$1.2 bn budget deficit forecast as CPF rates rise

Sin taxes up, lower income earners, SME's big winners, no changes on foreign workers.

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5:09 PM Budget balance is forecast to be in deficit of $1.2 bn for FY 2014

5:06 PM Fun taxes up: Booze taxes up 25% and tobacco taxes up 10%

5:05 PM We will enhance bonus COE period to incentivize owners of environment-friendly vehicles

4:59 PM There will be a one-off GST Voucher U-Save Special Payment this year. It will benefit 800,000 HDB households

4:53 PM For workers aged 50-55, CPF contribution rates will increase by 1.5% point: 1% point from employer & 0.5% point from employee. For workers aged 55-65, CPF contribution rate for employers will increase by 0.5% point.

4:50 PM All Pioneer Gen will receive special benefits regardless of income, for the rest of their lives.

4:43 PM Three (3) components to pioneer generation package: Outpatient care; Medisave top ups; MediShield life subsidies. Over 450,000 Singaporeans eligible for pioneer generation package

4:40 PM We will allow elderly Singaporeans to use a portion of their Medisave more flexibly. Pioneer package will provide a special package of support on top of other enhancements

4:37 PM CPF RATES: MediShield payments must go up and employers must play a role too. The CPF contribution rate will be raised by 1% for all workers and it will go to Medisave account. The government will offset by 0.5% for the first year. The offset will cost $330 million. Overall CPF rate is now 37% and is higher than the range of 30% to 36% considered a decade ago. Life expectancy is increasing as is demand for healthcare. We do not expect to make further changes soon to CPF rates. Future changes much be considered carefully.

4:35 PM An estimated 400,000 patients will benefit at a cost of $123 million each year.

4:34 PM MediShield life review-enhancements must require higher premiums but we will ensure they will be affordable. It'll be achieved in two ways. First, we'll provide significant permanent subsidies. Second, to ease transition, we'll provide subsidy to offset premium increases

4:33 PM HEALTHCARE: subsidies now around 50%. Lower income subsidies raised to 70% and for middle income earners to 60%. Medication will also be similarly subsidised.

4:29 PM EDUCATION: More households in the lower quartile with household income of $3000 a month will pay just $3 a month compared to $75 previously. Middle income earners also will get help. Institutes of higher learning will see more students qualifying for bursaries by raising the per capita monthly household income threshold from $1,700 to $1,900 for students. Fee assistance extended to all Anchor Operators and MOE Kindergartens. All these changes will cost $147m more each year.

4:27 PM We must ensure that hospitals, insurers, doctors, and patients have the right incentive.

4:26 PM Healthcare will be the driver of higher social spending for Singapore in next 10-15 years. We must ensure that healthcare cost inflation will be controlled in the next years to come. We have to reshape our healthcare system to control costs.

4:24 PM Budget aims to achieve a fair and equitable society. Multi-year initiatives to promote social mobility and enable every Singaporean to contribute to society.

4:20 PM Use of productive technologies will be mandated for selected Government Land Sales (GLS) sites.

4:18 PM There will be more intensive efforts to upgrade the Construction sector. Transforming the industry requires change in the whole ecosystem.

4:17 PM Max quantum for Internationalisation loan raised from $15m to $30m.

4:14 PM Co-investment programme phase 2 will see government provide additional $150m to match private investments. Programme will continue to focus on investing in growth-oriented SMEs

4:12 PM We will subsidise SMEs for >100mbps broadband subscription plans for Wireless@SG services. Ensure more building facilities can provide fibre broadband to their tenants.

4:11 PM Our second major thrust will be to catalyse the adoption of ICT solutions, especially by SMEs.

4:10 PM I will top up the Lifelong Learning Endowment Fund by $0.5b to $4.6b.

4:09 PM The land intensification allowance will be renewed till Jun 2020 extended to logistics sector.

4:08 PM New industrial clusters to be created. JTS Food Hub concept will feature shared facilities for cool rooms and logistics.

4:07PM Ten-year extension of 50 % tax deduction on R&D. Further tax deduction for approved R&D projects extended by five years

4:06 PM PIC scheme extended will be extended by three years until 2018 at a cost of $3.6 bn. Also a PIC Plus Scheme for SMEs will be introduced. Under the current scheme, the cap is $400,000 a year with a total of $1.2 mn across 3 years. Cap is now raised for SMEs to $600,000 from 2015 meaning tax deductions can be claimed for up to $1.8 mn in exoenditure.

4:03 PM Three examples of productivity: One Berry, a security firm, has no onsite guards but monitors from a central location. Marcella, a clothing company, has software to have sales staff to convert designs by computer which reduces needs for alterations. It uses laser to cut fabric for better accuracy and reduce wastage. With this, Marcella open its first retail outlet in NY this year. Example 3: Genki Sushi. Invested in system to reduce staff by 85% and cut waiting times for orders by 50%. Orders are placed via iPad and delivered by robot Shinkansens. Plates are cleared automatically.

4:00 PM Change is happening on the ground to do things differently.
3:59 PM Productivity: We are seeing high take up rates for the PIC scheme. 2 out of 3 SMEs with turnover of over $1 million have claimed benefits from PIC scheme.

3:55 PM 2.5 times more support will be given to lower and middle income Singaporeans than ten years ago. This is a major shift. For example, a typical low income couple at the 10th percentile buys a home. Nowhere else in the world is this possible. They receive 60,000 in housing grants with payments only from CPF, nothing from their take home pay. If they upgrade to 3-bedroom they get $15,000 more. Childcare fees are typically at $3 a month. Financial assistance will cover total fees through school and on to poly or ITE. Workfare top up pays up to 30%. As the couple gets older, healthcare gets more important - subsidies of 70% to 80% on healthcare. Government transfers net of the taxes they pay will exceed their lifetime incomes.

