Budget 2024 Speech – by Louis Chua

Budget Speech – 26th February 2024

Chua Kheng Wee Louis  

Observations on our fiscal position 

Mr Speaker, as I have shared in my IRAS (Amendment) Bill speech on Budget Day itself, FY2023 did turn out to be another record year of tax collections, after significant increases in IRAS’ tax collections over the last two years, a jump of around 38% to $68.2 billion in FY2022. 

Overall operating revenues increased by S$13.3 billion in FY2023 compared to a year ago to S$104.3 billion, and this is also S$7.6 billion higher than projected operating revenues first revealed in Budget 2023 last year. What is noteworthy is that this is not solely on the back of volatile revenues such as stamp duties or vehicle quota premiums, but on the back of record levels of corporate income tax, personal income tax and of course GST revenues, all of which continued to break new record highs. What was most impressive was the 23% jump in corporate income taxes in FY2023, even after a sharp jump of 27% the year before, with corporate income taxes set to be sustained at record high levels of around S$28 billion. This was not surprising, given news of record profits from some of the larger Singapore corporates from DBS Bank to Sembcorp Industries. 

Positive revisions to FY2022 data also meant that instead of a revised deficit of S$4.2 billion, FY2022 saw a surplus of S$1.7 billion instead. While the overall fiscal position for FY2023 is still projected to be in deficit, this was largely due to an increase in special transfers, chief of which is the recent inclusion of the S$7.5 billion Majulah Package Fund, without which FY2023 would have seen a S$3.9 billion surplus instead.

It is important to put into context the record operating revenues and improved fiscal position of the Government, against the challenging economic environment that we faced in 2023. GDP growth slowed to a mere 1.1%, while inflation was a source of consternation for many Singaporeans, which was what led The Workers’ Party to raise the Cost-of-Living motion in Parliament late last year, to share ideas and possibilities of reducing cost of living pressures by way of policy change, many of which are structural.    

Revenue measures to consider? 

In line with the theme of providing constructive feedback and ideas, I have two revenue measures for the Government to look into, after studying the revenue and expenditure trends over the past years. This would be in addition to revenue raising moves that my colleagues and I have shared in past budget debates, such as the issue of wealth taxes which I have raised previously, where even though we may have raised the highest personal income tax bracket and property taxes, the likes of wealthy individuals earning dividends and capital gains income from their vast wealth while renting luxury apartments in Singapore will still not be taxed directly.  

Firstly, looking at revenue collections as a percentage of GDP from FY18 to FY24 in Table 3.2b, over the years, customs and excise taxes is one of few categories which has seen a decrease in contribution as percentage of GDP over the years, despite higher tobacco excise duties from last year, and the inclusion of carbon taxes in this category. In line with the spirit of wealth taxes, there is room to study the potential to have liquors being taxed on an ad valorem basis, in light of our suggestion of raising so called ‘sin taxes.’ This need not result in any increase in duties on everyday alcoholic beverages, but it would be much more equitable if the ‘atas’ wines of the world which easily cost thousands of dollars a bottle incur a higher excise duty compared to the $20 a bottle wine found in the supermarket. 

Second, I note that casino taxes were raised in 2022. In spite of this, betting taxes as a percentage of GDP have been flat in past years at around 0.5%. Given that gambling duties have been unchanged since 2014, there is room to look into raising the relevant gambling duties, which could also serve a deterrent function. 

Structural changes vs. one-off handouts

Moving on to the main body of my speech today, I will touch on the importance of structural changes compared to one-off handouts, where I will highlight the need for structural improvements to personal income taxes and corporate income taxes to better support individuals and businesses while keeping our tax system progressive and up to date, and also touch on the urgent and important topic of retirement adequacy. 

Conceptually, I believe that one, it is important to put in place structural levers in our system as opposed to relying on one-off schemes, which may either be new or have to be refreshed year after year, incurring a lot of administrative costs and resources to operate on the part of the civil service, and creating much uncertainty on the part of Singaporeans. Two, it is also important to direct our resources to those who need them the most, rather than broad-based handouts to everyone, which could lead to allegations of budget measures being part of an “election budget.” 

