It would also mean having to reduce the 20 per cent tax rebate to only 8 per cent for taxpayers.

Responding to calls from backbenchers for the 20 per cent personal income tax rebate, capped at $2,000, to be raised to help boost spending, Mr Tharman gave two reasons for the cap.

First, he said raising the cap would only benefit a small proportion of the population - but at a high cost to revenue.

Only the top 5 per cent of Singapore's resident labour force will be affected by the cap of $2,000.

"The middle class, in fact, even the upper middle class, is not affected by this cap," said Mr Tharman when wrapping up Budget debate.

"Removing the cap would be costly to revenues. Even just raising it from $2,000 to $3,000 would have cost us an additional $100 million."

To Ang Mo Kio GRC MP Inderjit Singh's call for the cap to be removed, Mr Tharman said it would more than double the cost from about $500 million to $1.1 billion.

"And that means we will have had to either significantly reduce some of the other measures in the Budget package or we would have to reduce the income tax rebate percentage from 20 per cent to 8 per cent," he cautioned.

"If we lifted the cap completely and wanted to stay within the budget of about half a billion dollars, it would have meant reducing the personal income tax rebate percentage to 8 eight for all taxpayers in order to stay within that same cost.

"This would have meant less for the middle and upper middle income groups in order to give more to the top most brackets."

The second reason, said Mr Tharman, is that a larger personal income tax rebate would not give "as much bang for the buck" as a measure to boost demand.

"Unlike the lower and middle income groups, the top income groups tend to save most of the benefits they receive. This is one of the least contested economic facts all over the world,' the minister explained.

"The marginal propensity to consume among the rich is low, and conversely, it is very high among the lower income groups. The lower income groups tend to be cash constrained and they spend most of the additional benefits that we hand out."