SINGAPORE: The Singapore government has announced an unexpected Budget surplus, powered by billions of dollars in revenue from vehicle quota premiums, personal and corporate income taxes, and contributions from its state wealth funds.
Data released on Tuesday (Feb 18), reported by Bloomberg and featured in an article from The Star, highlights how the city-state exceeded its original projections.
Vehicle quota premiums: A key source of government revenue
The auction of vehicle permits has emerged as one of the most significant sources of revenue for the Singapore government. The auctioned certificates of entitlement (COEs) allow car owners to drive their vehicles for up to 10 years, with prices for permits reaching as high as S$110,000 (approximately US$80,000) for larger sedans.
In fiscal year 2024, the government collected S$6.54 billion (around US$5 billion) from vehicle permits—S$1.82 billion more than initially expected. As car prices remain high due to limited permits, COE has grown into a critical financial driver.
The government is expecting even higher revenues this year, projecting a record S$6.6 billion in vehicle quota premium (VQP) revenue, continuing a trend of exceeding forecasts. The Finance Ministry has recorded a higher-than-expected VQP revenue in three of the past five years, making it a key pillar in the country’s fiscal strength.
State wealth funds and income taxes boost national coffers
In addition to vehicle permit revenue, Singapore’s state wealth funds contributed a significant boost to the budget. The government received S$24 billion from the Net Investment Returns Contribution (NIRC) in 2024, exceeding expectations by S$520 million.
The NIRC, a vital source of revenue, represents long-term returns from Singapore’s sovereign wealth funds Temasek Holdings and GIC Pte and from the Monetary Authority of Singapore. The government is projecting a further 13% increase in NIRC for fiscal 2025, bringing it to S$27.1 billion.
Personal income tax also saw impressive growth, rising 8.3% from the previous year to nearly S$19 billion. Additionally, corporate income tax collections surged by 10.2%, reaching S$30.9 billion—above the original forecast of S$28 billion. The finance, insurance, and wholesale trade sectors were key drivers behind this surge.
GST increase and the path forward
A goods and services tax (GST) hike to 9% in 2024 also played a role in boosting revenue. The adjustment generated S$20.6 billion, surpassing the projected S$19.4 billion, further cementing the government’s robust fiscal position.
Looking ahead, Singapore’s financial outlook remains strong, with a S$6.81 billion surplus forecast for fiscal 2025. This comes as a surprise to economists who had anticipated a minor deficit. As the ruling party prepares for the upcoming general election, the government has pledged voucher giveaways to support citizens, with this surplus serving as a crucial tool for economic stability.