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Singapore’s budget for FY2011 is expected to gain a huge surplus exceeding what the PAP government has estimated a year ago.
The PAP government had originally estimated an overall budget balance of $100 million or 0.02% of GDP. However, it ended up with a humongous overall budget balance of $2.3 billion or 0.7% of GDP for FY2011!
Where did the “extra” or “unaccounted” revenue come from?
According to the Budget Book, the Government collected $12.2 billion in corporate income tax receipts, nearly 11% more than expected.
Despite a number of measures implemented to cool the property market last year, including additional buyer’s stamp duties, higher property prices and volume of transactions netted $6.8 billion in property-related taxes. This includes stamp duty collections of $2.9 billion or $800 million (37%) higher than forecast. Property tax revenue also benefited and netted an extra $300 million.
The increase in GST revenue contributed to some $300 million more than anticipated.
The net effect was that the overall budget balance for FY2011 rose from the original estimated $100 million to $2.3 billion giving the government a windfall of $2.2 billion.
This is not the first time that the government scores huge budget surpluses so as to help “beef up our reserves”.
In fact, in FY2007 Budget, when the government decided to introduce the Workfare Income Supplement (WIS) Scheme to supplement wages of low income workers, it announced the raising of GST by 2% to the present 7% rate. The rationale for the raising of GST was to “enable the government to implement Workfare and other initiatives to strengthen the social cohesion and grow the economy”.
Despite the increase in GST rate and after taking into account of the GST Offset Package, Workfare, and top-ups to NRF and the endowment funds, the government actually estimated an original deficit of $0.7 billion for its overall budget balance of FY2007.
And what was the result at the end of FY2007?
The overall budget balance turned out to be a surplus of $6.4 billion instead of the original projected deficit of $0.7 billion. GST revenues alone exceeded government’s projection by about $1.2 billion. The other large revenue component came from stamp duty collections from property transactions and other related property revenues. The government then said that, “These were large gains, out of the ordinary, and which we cannot expect to see very often”.
Indeed, in recent years, the buoyant property market has helped the government increase its coffer substantially, which goes to “beef up our reserves” nicely.
This was confirmed by the then National Development Minister Mah Bow Tan in 2011. In his last year in the Cabinet, Mr Mah scoffed at opposition MP Low Thia Kiang’s proposal to lower land cost as a way to reduce new HDB flat prices. Mr Mah warned that this is tantamount to “raiding” Singapore’s reserves, which of course, we all know that it is being used by Temasek Holdings and GIC for their investment activities.
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