In his maiden budget speech on Friday (Feb 18), Finance Minister Lawrence Wong underlined the need for Singapore to have a fairer revenue structure in preparation for healthcare costs to increase to meet the demands of an ageing society.
He spoke about impending changes in taxes, which mainly would affect the wealthiest.
But for those with lower incomes, a number of support schemes were announced toward their support in the pursuit of building a “more inclusive society.”
Perhaps the most welcomed announcement, for many Singaporeans still reeling from the economic effects of the Covid-19 pandemic, is that the Goods and Service Tax, at the end of last year when Prime Minister Lee Hsien Loong said it needed to get moving, will be delayed to the beginning of next year.
Moreover, Mr Wong said the GST hike will be staggered over two steps. The first increase is to take place on 1 Jan 2023, from 7 per cent to 8 per cent, and the second increase on 1 Jan 2024 from 8 per cent to 9 per cent.
The GST hike had been announced in 2018 and was set for implementation between 2021 and 2025, but former Finance Minister Heng Swee Keat announced last year that it would be delayed due to the Covid-19 pandemic.
Mr Wong began his speech by saying that this year’s budget “is about charting our new way forward together. It is a first step in renewing and strengthening our social compact for a post-pandemic world, and in realising our vision of a fairer, more sustainable, and more inclusive society.”
Finance Minister @LawrenceWongST: #SGBudget2022 is about charting our new way forward together. It is a first step in renewing and strengthening our social compact for a post-pandemic world, and in realising our vision of a fairer, more sustainable, and more inclusive society.
— MOFsg (@MOFsg) February 18, 2022
He outlined the following “key” changes he said Singapore must make: Invest in new capabilities, advance our green transition; renew and strengthen our social compact; and develop a fairer and more resilient revenue structure to support our growing expenditure needs.
Among the support packages the minister mentioned were the following:
- A $500 million Jobs and Business Support Package
- A $560 million Household Support Package to help with household daily expenses
- Around $100 million will be set aside to support NTUC to scale up Company Training Committees
Importantly, he also said that under the Progressive Wage Credit Scheme, the Government will be co-funding the salary increases of lower-wage workers between 2022 and 2026 as well as providing some support for workers earning above $2,500 and up to $3,000.
As for taxes, Mr Wong announced that the carbon tax will be raised to $25 per tonne in 2024 and 2025, and $45 per tonne in 2026 and 2027, with a view to reaching $50 to $80 per tonne by 2030.
The effect of this on households will be felt primarily through an increase in utility bills. As an example, he cited that this will mean an increase of about $4/month for an average 4-room HDB household, but there will be support in the form of U-Save rebates and other means, to help cushion the impact.
From 2024 onward, personal income tax rates will be increased.
“The portion of chargeable income in excess of $500,000 up to $1 million will be taxed at 23%, while that in excess of $1 million will be taxed at 24%; both up from 22% today,” the Minister said, noting that the increase is expected to affect the top 1.2 per cent of personal income taxpayers and will add $170 million in additional taxes per year.
Property taxes, which Mr Wong mentioned are currently the principal means of taxing wealth, will also increase the 10 to 20 per cent to 12 to 36 per cent.
As for owner-occupied residential properties, the current rate of 4 to 16 per cent will be raised to 6 to 32 per cent.
These increases, however, will be implemented in two steps beginning next year.
Luxury cars will be also taxed at a higher rate.
Toward the end of his speech, Mr Wong noted that when the Covid pandemic began in 2020, the government expected to draw up to $52 billion from Past Reserves to protect lives and livelihoods. This amount has since been adjusted to $31.9 billion. And for last year, instead of drawing up to $11 billion from Past Reserves for the COVID-19 Resilience Package, only $5 billion was drawn from Past Reserves. /TISG
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