Take the CDC Voucher Scheme for example. While I am sure all Singaporeans appreciate cash handouts amid the cost of living crisis, the CDC voucher scheme evolved from one aimed at helping Singaporean lower-income households defray their cost of living in 2020 to one where all Singaporean households are eligible. The amounts given have also varied quite significantly over the years, and it remains a question whether the scheme will be a permanent one, and if so, whether all households will continue to qualify and just how much are the vouchers going to be worth. 

Moreover, as opposed to the existing GST voucher scheme, there appears to be many operational challenges faced by Singaporeans when trying to claim the CDC vouchers, such as those who are renting their flats and sharing the same address with other households, those living in shelters and also those who no doubt may belong to the same household but are facing difficult familial relationships. 

Updating personal income tax brackets 

On personal income tax, I note a tax rebate worth 50% of tax payable, or up to $200 was introduced in YA2024, similar to YA2019. However, instead of a one-off rebate, we are better off raising the bottom-end of marginal resident personal income tax rates and increasing the tax-free threshold for the first $20,000 of chargeable income to reflect inflation over time. This was what I raised in a Parliamentary Question back in 2022. 

Corporate income tax reforms 

Similarly on corporate income tax, a CIT Rebate of 50% of the corporate tax payable will be granted to all taxpaying companies, whether tax resident or not, for YA 2024. In my speech on the Income Tax (Amendment) Bill in 2021, I suggested raising the level of progressivity in our corporate income tax regime to better support our local SMEs. 

Even as other support for companies to build capabilities is being strengthened, I hope the Government would consider providing greater tax relief to our SMEs, such as by raising the tax exemption limits, or by introducing schemes similar to the two-tiered profits tax rate regime in Hong Kong, which they introduced in 2018 to relieve the tax burden for SMEs in particular. 

This is important given that in Budget 2018 the Government announced tighter restrictions around our tax exemption schemes. For an SME making $300,000 in chargeable income for example, total corporate income tax paid before any rebates would be close to $34,000 or an effective tax rate of 11.2%, compared to around $25,000 or an effective tax rate of 8.4% based on prior rules.

Having such corporate income tax reforms built into the tax regime would also provide for greater certainty, as opposed to the current CIT rebates which significantly vary year after year from 20% to 50% in terms of the rebate, to a cap of $10,000 to $40,000 in the last decade from YA2013 to YA2024. 

It is critical to ensure that we continually reinvest in our local SMEs, the backbone of our economy representing 99% of all enterprises here and responsible for the jobs of 71% of employees, to enable Singapore to stay competitive in a post-BEPS world. Otherwise, we could well see a reduction in our tax base and employment levels, should our local SMEs shift more of their activities to other jurisdictions in response to the new business environment.

BEPS 2.0: back to square one? 

Touching on the topic of BEPS2.0, which I have also spoken about in past Budget debates, the time for introducing adjustments to our tax system is finally before us. DPM Wong has also announced the introduction of two components of Pillar Two, the Income Inclusion Rule and the Domestic Top-up Tax. 

As I have asked last year, while precise numbers may not be feasible, does the MOF not have a range of blue sky and grey sky projections as to the impact of the implementation of a domestic top-up tax? Especially when we are looking at the IIR and the DTT taking effect in less than a year’s time, for businesses’ financial years starting on or after 1 January 2025? 

To put into context my question, the OECD has published a working paper earlier this year, which finds that the global minimum tax “can raise between USD 155-192 billion of additional CIT revenues per year, with revenue gains accruing to all jurisdiction groups”. Moreover, estimated participating countries categorised as “investment hubs,” which includes Singapore, would have the largest expected gains from the reforms, with corporate income tax revenues rising from 14% minimum to up to 34%. If this is factually incorrect, given that the MOF will have a better basis to make its own estimates, then I hope DPM can correct this in his roundup speech. 

Instead, DPM shared in his budget speech that he does not expect the new moves to generate “net revenue gains,” due to the “significant spending required to stay competitive.” To say so is just akin to saying any forms of tax rate increases, from personal income tax, stamp duties to the GST is not going to generate net revenue gains due to higher spending needs. 

