Barings harmless to Singapore's budget

Barings harmless to Singapore's budget

By Chen May Yee

SINGAPORE (AFP): Singapore was set Tuesday to present what is
touted as a pre-election national budget, which financial
analysts say is unlikely to be overshadowed by a billion-dollar
futures scandal here.

"The budget and the Barings incident are two separate issues,"
said Chan Tuck Sing, senior dealing director at Overseas Union
Bank Securities.

Other analysts called the Barings debacle an isolated incident
that was unlikely to affect any "goodies" the government could
offer in its budget set for presentation to parliament Wednesday
for the financial year to next March.

Chan said the scandal involving Baring Futures (Singapore)
Pte. Ltd., the massive losses of which led to the collapse of its
parent bank, had already taken its toll on the stock market,
which rebounded Monday after steep losses in early trading.

Prime Minister Goh Chok Tong is widely expected to call for
elections later this year although the government's five-year
mandate does not end until August 1996.

Analysts said Singapore, running a healthy surplus, could
afford to be generous with tax cuts and incentives.

The government collected more than one billion dollars
(US$666.67 million) in a goods and services tax (GST) last year
since its introduction in April.

"There is the expectation of a cut in corporate tax rates
given the substantial fiscal surpluses," said Low Siew Kheng,
head of research at Union Bank of Switzerland (UBS) Securities.

Industry leaders and analysts have stressed the need for
Singapore, with its spiraling operating costs, to stay
competitive by reducing corporate taxes.

"Our corporate taxes are still higher than our major
competitors like Hong Kong," said Lee Ju Song, deputy executive
director of the Singapore International Chamber of Commerce.

Singapore's corporate tax rate, at 27 percent, is 10
percentage points higher than Hong Kong's 17 percent but lower
than neighboring Malaysia's 30 percent.

Lee said her wishlist included a reduction in corporate tax
from 27 percent to 25 percent this year.

But some analysts said the government could reduce personal
taxes instead, arguing that a corporate tax cut was unnecessary
for an economy that grew by a hefty 10.1 percent last year.

Singapore's top personal income tax rate of 30 percent could
be trimmed and taxpayers may be treated to a one-time tax rebate,
which will also boost sluggish consumer spending, they said.

"The three percent disparity between corporate and individual
taxes is quite glaring already. Maybe there will be a one-to-two
percent income tax cut and a couple of percent on a one-time
rebate on personal income tax," said Chan.

Analysts also said they expected the government to announce
other rebates and incentives aimed at grooming Singapore as a
major financial hub after Senior Minister Lee Kuan Yew in
September announced plans to turn the island state into a center
for portfolio management.

"The government needs to encourage (foreign) talent to come in
and also bring foreign funds in," said Alex Chung, assistant
general manager of Alliance Securities.

Analysts said they expected concrete incentives to draw these
foreign fund managers to Singapore.