3:53 PM Budget to focus on giving special recognition to the pioneer generation. Support for the middle-income Singaporeans will be strengthened. CPF contributions will be increased.

3:50 PM Singapore's Gini coefficient was lower in 2013. We are helping lower paid workers through economic and social strategies. We are using tax revenues to top up the wages for those in the lowest 20%. The average lower wage Singaporean at least 1/4 higher than what the employers will pay, at least. The three-year wage credit scheme is working well. Wages for lower paid Singaporeans have improved the most rapidly. Cheap sourcing has required a more interventionist solution. In cleaning and security it has held down pay and let to high attrition. The progressive wage model, which will be licensing requirement, will ensure cleaners and security get an increase in wages.

3:48 PM "We must all make the effort to change our social norms, so that we can raise productivity and pay."

3:46 PM We need a workplace culture where employees’ views and contributions are valued up and down the line. When employees are engaged and empowered, productivity goes up. We also need a culture of mastery.

3:42 PM Productivity increased by 11% since we began the restructuring journey 4 years ago.

3:41 PM Game changing innovations. Mindsets have changed. Two years ago the mood was to call on the government to slowdown foreign worker inflows. Now they understand the realities and are seeking opportunities to expand abroad. We will aggressively support every form of upgrading by firms. Budget 2014 will strengthen support for early adopters of new technologies and we will promote wider adoption of high impact productivity solutions in each industry. This includes using more ICT. In construction, we will tighten upstream rules and give stronger incentive for contractors to invest in skills of workers. Schemes will favour more dynamic and efficient players.

3:41 PM Raising productivity is at the center of economic agenda; that's the only way we can raise living standards in the years to come.

3:39 PM "Among citizens, median wages have increased by 9% in the 5 years to 2013. This is better than in Hong Kong, Korea and Taiwan. Real incomes at the 20th percentile rose by a similar amount. We have avoided the problems seen in other countries where median wages were stagnant. We can only sustain labour wage increases if we can have good productivity growth."

3:38 PM "We are building a fair society where everyone has a fair chance to pursue their aspirations and earn their own success."

3:38PM "We are transforming our economy, we are investing in new manufacturing capabilities, we are developing an equal system to exploit big data."

3:35PM "We are concerned by property prices, with cooling measures working. HDB BTO prices are stable because they have been delinked from the resale market. We are not engineering a hard landing but neither can we climate swings in the property market. It is too early to start relaxing our measures."

3:34 PM Unemployment remains at close to full employment and there are more jobs open than available workers. The median Singaporean worker wages increased 5% in real terms in 2013, and those at the 20th percentile saw wages rise 7%.

3:32 PM $3.9bn surplus for 2013, higher than budgeted. Delays in implementing public infrastructure helped and revenues boosted by higher COE's. Moreover, stamp duties didn't fall as much as expected.

1:41 PM Deloitte Singapore says Budget 2014 must take a leaf or two from UK's tax book. Deloitte notes that while these changes seem relatively minor, they could potentially go a long way to ensuring sustainability for businesses and to encouraging investment.

11:49 AM For FY14, DBS Group Research expect a generous special transfer worth SGD 9bn to be introduced to alleviate the well-being of the less fortunate segments of the society. Recognition for the contributions by the pioneer generation in nation building as well as preparing the economy for the challenge of an aging population will likely dominate the government transfer package.

10:50 AM The qualifying criteria for the Productivity and Innovation Credit (PIC) scheme may be tweaked to benefit smaller companies, according to DBS Group Research. Measures to help companies cope with the rising business costs will likely be featured too.

10:40 AM Maybank Kim Eng says Budget 2014 will likely focus on sustainable and inclusive development. Maybank notes, at the outset, the Government will maintain a relatively balanced budget – the cornerstone of Singapore’s fiscal policy. In terms of measures, the focus will be continuing with the ongoing economic restructuring, and achieving a more inclusive and equitable society.

10:33 AM Deloitte Singapore tax team proposes an extension of the tax exemptions schemes for funds managed by a fund manager in Singapore as these schemes have proven attractive to investors seeking to set up funds in Asia.

10:06 AM UOB expects more help for lower income households and enhanced incentives to encourage higher rates of citizen labour force participation, as a means to lower Singapore’s dependence on lower-wage foreign workers. To reduce the impact of higher foreign worker levies, lower foreign workers dependency ratio, and higher wage costs on companies, UOB says the Government will continue to tweak and enhance productivity-improving schemes and incentives to encourage companies to achieve higher levels of productivity.

9:48 AM OCBC Treasury Research predicts the Budget 2014 to focus on productivity, healthcare & SMEs; further push up the innovation, R&D and competitiveness ladder for SMEs. Wealth redistribution will remain important, but GST hike is possible in the medium-term.

9:33 AM The Productivity and Innovation Credit (PIC) scheme is expiring in Year of Assessment 2015. According to KPMG's Singapore Pre-Budget 2014 Survey, an overwhelming 96.8 percent of 159 companies in Singapore believe the scheme should be extended.

9:31 AM Welcome to Singapore Business Review's coverage of the budget which we will be covering live from 3:30 PM. Keep checking this page for the latest, up-to-the-minute news about Singapore Budget 2014.
The FY2014 Budget Statement will be delivered by Deputy Prime Minister and Minister for Finance, Mr Tharman Shanmugaratnam today, 21 February 2014 at 3.30pm in Parliament.