Channel NewsAsia
Updated: 02/26/2013 01:07 | By Channel NewsAsia

Budget 2013: Workfare Income Supplement expanded, taxes made more progressive

Budget 2013: Workfare Income Supplement expanded, taxes made more progressive

Budget 2013: Workfare Income Supplement expanded, taxes made more progressive

SINGAPORE: In a move to further narrow income gaps and mitigate social inequality, low—wage workers in Singapore are getting a helping hand in the Budget 2013.

Those earning up to S$1,900 a month will now be covered under the Workfare Income Supplement (WIS) scheme, up from the previous cap of S$1,700.

About 480,000 Singaporeans or around 30 per cent of the citizen workforce will benefit.

In addition, tax structures for properties and cars will be made more progressive, with those earning more paying more.

Finance Minister Tharman Shanmugaratnam announced the changes in his Budget Statement on Monday.

WIS payouts will also be raised by between 25 and 50 per cent, depending on age.

For someone who is earning S$1,000 and aged 45 and above, his payout will increase by S$700.

The cash component will also be higher. Workers will now get 40 per cent of Workfare in cash, up from 29 per cent.

CPF contribution rates for low—income workers will also be raised to the same level as those for higher—income workers.

Take—home pay for most will not be reduced.

"We will therefore restore the employer contribution rates fully to the same level as higher—income workers of the same age group from 1 January 2014. We will also bring the employee contribution rates for most of these workers to the normal levels. The increased CPF will help them with their retirement and medical needs."

The increase in employer contribution rates is expected to cost employers S$83 million in 2013.

Where taxes are concerned, rates on most owner—occupied residential properties will be lowered.

Homes with annual values of S$12,000, like five—room Housing Board flats, will get tax savings of S$80 or 33 per cent of the current property tax bill.

"We have retirees who do not have significant cash resources even if the homes they live in may be of significant value. The new property tax schedule for owner—occupied residential properties will ensure that most retirees end up paying less property tax," said Mr Tharman.

High—end investment properties will see significant increases in tax rates.

Mr Tharman said that a more progressive property tax allows greater social equity without hurting economic competitiveness. The rationale is to implement a fair system, with those owning the most expensive homes paying more taxes.

For vehicles, a new tiered Additional Registration Fee structure will be implemented.

Fees for economy cars with open market values (OMVs) of up to S$20,000 remain unchanged.

But for a mid—range model like an Audi A5 with an OMV of S$45,000, registration charges will increase by 22 per cent to S$55,000.

A luxury car like a BMW 7—series with an OMV of S$74,000 will attract a fee increase of 42 per cent to S$105,200.

— CNA/fa/ir

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