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Singapore Budget 2022: More winners than losers

Here is a look as some of the winners and losers of Singapore Budget 2022. (PHOTO: ROSLAN RAHMAN/AFP via Getty Images)
Here is a look as some of the winners and losers of Singapore Budget 2022. (PHOTO: ROSLAN RAHMAN/AFP via Getty Images)

SINGAPORE — Singapore's Finance Minister Lawrence Wong presented a Budget that seeks to boost revenue for a post-pandemic future by raising taxes on the rich and on consumption.

The government will aim to raise Goods and Services TAX (GST) in two stages from 7 per cent to 8 per cent on 1 January 2023, and from 8 per cent to 9 per cent on 1 Jan 2024.

The increase in GST will be cushioned by the additional S$640 million top-up to the S$6 billion Assurance Package, the minister said.

Wong announced the measures in his “Charting Our New Way Forward Together” Budget which comes on the back of close to S$100 billion of pandemic support over the last two years.

The Singapore economy is expected to grow 3% to 5% this year, and resident unemployment rate has reached 3.2%, comparable to pre-COVID levels.

“Singapore Budget 2022 exudes positivity for Singapore’s future, underscored by a ‘never-say-die’ spirit. It covers a myriad of areas, looking at near-term issues to charting the longer-term future for generations beyond," Soh Pui Ming, Singapore Head of Tax, Ernst & Young Solutions LLP, said.

Here is a look as some of the winners and losers of Budget 2022.

Winners

  • Businesses

Businesses most affected by COVID-19 in sectors such as food & beverage, retail, tourism and hospitality can expect to be supported by a S$500 million Jobs and Business Support Package.

The government will set aside S$600 million for local enterprises under the Productivity Solutions Grant to help in implementing digital and automation solutions. Larger local enterprises can expect to receive broader support under the Enterprise Financing Scheme with the inclusion of domestic merger and acquisitions activities under the M&A loan programme from 1 April 2022 to 31 March 2026.

The Temporary Bridging Loan Programme and the enhanced Trade Loan Scheme will be extended for another six months till 30th September 2022.

  • Households

The Household Support Package worth S$560 million was introduced to help Singaporeans with utility bills, children’s education and daily essentials.

As part of this package, the government will double the GST Voucher–U-Save rebates for the rest of this year. Eligible HDB households will receive additional rebates of up to S$285. The government will also give another set of S$100 Community Development Council (CDC) vouchers this year, which can be used at participating heartland shops and hawkers.

Children below the age of 21 will receive a top-up of S$200 each in the Child Development Account.

The government has also announced a top-up of S$640 million to the S$6 billion Assurance Package to help offset the impact of a rise in GST to 9 per cent from 7 per cent in two stages in 2023 and 2024.

  • Workers

S$100 million will be set aside for NTUC to scale up Company Training Committees (CTCs) in supporting concrete firm-level transformation plans to ensure that workers receive the relevant training.

  • Green Financing

The government seeks to issue up to S$35 billion of green bonds by 2030 to support public sector green infrastructure projects.

  • Electric Vehicles

Singaporeans can expect to see more charging points closer to home as the country seeks to spur EV adoption.

“Accessibility of EV charging infrastructure nationwide will be critical to the continued growth momentum in Singaporeans’ adoption of EVs,"Satya Ramamurthy, Partner, Head of Infrastructure, Government & Healthcare, KPMG in Singapore, said.

Losers

  • Higher personal income taxes for top earners

Resident taxpayers' chargeable income in excess of $500,000 up to $1 million will be taxed at 23 per cent, while chargeable income in excess of $1 million will be taxed at 24 per cent. The is effective from the year of assessment 2024.

This is up from the current 22 per cent tax levied on chargeable income in excess of $320,000.

“Given the challenges in implementing a net wealth tax and the low prevalence of such taxation in OECD countries, the government has taken pragmatic steps to encourage greater equality by focusing on traditional means of taxing wealth, namely increase in personal tax rates and tax on property as well as car ownership," said Desmond Teo, EY Asean Private Tax Leader.

  • Increased tax rates for residential properties

The property tax, which the Finance Minister says is currently Singapore's principal means of taxing wealth, will be adjusted from 2023.

All non-owner-occupied residential properties, such as investment properties, will face higher taxes of 12 per cent to 36 per cent, up from 10 per cent to 20 per cent currently, with the increase more significant for properties at the higher end.

For owner-occupied homes, the property tax rates for the portion of annual value in excess of S$30,000 will also be increased to 6 per cent to 32 per cent, from 4 per cent to 16 per cent now.

"The steep increase in rates show the government’s resolve in tackling rising wealth inequality in a country where immovable properties constitute a significant proportion of the assets of high net worth individuals," See Wei Hwa, Partner, Tax, KPMG in Singapore, said.

"Although primarily introduced as a measure to tackle wealth inequality, the hike in property tax rates is also expected to add to the cost pressure faced by property developers who are facing challenges in clearing their inventories of unsold residential units," See added.

  • Luxury cars to be taxed at higher rate

The government plans to tax luxury cars at a higher rate to make the vehicle tax system "more progressive". An additional ARF (Additional Registration Fee) tier for cars will be introduced at a rate of 220 per cent for the portion of open market value in excess of S$80,000.

As high income earners will be confronted with a multiple whammy of tax increases in the coming years and as such, some negative wealth effect on consumption of luxury goods and property investment is to be expected, Irvin Seah, senior economist at DBS Bank said.

  • Carbon tax rate to be raised

The carbon tax will be raised in stages— it will be increased to $25 per tonne in 2024 and 2025 from the current $5 per tonne, and $45 per tonne for 2026 and 2027, and reaching S$50 to S$80 per tonne by 2030.

"What is good is that this change is staggered, giving businesses sufficient time to adjust and decarbonise, while minimising the impact to their business. An immediate or steep increase in carbon tax would have been difficult for businesses to swallow, especially in our recovering economy." Ajay Kumar Sanganeria, Partner, Head of Tax, KPMG in Singapore, said.

  • Exploring higher corporate tax

Singapore's corporate system will need to be updated due to global tax developments relating to the Base Erosion and Profit Shifting initiative (BEPS 2.0), the minister said.

The government is exploring a top-up tax, called the Minimum Effective Tax Rate (METR), which will top up the multi-national enterprise (MNE) group's effective tax rate to 15 per cent. The Inland Revenue Authority of Singapore will study this further and consult the industry on the design of this top-up tax.

  • Adjustments to foreign workers policies

Singapore will raise the minimum qualifying salary for new Employment Pass (EP) for professionals and senior executives, and S Pass applicants, as it reviews and adjusts key parameters in its foreign worker policies.

The government will also tighten the foreign workforce quota by reducing the dependency ratio ceiling (DRC) and replacing the man-year entitlement framework with a new levy framework.

"The increase in qualifying salary thresholds for Employment Pass and S Pass holders will ensure that the foreign talent brought in are highly skilled and valuable team members, who can positively contribute to the Singapore economy and the fabric of our society," Kerrie Chang, Partner, People Advisory Services — Mobility Tax, Ernst & Young Solutions LLP, said.

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