Fiscal Policy

In Singapore, the long-term objectives of government budgetary policy are :

• to keep the public sector lean and trim in order to leave more manpower and financial resources for the private sector;

• to maintain a balanced budget i.e.. to finance total operating and development expenditures from operating revenue; and

• to focus government expenditure in areas which yield lasting returns, eg. education, healthcare, infrastructure, housing and programmes to protect the environment.

Underlying the above objectives are the recognition of market forces in driving the economy, financial prudence and emphasis on human & infrastructure investment.

There are 3 main sources of government operating revenue, namely tax revenue, fees and charges and other receipts. The most significant is tax revenue arising from the various taxes imposed by government (this has accounted for about 79% of the government operating revenue for the years 1990 to 1998). The second source is fees and charges. These arise from provision of services, sale of goods, issuance of permits and licenses, fines and forfeitures. The third source, other receipts, is derived mainly from interest income from loans advanced to public employees.

The various taxes imposed in Singapore are:

• Income Tax
  Income tax is chargeable on income of individuals and companies.

• Property Tax
  Property tax is imposed on owners of properties based on the expected rental values of the properties tax is imposed on owners of properties based on the rental values of the properties.

• Estate Duty
  Estate duty is levied on the value of a deceased's net assets in excess of a threshold amount duty is levied on the value of a deceased's net assets in excess of a threshold amount.

• Motor Vehicle Taxes
  These are taxes, other than import duties, that are imposed on motor vehicles. These taxes are imposed to curb car ownership and road congestion.

• Customs & Excise Duties
  Singapore is a free port and has relatively few excise and import duties. Excise duties are imposed principally on tobacco, petroleum products and liquors. Also, very few products are subjected to import duties. The duties are mainly on motor vehicles, tobacco, liquor and petroleum products.

• Goods & Services Tax
  GST is a tax on consumption. The tax is paid when money is spent on goods or services, including imports.

• Betting Taxes
  These are duties on private lottery, betting & sweepstake.

• Stamp Duties
  This is imposed on commercial and legal documents relating to stock & shares and immovable property.

• Others
  The two main taxes are the foreign worker levy and the airport passenger service charge. The foreign worker levy is imposed to regulate the employment of foreign workers in Singapore.

IRAS is responsible for collecting income tax, property tax, goods & services tax, estate duty, betting taxes and stamp duties.

Tax policy is an integral part of fiscal policy. The main objectives of tax policy in Singapore are :

• Revenue Raising
  This is the traditional aim of tax policy. Tax revenue is a substantial source of funding for government operations.

• Promotion of Economic and Social Goals
  Tax has been used to influence behavior towards desirable social and economic goals. For instance, to encourage mechanization and automation, the government allows accelerated capital allowance for most assets used for business purposes. To encourage Singaporeans to have more children, tax rebates are given for the third and fourth child.

The fundamental tenet of Singapore's tax policy is to keep tax rates low, both for corporations as well as individuals. Keeping our corporate rate low will help us to continue to attract a good share of foreign investment. Keeping our individual rates low will encourage our people to work hard. It will also make risk-taking worthwhile.

Another fundamental tenet of our tax policy is to keep the tax base broad. The aim is to inculcate awareness among citizens the social responsibility of paying taxes. For this reasons, our personal relief's for individuals are deliberately kept low. This means that potential taxpayers would join the tax stream earlier.

The Inland Revenue Authority of Singapore (IRAS) was incorporated on 1 September 1992 by an Act of Parliament. IRAS acts as agent for the government to assess, collect and enforce payment of taxes. In connection with such functions, IRAS is responsible for administering the following Acts:

• Income Tax Act;

• Economic Expansion Incentives (Relief from Income Tax) Act;

• Property Tax Act;

• Property Tax (Surcharge) Act;

• Goods & Services Tax Act;

• Stamp Duties Act;

• Betting & Sweepstake Duties Act;

• Estate Duty Act; and

• Private Lotteries Act.

IRAS also administer the Auctioneers’ Licenses Act and Charities Act. It grants licenses and permits for auctioneers, appraisers and housing agents. And under the Charities Act, it registers and supervises charitable organizations. The other non-revenue functions performed by IRAS include representing the government in tax treaty negotiations, providing advice on property valuation, commenting on tax policy proposals and drafting of tax legislation.