mr Liew said revenues from the goods and services tax (GST) probably exceeded government projections, too. He noted that the booming economy has allowed consumer prices to rise strongly, probably exceeding government forecasts, which will boost GST receipts.

The experts say the Government should distribute the bulging surplus mainly to individuals who face a slowing economy and rising inflation.

‘The key focus will likely be measures to address the widening income gap and help the lower-income group cope with high costs of living,’ said United Overseas Bank economist Ho Woei Chen. This will likely take the form of one-off help, such as rental and utility rebates for the poor.

Beyond addressing acute challenges, economists said the Government would likely keep an eye on the medium to long term also.

A cut in personal income tax rates to match last year’s reduction in company taxes is widely anticipated to help Singapore attract foreign talent to live and work here.

The Government may also look to further enhance public infrastructure to keep Singapore competitive.

Filling the Government coffers

AN UNEXPECTEDLY strong economy last year should translate into a large surplus for the Government. With growth tipped at 7.5 per cent, tax collections probably exceeded projections made a year ago.

Income taxes paid by companies probably surged despite a 2 percentage point cut in the corporate tax rate as businesses enjoyed robust profits amid a buoyant economy.

Personal income tax receipts likely surged amid strong wage growth and record bonuses. The unemployment rate is at a decade low as job creation hits new highs.

Goods and services tax (GST) collections would have been boosted by a 2 percentage point hike in July. A strong economy has also fuelled inflation, further adding to GST receipts as the tax is proportional to prices.

A strong property market means higher collections from stamp duty and other real estate-related taxes.

Source : Straits Times – 13 Feb 2008

Bush to sign $215b stimulus bill on Wed

UNITED States President George W. Bush said he would sign a US$152 billion (S$215 billion) package on Wednesday that is aimed at keeping the world’s largest economy out of recession with tax rebates and business investment incentives.

Citing private-sector economists, Mr Bush said on Sunday he did not believe the US economy was in recession despite an implosion in the housing market, a widening credit crunch and, for the first time in 53 months, a loss of jobs in January.

‘I will be signing this bill Wednesday,’ Mr Bush said in an interview on Fox News Sunday.

Asked whether he would consider further action if the economy continued to sputter, Mr Bush said: ‘We just have to play it by ear.’

Beyond prompting fears of a global ripple effect, the health of the US economy has become a key campaign issue for Republican and Democratic candidates seeking to contest November’s presidential election to succeed Mr Bush.

US economic growth slowed abruptly to 0.6 per cent in the fourth quarter last year, following a surge of 4.9 per cent in the third quarter, the US government said.

The housing sector continued to soften. Pending sales of previously owned homes fell by 1.5 per cent in December and were off a sharp 24 per cent from a year ago, the National Association of Realtors said. Major retailers reported a slowdown in consumer spending.

Finance officials from the Group of Seven industrial nations said this weekend that while the US economy was likely to escape a recession in 2008 and economic fundamentals remained ’solid’, far more work was needed to restore financial markets to good working order and safeguard global growth.

The G7 ministers pointed to serious risks from the US property market slump and subsequent tightening of credit conditions, which has slowed the flow of money to the consumers and companies that drive the world’s largest economy.

Business incentives

‘The current financial turmoil is serious and persisting,’ US Treasury Secretary Henry Paulson said as the G7 finance leaders laid out plans to treat the root causes of market distress at a meeting in Tokyo.

‘As the financial markets recover from this period of stress, as of course they will, we should expect continued volatility as risk is re-priced.’

Some Democrats have talked about offering a second measure aimed at providing more aid to the economy but Mr Bush warned Congress against going too far to adopt regulations that could constrain businesses and the economy.

‘That’s why I was so supportive of this current package, because it was temporary,’ Mr Bush said.

After a brief spat over the size of the stimulus package, the Senate and House of Representatives agreed on Thursday to a measure that would provide one-time rebates of up to US$600 for individuals, US$1,200 for couples and US$300 for each child.

Low-income people, including retirees on Social Security and disabled veterans who pay no income taxes, would receive cheques of US$300. The cheques could be in the mail within months.

The package should fuel corporate investments by allowing firms to write off equipment purchases made this year more quickly.

Some economists have said that while the measures will buy time, they may not be enough to avert recession. — REUTERS

Source : Straits Times – 11 Feb 2008