SINGAPORE will likely end the new financial year with 'close to zero' budget balance - afer reporting a surplus of $6.4 billion in the last budget year.

The Government also expects to bring down deficit to $0.8 billion. Finance Minister Tharman Shanmugaratnam, summing up his 2008 Budget speech in Parliament on Friday, said the Government expects a surplus of $3.2 billion for FY2008, which ends in March 2009 - before taking into account the Net Investment Income (NII) Contributions, Special Transfers and the tax changes introduced in this year's Budget.

The various tax changes will reduce operating revenue by $0.5 billion. Further, the special transfers and tax rebates provided as part of the surplus sharing package this year, as well as the special transfers for FY2008 that were committed in the GST Offset Package last year, will cost an additional $2.8 billion.

He explained that this is before adding the NII to the revenues, and setting aside funds to top up various endowment funds and the National Research Fund, as well as the provisions the Government is making for other long term needs.

'The net effect of these additions is to bring the Overall Budget Balance for FY2008 to a deficit of $0.8 billion,' he said.

He also assured Singaporeans that the Government will not need to draw on past reserves as the deficit can be fully financed by funds accumulated since the new Government took office in May 2006.

On FY2007's estimated surplus of $6.4 billion, Mr Shanmugaratnam said it surplus was supported by strong economic growth which came in at 7.7 per cent for 2007.

Revenue from corporate and personal income taxes and the goods and services tax had exceeded government projections, he said as he presented the fiscal 2008 budget in Parliament.

The largest boost to revenue came from the buoyant property market which saw private residential units rise by over 30 per cent, much higher than industry forecast of about 10-15 per cent, he said.

The volume of property transactions went up by over 60 per cent.

'With stronger-than-expected economic growth in 2007, the projected budget ... improved significantly,' the minister said.

'We expect the overall budget balance to be a surplus of $6.4 billion for financial year 2007, compared to the deficit of $0.7 billion that was originally projected.'

The growth rate of 4 per cent to 6 per cent was also in line with market forecasts, he said. With actual growth at 7.7 per cent, corporate and personal income taxes came in to some $1 billion higher than projected. GST revenues also exceeded projection by about $1.2 billion, mostly from higher consumption.

GST collection arising from the 2 per cent hike in July is estimated at about $1.4 billion in total, which now just matches the size of the GST Offset Package and Workfare Income Supplement tranches that were distributed in FY2007.

Stamp duties consequently rose to an unprecedented $3.8 billion, $2.3 billion higher than expected. Other property related revenues were around $1.1 billion above projections.

'These were large gains, out of the ordinary, and which we cannot expect to see very often,' said the Minister.

'The overall budget surplus of $6.4 billion was therefore the result of a strong economy and property market.

The surplus was also an appropriate fiscal stance to adopt, as it avoided adding further liquidity and stimulus to an already rapidly growing economy.'

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