I understand that this could be due to the introduction of Refundable Investment Credits (RICs), and the net effect of BEPS 2.0 and the RIC is to an extent also dependent on just how generous the EDB and ESG are in awarding these RICs to companies. 

I agree that only time can tell when it comes to the actual revenue gains, as we await the rollout of Pillar Two globally, but it would be a sad day if countries go against the spirit of the reforms in the first place.

The BEPS 2.0 reforms were introduced to stop the race to the bottom when it comes to sovereign tax policies, and to facilitate international collaboration to end tax avoidance. Let me repeat that the OECD has shared that with the Two-Pillar Solution, all economies will benefit from extra tax revenues. All economies. I hope the additional tax revenues from BEPS 2.0 will not simply be in substance returned to MNEs through other forms.

Strengthening retirement adequacy

Finally, let me touch on a topic which is close to my heart, and that is retirement adequacy. It is also a pressing issue which requires urgent and decisive action, given our rapidly ageing society. While there are several good moves to improve retirement adequacy, like raising the ERS and enhancing the Silver Support Scheme and MRSS, I am concerned about the closing of the Special Account after the age of 55, and the lack of longer term measures to help Singaporeans grow our retirement nest egg sustainably. 

Closing of the SA: a step backwards 

In itself, I do not have qualms with the closing of the Special Account (SA). However, this is a step backwards when it comes to ensuring the retirement adequacy of Singaporeans, and much needs to be done, to truly strengthen retirement adequacy for the seniors today and tomorrow.

When the compulsory annuity scheme CPF life was introduced, the SA continues to provide flexibility to CPF holders to access or “touch” their retirement savings, while providing a decent interest rate floor of 4%.

DPM Wong said in his budget speech, “The remaining SA savings will be transferred to the Ordinary Account. Of course, members can voluntarily transfer their OA savings to the RA at any time, up to the revised ERS, to earn higher interest, and to receive higher retirement payouts.” Is this the full picture though? 

Singaporeans will know that funds in the RA will be used to pay the premiums for their CPF LIFE plan, meaning to say we can no longer withdraw the funds as we wish. It is also true that from the age of 55 to say the payout age of 65, these RA funds continue to earn the same interest rate floor of 4% as with the SA. So far so good. But unbeknownst to many, from the moment payouts commence, any interest earned will not accrue to the CPF holder but is pooled together under CPF life for all members. 

An FAQ by the CPF Board says it best, that interest earned on CPF LIFE premium is not included as part of the amount paid to beneficiaries when one passes away.

I understand that this is the concept behind annuity schemes, to enable members to get lifetime payouts. But it also means that even though the stated interest rate of the SA and the RA is identical, the actual yield that is earned by the two accounts could not be more different. And that based on the latest average life expectancy of Singaporeans, it is unlikely that the effective yield for RA savings will exceed that of funds that would have been in the CPF SA. 

Moreover, whenever I raise the issue of CPF interest rates in Parliament, the response by various political officeholders has been to stress the attractiveness of prevailing risk free interest rate floors of 2.5% for the OA and 4% for the Special, Medisave and Retirement Accounts (SMRA), over the past two decades of protracted low interest rate environment. The closure of the SA from age 55 takes the shine out of such counterarguments in my view.

As DPM Wong reminded us, we are facing a change in environment from very low interest rates to a more normalised period where interest rates will be higher for longer, and the era of easy money is over. It is in the context of this sea change that we should look at CPF interest rates going forward. How then should we allow the laws of mathematics and compounding to work for our seniors’ retirement funds? 

Co-investing with the GIC 

I continue to stick by what I spoke about in the Reserves motion earlier this month, and that is to enable all Singaporeans, not just our reserves, to directly participate in the long term returns from the Government’s fund manager, GIC, with adequate safeguards in place. This is especially pertinent when we consider the source of funds for the GIC in the first place, a part of which is indirectly derived from CPF savings via the SSGS bonds. 

