SINGAPORE – The question of how much money the Government has to spend, and where this money will come from came under the scrutiny of MPs on Feb 26, as Parliament sat for the first day of the Budget debate.

There were those who were worried about the accuracy of revenue and expenditure forecasts, wondering how this might affect the Government’s ability to plan its policies, and others who pushed for more information on the Republic’s fiscal position.

Ms Foo Mee Har (West Coast GRC) spoke on budget marksmanship – the difference between projections of revenue and expenditure, and actual receipts and spending – noting that there have been divergences between the estimated fiscal position and the revised or final fiscal positions in the past two financial years.

In FY2022, a deficit of $2 billion was projected, but there was eventually a surplus of $1.7 billion, and in FY2023, a deficit of $400 million initially projected has since been revised to $3.6 billion, she said.

She wanted to know how the Government ensures a level of predictability to inform crucial decisions, such as the need to raise taxes to balance the Budget.

Debates on the Budget will only be meaningful if the Government is more forthcoming and transparent with information, said Leader of the Opposition and Workers’ Party chief Pritam Singh.

He noted the increasing difficulty in achieving budget marksmanship, adding that there was a lack of information on the sources of Singapore’s fiscal strength.

Two Budgets ago, he had asked about the total estimated amount that would be collected in carbon taxes, but the Government did not provide the information even though the preliminary numbers “probably had already been tabulated by the Ministry of Finance”, he said.

In the recent Budget presented on Feb 16, Deputy Prime Minister and Finance Minister Lawrence Wong had announced that the Forward Singapore policy moves would use about $40 billion by the end of the decade, but had not spelled out these initiatives even though “some thought appears to have been applied to how much it will take to fund (the) plans”, he added.

“So the PAP (People’s Action Party) must tell us how the Government will deploy the $40 billion for Forward Singapore policies so that Singaporeans can understand what the PAP believes the social compact of tomorrow requires,” he said.

“Just as the PAP calls on the Workers’ Party to lay out its alternatives, surely the PAP must lay out its proposals too.”

He reiterated his call for a parliamentary Budget office to be set up, saying there was a greater need to track the effectiveness of government policies and their expenditure outcomes.

He added that calls for more information on government spending and revenue cannot be dismissed as “red herrings”.

“These calls represent a desire to shape a political environment that is fit for Singapore’s purposes. Singaporeans need to know how much there is to spend and where the money comes from,” he said.

“These are basic requirements for having rational discussion on fiscal matters and for realistic, alternative visions to emerge.”

Rebutting Mr Singh later during the debate, Mr Murali Pillai (Bukit Batok) said details of the Government’s revenue and expenditure are in the yearly statement of accounts presented to Parliament for MPs’ scrutiny.

With this information widely available, it is incumbent upon MPs to support policy proposals with suggestions about how much it would take to fund them, he said.

Merely proposing that more be done, without also assessing existing programmes and figuring out where the money would come from is akin to populism, he added.

He said that it was a “red herring” to claim that more information is necessary to better inform debate, since “all the information needed to calculate revenue is there”, including the proportion of revenue coming from the net investment returns contributions from investing past reserves, for instance.

MPs also suggested that uncertainty surrounding the Government’s tax collections is likely to continue, with Singapore adjusting its corporate tax system in line with the Base Erosion and Profit Shifting (Beps) 2.0 global framework to stop harmful tax competition. 

DPM Wong had announced in his Budget speech that Singapore will implement two components under Pillar Two of the framework, which brings in a global minimum corporate tax rate of 15 per cent for large multinational companies.

The first component, the Income Inclusion Rule (IIR), will subject the overseas profits of multinational corporations (MNCs) based in Singapore to a minimum effective tax rate of 15 per cent, regardless of where they operate.

The second component, the Domestic Top-up Tax (DTT), will subject MNCs to a minimum effective tax rate of 15 per cent on their Singapore profits.

Both will take effect for businesses in the financial years starting on or after Jan 1, 2025.

Mr Liang Eng Hwa (Bukit Panjang) and Mr Louis Chua (Sengkang GRC) asked how this would impact revenue.

Both MPs pointed out that an Organisation for Economic Cooperation and Development report published earlier in 2024 had said the changes would bring higher corporate tax revenues of up to 34 per cent, especially for countries such as Singapore, which are categorised as investment hubs. 

Mr Chua noted that this was contrary to what DPM Wong had said in his Budget speech about how the tax changes are not expected to generate net revenue gains on a sustained basis due to the significant spending required to stay competitive.

The Workers’ Party MP added: “To say so is just akin to saying any form of tax rate increases, from personal income tax, stamp duties to the GST (goods and services tax), is not going to generate net revenue gains due to higher spending needs.” 

He also said he hoped countries would not go against the spirit of the reforms and return all tax gains to companies in some other form.

If the OECD’s estimates are indeed off the mark, the Ministry of Finance should be able to provide a better estimate of the impact, especially since the changes would take effect in “less than a year’s time”, he said.

Offering a different take, Mr Liang said both Hong Kong and Switzerland had estimated a smaller impact on their revenue than what the OECD report would suggest. He warned that there is a limit to how much previous experience can help predict the impact of this unprecedented change in tax policy.

“The more important point is Beps 2.0 is a key challenge for Singapore which we must navigate carefully,” he said, adding that that is why he supports the measures to enhance Singapore’s competitiveness as an investment destination.