Finance Minister Richard Hu has cut the corporate tax rate by one percentage point to help reduce business costs in the city-state. In presenting his annual budget, Mr Hu also unveiled reductions in income tax rates, with the majority of citizens estimated to have their bills lowered by at least a quarter. A one-off income tax rebate of 10 per cent was also announced, up from a 5 per cent rebate this financial year. The moves, coupled with a slew of other measures to boost the standing of the poorer members of society, could pave the way for a general election later this year. One must be held sometime before August next year. The veteran finance minister said the tax changes would help to transform Singapore into a more flexible, knowledge-based economy, while at the same time safeguarding the interests of the elderly and less-skilled. 'The government is committed to creating the best conditions for private enterprise to flourish, while adhering to the principles of fiscal prudence,' he said. 'In recent years, many developed economies such as Germany, United Kingdom, Australia and Ireland have lowered their corporate tax rates in order to stimulate and attract investments. We have to keep pace.' From next year the corporate tax rate will be cut to 24.5 per cent. It was reduced half a percentage point last year. The budget was framed in the wake of last year's robust 9.9 per cent growth in gross domestic product, which helped push the budget surplus this financial year to S$3.5 billion (about HK$15.64 billion). Although Mr Hu warned the projected 5 per cent to 7 per cent GDP growth for this year might not be met, he forecast operating revenue in the forthcoming financial year of S$34.3 billion, expenditure of S$28.1 billion, and a surplus of S$4.4 billion. 'While the overall outlook for 2001 remains fair, we must be prepared for slower growth,' Mr Hu said. 'The consensus is that the United States economy will grow by only 2 per cent to 2.5 per cent this year. But if it turns out lower, we will be in for harder times ahead.' Business groups had been lobbying hard for a reduction in costs, and most of their demands had centred on a reduction in corporation tax. 'In relative terms, we have come out of the Asian crisis stronger and are able to start the new millennium on a solid footing. With this year's budget, the government will continue to facilitate the upgrading and restructuring of the economy,' Mr Hu said. From next year personal tax rates for all workers will be cut by between two percentage points and five percentage points. Mr Hu also reduced property tax to 10 per cent from 12 per cent, moved to extend rebates on employee stock-option schemes, and provided a top-up of the Central Provident Fund (CPF) accounts by S$1 billion. The CPF is a mandatory savings scheme for worker pensions, underwritten by both employees and employers. 'Today, the new millennium ushers in a new age in which ideas, knowledge and talent are the main drivers of growth,' Mr Hu said. 'It is an era where it is the economies that are best able to generate and attract wealth-creating ideas, knowledge and people that will succeed. 'Therein lies the great opportunity for Singapore, a country whose advantages are its people, and its connectivity to the rest of the world,' Mr Hu said.