Budget 2018: Economists expect bumper surplus for 2017

They point to higher tax and stamp duty receipts, lower development expenditure

While economists agree that Singapore's fiscal discipline is set to continue, expectations differ on the Budget surplus for the coming 2018 financial year. ST PHOTO: ALVIN HO

With Singapore's strengthening economy having boosted government coffers, economists predict a larger than expected Budget surplus for the financial year ending March 31.

Ahead of Finance Minister Heng Swee Keat's delivery of the Budget today, economists have made their own estimates of the Government's likely revenue and spending.

United Overseas Bank economist Francis Tan expects an overall surplus of $3.1 billion for FY2017, compared with the official initial estimate of $1.91 billion. UOB's econometric model projects that the Government may see $2 billion more in revenue than expected, due mainly to higher corporate income tax receipts and stamp duties.

Mr Tan expects corporate income tax revenue to hit $14.8 billion, higher than the official estimate of $13.6 billion. If so, corporate income tax would regain its place as the largest contributor to revenue, ahead of the projected $14.11 billion net investment returns (NIR) contribution.

In FY2016, after Temasek was added to the framework, NIR contribution overtook corporate income tax to become the top source of government revenue for the first time.

A higher than anticipated volume of property transactions may have also bumped up stamp duty takings. UOB's model estimates $5 billion from stamp duties, far above the official estimate of $2.7 billion.

But UOB's model predicts goods and services tax (GST) revenue of $11.2 billion, slightly lower than the official $11.3 billion estimate, and personal income tax revenue of $10.70 billion, shy of the official $10.74 billion projection.

DBS economist Irvin Seah expects an even larger overall surplus of $5 billion, or 1.2 per cent of gross domestic product, on the back of lower than projected operating expenditure. This is due partly to lower development expenditure, arising from 2017's low inflation of 0.6 per cent.

OCBC economist Selena Ling expects total tax revenue receipts to exceed the budgeted amount by some 5 per cent, yielding an overall surplus of $5.41 billion. "The healthy Singapore economy has lifted many boats, including benefiting tax collections," she said.

But while economists agree that Singapore's fiscal discipline is set to continue, expectations differ on the Budget surplus for the coming 2018 financial year.

UOB's Mr Tan expects the overall surplus to narrow to $2.1 billion in FY2018, with total expenditure rising faster than operating revenue.

OCBC has three scenarios, depending on whether an anticipated GST hike goes into effect. These range from a surplus of $3.1 billion without a hike, to one of $4.6 billion with a 1 percentage point hike, and $4.8 billion with a 2 percentage point hike.

DBS' Mr Seah expects a larger surplus of $6.5 billion, with marginal rises in revenue and spending.

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A version of this article appeared in the print edition of The Straits Times on February 19, 2018, with the headline Economists expect bumper surplus for 2017. Subscribe