Budget 2018

Well-calibrated plan will lift both productivity and wages: Panellists

(From left) The Straits Times associate editor Vikram Khanna moderated the panel comprising Mizuho Bank’s head of economics and strategy Vishnu Varathan; KPMG tax partner Ajay Sanganeria; and Ademco Security managing director Toby Koh for the discu
(From left) The Straits Times associate editor Vikram Khanna moderated the panel comprising Mizuho Bank’s head of economics and strategy Vishnu Varathan; KPMG tax partner Ajay Sanganeria; and Ademco Security managing director Toby Koh for the discussion on Money FM 89.3 yesterday morning.

They also discuss hikes in GST and corporate tax rebate on Money FM 89.3

The Budget is "well-calibrated" to both address productivity and help lift wages, noted one of the panellists at a radio discussion yesterday.

Mr Vishnu Varathan, head of economics and strategy at Mizuho Bank, pointed to the Wage Credit Scheme, which has been extended because pay for low-income workers has "lagged for the longest time", leading to inequality.

The scheme will be extended for an additional three years until 2020, but with gradually reduced levels of co-funding by the Government. It will provide 20 per cent co-funding for this year, 15 per cent for next year and 10 per cent for 2020.

The scheme, which aims to encourage employers to share productivity gains with staff, will cost the Government about $1.8 billion over the next three years.

"So one of the things the Government wants to do is, while raising productivity, they also want to raise wages to ensure well-being across the board," Mr Varathan added during the discussion on Money FM 89.3 yesterday morning. "They would much rather re-engineer the jobs to fit the wages, but they don't want wages to lag for too long."

The panel, which was moderated by The Straits Times associate editor Vikram Khanna, also included Mr Ajay Sanganeria, tax partner at KPMG, and Ademco Security managing director Toby Koh.

They touched on new Budget measures, in particular the proposed rise in the goods and services tax (GST), slated to come into effect some time between 2021 and 2025, as well as the increase in corporate tax rebate from 7 per cent now.

Mr Sanganeria noted it was "inevitable" the GST would go up, given that most Organisation for Economic Cooperation and Development countries impose the levy in the range of 10 per cent to 15 per cent. "We have a surplus now, so the current Government isn't going to hasten it (the GST hike)... I think starting in 2021 gives the Government a good time to think about it," he said, adding that clarity on how much GST will be hiked removes any uncertainty over the amount, but leaves some flexibility around timing depending on tax buoyancy.

Mr Koh said he believes the hike in corporate tax rebate will keep businesses happy, even though it was a small rise of $5,000. "I think it helps, and sends a strong signal to the business community that the Government is concerned about viability, and whether the economy is taking off on a strong tangent."

The panel also discussed the new higher stamp duty for property: It raises the top marginal buyer's rate for residential real estate from 3 per cent to 4 per cent. "I think they are moving in line and saying we need to narrow the gap in income disparity," Mr Varathan said. "As Singapore ages, a lot of the disparity may not be from the earnings, but what we have in terms of wealth, and property accounts for a big part of it."

A version of this article appeared in the print edition of The Straits Times on February 21, 2018, with the headline 'Well-calibrated plan will lift both productivity and wages: Panellists'. Print Edition | Subscribe