Amadeusz Juskowiak

Neutral budget expected in singapore

Singapores Finance Minister Richard Hu is expected to announce a neutral budget tomorrow with no major tax changes for the 198788 year starting April 1 bankers and economists told Reuters

They said with real growth at an estimated 19 pct in calendar 1986 indicating signs of recovery from the 17 pct shrinkage in 1985 the government was likely to hold its course and wait for measures introduced in last years budget to work

Last March Hu cut corporation tax to 33 pct from 40 pct and income tax was reduced by the same margin

Last year the government also reduced wage costs by introducing a wage freeze and cutting employer contributions to the mandatory state savings scheme the Central Provident Fund CPF to 15 pct of salaries from 25 pct

I dont foresee any new or additional stimulus because the economy is now improving said Clemente Escano vice president of the Union Bank of Switzerland

The governments economic report for calendar 1986 issued last week said the CPF reduction and other costcutting measures only started to bite in the third quarter of 1986

But the report said over half the economy especially the commerce financial and business services sectors continued to be depressed by weakness in the surrounding regional economies and an excess of domestic property

The sources said the fragility of the economic recovery suggested the government would not introduce much of its planned consumption tax in the coming financial year

In last years budget Hu said he planned to set up collecting machinery for the tax Economists said a campaign against smoking this year might be the opportunity for him to levy the tax on tobacco as a first step towards its wider use

The sources said the government does not look likely to raise more revenue in this years budget

Last years budget projected a 322 billion dlr budget deficit for fiscal 198687 but the economic report projected an overall calendar 1986 surplus of three billion

Lower tax revenue was balanced by rising investment income and stringent controls on government operating expenditure helped by the wagefreeze policy

Anthony KP Lee vicepresident and deputy general manager of American Express Bank Ltd said he expected nothing exciting from this years budget

Lee said It will probably be a nonevent as most of the tax benefits were given last year The economy has already started moving so it does not need government support

Last weeks economic report attributed the one pct decline in domestic demand last year mainly to a sharp decline in private construction so this sector hopes for some relief from the budget economists said

The economic report said the sectors activity declined by 253 pct in calendar 1986 after a 139 pct contraction in 1985 A further decline is expected in 1987

But in last years budget a 30 pct rebate on tax for industrial and commercial properties was raised to 50 pct until the end of 1988 so the most Hu is likely to do is add incentives for creating property investment unit trusts

The only measures known to be in tomorrows budget are incentives to encourage population growth including incentives to families who have three children

Deputy Prime Minister Goh Chok Tong has already announced the government will try to encourage threechild families instead of the twochild families it encourages now