Are Singapore Taxes going up?
It’s budget season in Singapore and one of the biggest conversations happening around is the taxes in Singapore. Finance Minister Heng Swee Keat presented the budget and the question that is everyone’s asking is whether the taxes in Singapore will go up or not. Finance Minister Heng Swee Keat, who has been a big driver of big infrastructure projects and an increase social spending, aims to expand the funding allocated such projects.
Why could Singapore’s Taxes go up?
Singapore is one of the fastest ageing countries in the world. Estimates state that Singapore’s senior citizens will double the number of young citizens in 2030. Many retirees are depending on CPF for pensions, however, reports state that these pensions are not set to last a lifetime. This rising ageing population is set to take a heavy toll on the government’s social spending.
Over the years, Singapore’s expenditure has grown drastically. Between 2007 and 2016, the revenue growth has grown by a compound annual growth rate (CAGR) of 11.3%. In comparison, between 2007 and 2016, the expenditure has grown much quicker – at 16.6%.
To further break it down, expenditure in the infocomm and media, manpower and health sectors are the biggest growth factors.
- Infocomm and media – 68% CAGR
- Manpower – 51% CAGR
- Health – 32% CAGR
In comparison, corporate income tax, personal income tax and GST have grown at 8%, 13% and 12% respectively.
GST could be the biggest driver for an increase of taxes in Singapore. The reason for this could be a GST hike is because the last increase happened in 2007. In 2007, the GST rate increased from 5% to 7%.
Finance Minister Heng has publicly stated that the GST hike is necessary to manage the future expenditure of Singapore as other methods of prudent spending, saving and borrowing have not been sufficient.
The GST has been hiked from 7% to 9%.
Singapore may implement an e-commerce tax. Senior Minister of State for Law and Finance, Indranee Rajah, has revealed that the government is searching for the best way to implement an e-commerce tax in the country. With e-commerce sales in 2017 valued at$49.16 billion. This would be a valuable source of income for the government.
During the budget presentation, Finance Minister Heng stated that the e-service GST will be levied from January 1, 2020.
Introduction of Carbon Tax
Carbon tax has finally been introduced in Singapore. Particularly, it will be applicable to facilities that emit over 25,000 tonnes of greenhouse gas emission. The carbon tax will be $5 per ton of greenhouse tax.
Carbon tax will be applicable from 2019 and the tax tax rate will be review in 2023.
All of these factors make it evident that a tax hike is inevitable in Singapore.
Singapore faces several economic challenges, which if not met out may lead a slow-down of the economy. Two of these challenges are the demand for better infrastructure and the ageing population. Infrastructure, both digital and physical, is necessary for businesses to grow. With that in mind, the government needs to increase its revenue collection to accommodate infrastructure growth and more social spending. An additional challenge is that Singapore is not a welfare state, yet the care of the ageing population, from rising healthcare costs to eldercare, may fall upon the government.
As stated by PM Lee Hsien Loong, “spending on Singapore’s economy, infrastructure and social safety nets is necessary, and is a vote of confidence in the country’s future.”
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