Singapore to unveil pro-business budget

Singapore to unveil pro-business budget

SINGAPORE (Reuter): Finance Minister Richard Hu will unveil a generally pro-business budget on Friday with few surprises, analysts said.

"I'm not expecting any surprises," Jimmy Koh, regional economist at I.D.E.A, told Reuters.

"If anything it will be pro-business so we might see another percentage point taken off the corporate tax rate to get to the 25 percent level, which is a long-term goal," Koh said.

Analysts see the July 11 budget as part two of December 1996's interim budget, passed as a holding measure to guarantee expenditure plans ahead of the January 2 general election.

The poll returned the ruling People's Action Party to power with 81 of the 83 parliamentary seats.

Budget month is usually February in Singapore and with just seven months to go until the next one, commentators forecast little substantial change presented to parliament on Friday.

"Last year saw lowering of corporate tax, flattening of the personal tax structure, changes to withholding tax and a drop in property tax. They might not jump straight in with more this time," said one tax accountant.

"I think the government will want to keep something in reserve for next year," he added.

Last year's tax give-aways cost the Singapore exchequer about Singapore $2.5 billion (US$1.7 billion).

Analysts were reluctant to make predictions about the size of the expected budget surplus -- forecast at S$7.1 billion for the fiscal year to April 1997 in the February 1996 budget -- but they thought the level would be under pressure.

"Revenues will have been hit by falling retail receipts and weaker exports so it's difficult to pin down the number," said one economist with a foreign bank who declined to be identified.

Injecting vigor into the slowing Singapore economy -- seen growing at five to seven percent after years of double-digit expansion -- was viewed as a priority, as were measures to enhance regional competitiveness.

Winnie Liew, tax partner at accountant Arthur Andersen, said aligning corporate and personal tax at the 25 percent level could be one option, as would be allowing consolidated offsetting of corporate tax in group accounts.

"We hope consolidated offset will be allowed because it has been on the business wish-list for quite some time," she said.

"There is a greater need for group offset as Singapore companies become increasingly diversified and become exposed to different parts of the economic cycle," she added.

A third successive personal income tax rebate of 10 percent was thought unlikely by analysts, particularly as some 70 percent of Singaporeans fall outside the scope of its structure.

Some analysts thought it more probable there might be some form of relief for lower income families in public housing.