Singapore – In an interview with American news outlet CNBC, Finance Minister Lawrence Wong explained how Singapore is “an exception” to the “massive increases in public debt and public spending” caused by the Covid-19 pandemic, thanks to accumulated reserves.
During the CNBC Evolve Global Summit interview on Wednesday (June 16) with Michael Soong, Mr Wong touched on reserves, Government spending, and taxation increases.
When asked how much has Singapore spent in trying to offset the negative impacts of Covid-19, Mr Wong noted that about S$50 billion had been drawn out of the country’s reserves.
He also mentioned how almost all the countries in the world would emerge from the pandemic with “massive increases in public debt and public spending” at levels not seen since the end of World War II.
However, “Singapore is an exception”, said Mr Wong.
“We are fortunate because we have built up, accumulated reserves over the past years, and we have been able to draw on those reserves to tide through the crisis.”
Despite having drawn the estimated amount, Mr Wong added that Singapore is “continuing to run deficits”, with spending expected to rise in the coming years to meet the demands of an ageing population and growing healthcare and social needs.
As a result, “fair and equitable” ways to raise revenues to cover the increased spending are being studied.
Mr Wong was asked if this meant higher taxes in Singapore.
“Certainly, when you talk about increased revenues, then tax increases will have to be amongst the options that are considered,” confirmed the minister.
Mr Wong also mentioned the extra challenge of increasing taxes on an ageing population as it will impose a heavier burden on the young.
“At the same time, they (countries with rapidly ageing populations) find it difficult to tax corporates, because the corporate tax base is increasingly mobile in this globalised world,” said Mr Wong.
He noted that the synchronisation of taxation systems worldwide needed a multilateral consensus among countries big and small.
“So when these new rules are in place, Singapore will certainly adjust our tax systems accordingly to be in line with the global consensus, and also in consultation with businesses here.”
Singapore’s headline corporate tax rate is a flat rate of 17 per cent, while the Group of Seven (G7) nations have recently agreed to a global minimum corporate tax rate of at least 15 per cent.
Mr Wong admitted it is a judgement call for each country when it comes to increasing its taxes. A country should be also careful that the new threshold of a minimum taxation rate does not become a “maximum rate” that prevents a country from generating more revenues, said Mr Wong.
The full interview transcript could be read here.
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