By Fiona Chan

Low-income citizens with little education and minimal skills are likely to be the biggest focus of next year's Budget.

Already struggling to make ends meet after the recent rise in the cost of living, they are the most vulnerable in a downturn that looks set to drag on.

But economists and MPs are also asking the Government to offer some relief to the 'sandwiched' middle class, who are being pummelled by this 'white-collar' crisis: stock market plunges, financial sector retrenchments and falling private property prices.

'We're seeing professionals being laid off too,' said DBS economist Irvin Seah.

'There were complaints that past Budgets were very much focused on the low-income groups. The middle-income groups sometimes have not received benefits even though they are also badly hit.'

One way to help the middle class would be by lowering personal income taxes, said Mr Grahame Wright, Ernst & Young partner, tax services. Such taxes can go up to 20 per cent, higher than the corporate tax rate of 18 per cent.

Any cut will benefit only about 30 per cent of Singaporeans, Barclays economist Leong Wai Ho admitted. But it could 'go some way to alleviate the pain of white-collar workers who are bearing the brunt of what may be the start of a multi-year correction in property values'.

Alternatively, a one-time income tax rebate could be offered, similar to the one given this year, tax experts said.

A one-off individual tax rebate of between 10 and 15 per cent could encourage taxpayers to continue their regular spending patterns to stimulate the economy, said Mr Owi Kek Hean, head of KPMG tax services in Singapore.

He also suggested that the minimum income level subject to tax - currently set at $20,000 - be raised so that more people at lower income levels do not have to pay income taxes.

Nevertheless, most experts agreed that the worst-hit in a recession will still be those who do not pay taxes.

They are already vulnerable: The finances of many lower-income households were already tight before the recent bout of inflation. The higher cost of living now has made it even more difficult for them to make ends meet, said DrAmy Khor, an MP for Hong Kah GRC.

With the downturn, 'some of them are also seeing their earnings reduced due to less overtime or fewer odd jobs to do'.

To help these families cope, more service and conservancy charge rebates, rental rebates and direct cash payouts equivalent to Growth Dividends could be handed out, Dr Khor said.

Deloitte Singapore's director of corporate taxes Chan Huang Chay suggested exempting property tax on four-room and smaller HDB flats, and setting up a financial assistance scheme for children of lower-income families. This would help pay for textbooks, stationery, uniforms, school transport fees and food during recess.

More generally, measures that help to lower the cost of living for all Singaporeans will include a reduction in the goods and services tax (GST), rebates for utilities and transport costs, and help with home mortgages or rental, experts said.

Barclays' Mr Leong proposed temporarily exempting GST for essential expenditures such as medical bills at government hospitals.

Apart from directly helping Singaporeans with living expenses, the Government is also likely to focus on easing the pain of retrenchments.

Dr Khor suggested reviewing the Workfare scheme to increase payouts and make them more regular. The programme could also be extended to those who have been retrenched, at least temporarily, while they search for a new job.

But she added that while the Government will continue to help those who are vulnerable to tide them over the current crisis, such individuals will still have to get back to eventual self-reliance.

'We need to get back to basics such as job retention and retooling, which are long-term and more sustainable measures that can be married to short-term pain relief,' she said.

Ms Denise Phua, an MP for Jalan Besar GRC, recommended that the Government invest money to equip Singaporeans with skills in continued demand. One area is health care, including geriatrics, psychology and physiotherapy, she said.

This article was first published in The Straits Times on November 16, 2008.