The Scary Thing About Singapore’s Budget

By February 8, 2020Perspectives, The Dive, Work

TL;DR – The Singapore Budget isn’t simply an annual hongbao. Here’s a comic story of the “Scary Thing About The Singapore Budget”.

Graphics by @smithankyou

Many of us see the Singapore Budget as a kind of hongbao (red packet) we receive during or after Lunar New Year.

Do you know how the government earns the money it spends?


So what’s so scary about our Singapore Budget?


Every year, the government earns money from its operations (REVENUE) and spends money (EXPENDITURE).


For a sustainable Budget, the government should earn more than it spends right?

But no… it didn’t happen last year. The government spent more than it earned!

It earned $75 billion, but spent over $95 billion!

OMG, Why did the government spend so much in 2019?


Firstly, the government spent $80bn just for operating expenditure in 2019!

Plus the government also set aside extra $15bn for special transfers like Merdeka Generation Fund, Long Term Care Support and Rail Infrastructure etc.

Just looking at the 2008 vs 2018 Budget expenditure figures below, our Healthcare and Transport spending have been ballooning since 2007.

Our overall expenditure has more than doubled from $33bn in 2008, to $80bn in 2018 (and 2019 too).


Government spending on health and transport has ballooned since 2008 (via)

Dipping Into Investment Dividends (NIRC)

How else could the government have funded its spending?


As the government is short of $95bn – $75bn = $20bn, it made up for some of the shortfall using its Net Investment Returns Contribution (NIRC).

NIRC is like 50% of Singapore’s investment dividends from its assets.


But NIRC for 2019 is only $17bn, which added to $75bn revenue comes up to $92bn.

The expenditure was estimated to be $95bn, which means there is still a shortfall of $3bn.

Our country spent more than it could earn, even after taking into account half of its investment dividends.

Money no enough

If Singapore cannot increase revenues as taxes are hard to raise significantly, and expenses continue to rise, how ah?

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How can Singapore keep a balanced budget when citizens want more, different pockets of our population need more and different kinds of help and support, but yet citizens don’t want to pay more or more taxes for it?

Where will the money come from?

Can we spend less, or save more?


Our Budget is stretched over many sectors, each with citizens demanding more and more financial assistance, more infrastructure (hospitals, cycling paths etc), more subsidies, more training grants etc.

Everyone wants to spend more. But who is willing to pay more to fund the spending?


Besides the NIRC which is currently the biggest contributor of funds, the next two largest contributors are corporate income tax and personal income tax.

The government could also consider raising GST, betting taxes, and motor vehicle taxes and vehicle quota premiums.

Let’s explore these possibilities.

What if we raised corporate income tax?

Multinational companies, among other factors, look for countries that are business-friendly and have relatively lower corporate income taxes.

Singapore’s current corporate income tax is 17%.

In comparison, Thailand’s corporate income tax is 20%, Malaysia’s is 24% and Hong Kong’s is 16.5%.


If Singapore raised corporate taxes from 17% to 20%, will corporates start to consider moving to other countries that can offer competitive corporate tax rates and/or cheaper labour, taking away future corporate income tax contributions and jobs with them?

What about raising personal income tax?

It sounds very sexy, taxing the rich more.

Currently, half of Singapore workers don’t pay personal income tax.

Conversely, the top 10% of the taxpayers contribute 80% of personal income tax.


Suppose we raise income taxes for the rich. And they choose to migrate to cheaper income tax pastures.

Will the middle income (the new “rich” left behind) be willing to pay more income tax as a consequence?

What about raising other taxes like betting, tobacco, motor vehicle taxes?

Betting taxes will already be increased in 2022.

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Tobacco taxes were raised in 2019.

How high do you want COE to rise? Higher motor vehicle taxes impact not just rich car owners (who pay higher COE and road taxes anyway), but middle income car drivers, motorcyclists and businesses which need commercial vehicles.

What about raising GST?


The government announced that a GST hike (from 7% to 9%) will happen sometime from 2021 to 2025.

However, this is also a lightning rod topic that affects many Singaporeans, even though the government has promised the permanent GST Voucher scheme will be enhanced when the GST is increased.

And yea, we had already said it here a few years ago, that only very special people think that taxes won’t ever need to go up.

What about taking more from Singapore’s investment dividends?


Imagine this is a household with an $8,000 combined income with a $10,000 expenditure. Where should the balance $2,000 to pay the bills come from?

The household get $4,000 in investments dividends every year and choose to use half ($2,000) to make up for the shortfall.

The other half of $2,000 is saved for future expenses, such as tertiary education or providing for long-term eldercare.

However every year, the household may spend more and more money. The global economic situation is unstable, who knows if the household will still earn $4,000 of investment dividends every year.

Should the household take out more from their investment dividend to fund their increased spending?

Do Singaporeans really take back a chicken wing after giving the government a chicken?

No, for the low income and middle income. They get $4 and $2 respectively for every $1 of tax paid.

Yes, for the high income. They only get 20 cents for every $1 of tax paid.

So the question whether Singaporeans only take back a chicken wing after giving the government a chicken, is true for some, but false for many.

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Balancing a series of annual Singapore Budgets

The Singapore Budget is not simply an announcement every year.

The Singapore Budget is actually a series of annual Budgets that collectively should be balanced over the term of government (or from one General Election to the next) over several years, or what people refer to as “term of government”.

So the current term of government would refer to the government formed after GE2015 till the next GE. This government will need to make sure all the budgets under this term of government are balanced, ie it must be able to find enough revenue to support its expenditure.

As we had surpluses for 2016 and 2017 Budgets, hopefully the entire collection of annual Budgets from 2016 till the next General Election will be balanced, and we don’t need to kancheong over one Budget being unbalanced.

The Singapore Budget also builds on past Budgets

This means some announcements in previous years also continue till the present.

Examples are the Marriage and Parenthood package, Pioneer Generation and Merdeka Generation Packages announced in previous Budgets.

Just because there are no new announcements from these packages, doesn’t mean you get $0 from the government.

There are existing programmes/grants/subsidies/assistances still ongoing for you. You can still tap on public services like polyclinics, public schools and Adapt and Grow programme.

Now you know how the Singapore Budget consists of revenue, expenditure, NIRC and long-term planning for recurring and future costs, the scary thing is realising how many others don’t really understand the Budget, and see it as an unlimited hongbao to receive every year, if not #VTO!

Can you guess what are the top 5 expenditures in Singapore’s budget?



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