Manu Bhaskaran Breaks Down Key Economic Issues and What Singaporeans Should Expect in the Upcoming Budget
As Singapore prepares for the 2024 Budget announcement, the average citizen may feel overwhelmed by discussions about the economy. However, economics plays a crucial role in shaping the lives of Singaporeans—from tax policies to foreign talent management. Manu Bhaskaran, Vice President of the Economics Society of Singapore and CEO of Centennial Asia Advisors, brings over 40 years of experience in economics and public policy. He discusses various burning questions about Singapore’s fiscal policies and offers insights into how Budget 2024 might impact the nation.
One pressing question concerns the effectiveness of government assistance packages, such as CDC vouchers and lump sum payments, designed to offset the impacts of Goods and Services Tax (GST) hikes. Bhaskaran notes that these measures can help lower-income groups in the short term. However, their long-term effectiveness remains uncertain, as firms may increase prices beyond the GST hike, taking advantage of a lack of strong consumer protection laws.
The debate over tax policy also looms large. While the Laffer Curve theory suggests that lower taxes can lead to higher revenues due to increased spending, Bhaskaran dismisses this idea, explaining that the theory has been discredited. Lower taxes may have some benefits, particularly for attracting high-net-worth individuals, but they can also lead to reduced revenues for essential public services such as health and education. Bhaskaran emphasizes that the impact of tax cuts depends on how the government spends the money generated by these taxes.
A significant topic is the fairness of taxing the wealthy. While wealthier Singaporeans pay a higher tax rate, questions arise over the need for wealth taxes and whether such taxes should apply only to local citizens or extend to foreign nationals with assets in Singapore. Bhaskaran also highlights the challenges of defining “wealthy,” with some middle-class families feeling the impact of taxes on luxury items and property.
Another subject gaining attention is the rise in family offices in Singapore, with wealthy individuals setting up such entities for wealth management. Bhaskaran explains that while family offices contribute to the economy by hiring local talent and engaging professional services, the direct benefits to local firms remain uncertain. The increased demand for office space and higher wages may lead to rising costs for local businesses without significant long-term benefits.
For ordinary Singaporeans, Bhaskaran recommends keeping an eye on several key aspects of Budget 2024, such as the revenue forecast, the allocation of additional revenue, and any new relief measures or tax hikes. He also advises paying attention to the government’s social policies and whether there will be more support for vulnerable groups, such as the elderly, the poor, and the unemployed.
As Singapore looks toward the future, Bhaskaran underscores the importance of understanding how the budget will balance economic growth with social welfare, shaping the nation’s trajectory in the years to come.
