SINGAPORE – Finance Minister Lawrence Wong announced major tax changes and targeted help for workers, households and businesses in the Budget speech on Friday (Feb 18).
Here are some highlights from his speech:
1. GST hike
– The goods and service tax (GST) rate will increase from 7 per cent to 9 per cent in two stages – one percentage point each time on Jan 1, 2023 and Jan 1, 2024.
– The hike will bring in about 0.7 per cent of gross domestic product in revenue annually – about $3.5 billion – when the full hike is in place in 2024.
– GST will continue to be absorbed on publicly subsidised healthcare and education. – Town councils will be given an additional $15 million annually to absorb the additional GST payable on service and conservancy charges.
– Government fees and charges will not be increased for a year from Jan 1, 2023.
2. Cushioning the impact of GST hike
– The Government will top up $640 million to the $6 billion Assurance Package it has committed to cushion the effects of the tax increase.
– Every Singaporean aged 21 and above will receive cash payouts of $700 to $1,600 over the next five years.
– Cash payouts of $600 to $900 for eligible seniors aged 55 and above over three years from 2023 to 2025.
– Eligible HDB households will receive additional U-Save rebates totalling $330 to $570, depending on their flat type.
– All Singaporean children and seniors will receive MediSave top-ups worth $450 over the next three years.
– Households to receive a total of $400 Community Development Council (CDC) vouchers in 2023 and 2024
– GST Voucher (GSTV) scheme to be enhanced:
- Service and conservancy charges rebate will be made a permanent component.
- Assessable income threshold for GSTV-Cash will increase from $28,000 to $34,000.
- Increase in GSTV-Cash payouts – up to $500 for eligible Singaporeans
3. Carbon tax increase
– 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 current tax of $5 per tonne of emissions will remain unchanged until 2023. Large emitters in Singapore will from 2024 be able to buy international carbon credits to reduce the carbon tax they have to pay here.
4. Rise in personal income tax rates for top earners
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– Resident taxpayers’ chargeable income in excess of $500,000 up to $1 million will be taxed at 23 per cent, while income in excess of $1 million will be taxed at 24 per cent.
– This is up from the current 22 per cent tax levied on income in excess of $320,000. Income in excess of $320,000 up to $500,000 will continue to be taxed at 22 per cent.
– This will take effect from the year of assessment 2024.
– Top 1.2 per cent of personal income taxpayers expected to be affected, and this move will raise $170 million of additional tax revenue per year.
5. Higher taxes on properties, luxury cars
– Property tax rates for non-owner-occupied residential properties – which include investment properties – will be increased to 12 per cent to 36 per cent. This compares with the current 10 per cent to 20 per cent tax levied on such properties.
– Property tax rates for owner-occupied homes for the portion of annual value in excess of $30,000 will also be raised, ranging from 6 per cent to 32 per cent. This compares with 4 per cent to 16 per cent for such homes today.
– New tier of additional registration fee (ARF) for cars at a rate of 220 per cent for the portion of open market value in excess of $80,000.
– This will apply to all cars registered with certificates of entitlement (COEs) obtained from the bidding exercise from next week onwards. For cars that do not need to bid for COEs, such as taxis, the new rates will apply from Saturday (Feb 19). The additional fees are expected to generate an additional $50 million in revenue per year.
6. More help for families, including more vouchers for daily expenses
– A $560 million Household Support Package will be rolled out for families.
– All households will receive $100 worth of CDC vouchers this year that can be used at participating heartland shops and hawker centres.
– About 950,000 households will get double GST Voucher – U-Save rebates (up to $285 more) for April to December.
– About 790,000 Singaporeans below the age of 21 will get a $200 top-up to their Child Development Account, Edusave account, or Post-Secondary Education Account.
7. Greater support for businesses recovering from Covid-19
– New Small Business Recovery Grant: SMEs badly hit by Covid-19 will get $1,000 per local employee, up to $10,000 per company.
– $1,000 payout to groups which do not hire local employees such as Singapore Food Agency-licensed hawkers, market and coffeeshop stallholders.
– The Jobs Growth Incentive (JGI) will be extended to September, with stepped-down support rates
– Targeted assistance for aviation sector.
8. Uplifting lower-wage workers
– Government to co-fund wage increases of lower-wage workers between 2022 and 2026 by up to 50 per cent in the first two years for some workers.
– Workfare Income Supplement scheme will be enhanced, including higher maximum annual payouts of $2,100 to $4,200, increasing the qualifying income cap from $2,300 to $2,500, and extending the scheme to younger workers aged 30 to 34.
– The Progressive Wage Credit Scheme and enhanced Workfare are expected to cost the Government around $9 billion in total over the next five years.
9. CPF basic retirement sum to be raised
– The Central Provident Fund (CPF) Basic Retirement Sum will be raised by 3.5 per cent a year for the next five cohorts of CPF members turning 55 from 2023 to 2027.
– CPF contribution rates for senior workers will be increased between 1.5 and 2 percentage points.
10. Foreign worker policy revisions
– Employment Pass (EP) minimum qualifying salary will be raised from $4,500 to $5,000
– For the financial service sector, this will be raised from $5,000 to $5,500. These changes will apply to new EP applications from Sept 1, and to renewal applications from Sept 1 in 2023.
– The minimum qualifying salary for foreign workers on S Passes will be raised to $3,000 and to $3,500 in financial sectors.
– Lower Dependency Ratio Ceiling from 1.7 to 1.5 from Jan 1, 2024.
11. Singapore’s fiscal outlook
– The Budget will continue to be expansionary for financial year 2022 to support the economy, with an expected deficit of $3 billion, or 0.5 per cent of Singapore’s gross domestic product (GDP). This is smaller than FY2021’s overall deficit of $5 billion, or 0.9 per cent of GDP.
– An increase of $4 billion in total expenditure is expected in the coming year, as Singapore spends more on the areas of health, defence and manpower.
– The total expected draw on past reserves over FY2020 to FY2022 is up to $42.9 billion.
* This post originally appeared on straitstimes.com