NEUTRAL BUDGET EXPECTED IN SINGAPORE
Singapore's Finance Minister Richard
Hu is expected to announce a neutral budget tomorrow with no
major tax changes for the 1987/88 year starting April 1,
bankers and economists told Reuters.
    They said with real growth at an estimated 1.9 pct in
calendar 1986, indicating signs of recovery from the 1.7 pct
shrinkage in 1985, the government was likely to hold its course
and wait for measures introduced in last year's budget to work.
    Last March Hu cut corporation tax to 33 pct from 40 pct,
and income tax was reduced by the same margin.
    Last year the government also reduced wage costs by
introducing a wage freeze and cutting employer contributions to
the mandatory state savings scheme, the Central Provident Fund
(CPF), to 15 pct of salaries from 25 pct.
    "I don't foresee any new or additional stimulus because the
economy is now improving," said Clemente Escano, vice president
of the Union Bank of Switzerland.
    The government's economic report for calendar 1986, issued
last week, said the CPF reduction and other cost-cutting
measures only started to bite in the third quarter of 1986.
    But the report said over half the economy -- especially the
commerce, financial, and business services sectors -- continued
to be depressed by weakness in the surrounding regional
economies and an excess of domestic property.
    The sources said the fragility of the economic recovery
suggested the government would not introduce much of its
planned consumption tax in the coming financial year.
    In last year's budget Hu said he planned to set up
collecting machinery for the tax. Economists said a campaign
against smoking this year might be the opportunity for him to
levy the tax on tobacco as a first step towards its wider use.
    The sources said the government does not look likely to
raise more revenue in this year's budget.
    Last year's budget projected a 3.22 billion dlr budget
deficit for fiscal 1986/87, but the economic report projected
an overall calendar 1986 surplus of three billion.
    Lower tax revenue was balanced by rising investment income
and stringent controls on government operating expenditure,
helped by the wage-freeze policy.
    Anthony K.P. Lee, vice-president and deputy general manager
of American Express Bank Ltd, said he expected nothing exciting
from this year's budget.
    Lee said, "It will probably be a non-event as most of the
tax benefits were given last year. The economy has already
started moving so it does not need government support."
    Last week's economic report attributed the one pct decline
in domestic demand last year mainly to a sharp decline in
private construction, so this sector hopes for some relief from
the budget, economists said.
    The economic report said the sector's activity declined by
25.3 pct in calendar 1986 after a 13.9 pct contraction in 1985.
A further decline is expected in 1987.
    But in last year's budget a 30 pct rebate on tax for
industrial and commercial properties was raised to 50 pct until
the end of 1988, so the most Hu is likely to do is add
incentives for creating property investment unit trusts.
    The only measures known to be in tomorrow's budget are
incentives to encourage population growth, including incentives
to families who have three children.
    Deputy Prime Minister Goh Chok Tong has already announced
the government will try to encourage three-child families,
instead of the two-child families it encourages now.
 REUTER