As I have shared, based on the 20-year nominal returns of the GIC portfolio of 6.9%, and the CPF-OA rate of 2.5%, based on a simple rule of 72, the number of years it takes for our CPF monies to double goes from about 10 years based on GIC’s returns, to 29 years based on the prevailing OA rate! The effects on our ability to save for our own retirement is tremendous!

I listened to Minister Indranee Rajah’s explanation that in 2014, then DPM Tharman explained in Parliament at great length how we set our CPF interest rates and manage CPF proceeds. I went to do a bit of research into the Hansard and realised that I was far from being the first to bring this up. Then DPM Tharman’s explanation was actually in response to PAP MP Mr Inderjit Singh, who also questioned whether our 2.5% interest rate paid out to the CPF OA is a fair compensation for Singaporeans who have left their savings locked up for so long. 

In fact, if I go back further in time, many MPs, from the PAP, Workers’ Party and NMPs have all suggested allowing regular Singaporeans access better investment returns from the Government’s investment entities like GIC. 

PAP MP Dr Lily Neo called on the CPF Board to work with GIC and perhaps peg the interest rates at two percentage points below GIC’s returns. NMP Mr Siew Kum Hong quoted an academic paper which stated that, “To the extent that the [GIC’s] return on investments has been higher than the return actually credited to CPF members, a recurrent, highly regressive, large implicit tax on the CPF wealth has been borne by CPF members.” PAP MPs Mr Ong Kian Min and Mr Sin Boon Ann called on the Government to share with CPF members surpluses it makes using CPF monies, and Mr Ong even said, “I cannot understand how the Government can say it will not be responsible for providing for my retirement but I must lend the Government my retirement savings for investments and any gains earned on my money is not my money”. Finally, Ms Sylvia Lim from The Workers’ Party also called on the Government to do more to boost CPF returns while managing the risks, especially after the 2002 Economic Review Committee’s recommendations to do so via private pension plans. 

These are all words of wisdom by those who came before me, and two decades on, continue to resonate so deeply with me. How many more Singaporeans today could have met their retirement sums, compared to the four in ten five in ten today, had we implemented these suggestions back then? 

LRIS: the time is now

Now if for some reason the Government is still adamant, that we are unwilling or unable to allow Singaporeans to share in the fund management expertise and returns of the GIC, then the least we can do is to urgently implement the Lifetime Retirement Investment Scheme (LRIS). Something which I have been repeating in each of the last three years, so that we can better support Singaporeans’ retirement needs.

Let us remember that eight years ago in 2016, then Minister for Manpower Lim Swee Say had on behalf of the Government, accepted the recommendations within Part Two of the CPF Advisory Panel’s report, which included the introduction of the LRIS as an additional investment scheme, and to quote then Minister Lim, “These additional options will help address the concerns some Singaporeans may have with regards to the rising cost of living in retirement, and the desire for higher expected investment returns for those prepared to take on some investment risk”. 

One of the our fellow MPs today, Mr Saktiandi Supaat, was a part of the CPF Advisory Panel too, where Chairman Professor Tan Chorh Chuan articulated the limitations of the CPF Investment Scheme (CPFIS) and put it so aptly, that the Panel “believes there is a need to provide an additional investment avenue that can better help such CPF members earn higher expected returns than the CPF interest rates in a simpler way than CPFIS.”

The big question I have is, when will the Government finally be ready to roll this out? Is it still prepared to do so? I hope the Government is cognisant that the longer the delay, the higher the opportunity cost and real cost to Singaporeans’ retirement savings. 


To conclude Mr Speaker, I appreciate the Government providing for one-off goodies and hand-outs to Singaporeans and Singapore companies, on the back of yet another year of record high operating revenues which were S$13.3 billion higher compared to a year ago. However, it is important that we put in place structural levers in our system as opposed to relying on one-off schemes, and I have suggested changes to our personal and corporate income tax systems to illustrate this point. And finally, we are all aligned with the urgent need to strengthen Singaporeans’ retirement adequacy. So let us not shut Singaporeans out of attractive, sustainable and practical solutions to boosting our retirement funds.