Singapore will raise tax rates for higher income groups aka the rich. One of them, the increase in Goods and Services Tax (GST) next year.
As quoted by Reuters, Monday (21/2), the tax increase comes as Singapore struggles from the economic downturn caused by the pandemic, while maintaining its attractiveness as a global financial center. It is also to address local concerns about rising wealth inequality and rising cost of living.
Singapore's Finance Minister Lawrence Wong said the government would raise the GST tax in two stages. The first, carried out in January 2023, from 7% to 8%. Second, it will be carried out in January 2024, from 8% to 9%.
"I also understand the concerns of Singaporeans about the increase in GST that coincides with the increase in prices. Therefore, I have decided to postpone the increase in GST until 2023 and change the increase to two steps," said Wong.
In addition, the Singapore government also plans to increase income tax for high-income earners, increase residential property taxes, and impose higher levies on luxury cars.
"This tax adjustment will help increase additional revenue and also contribute to a more equitable revenue structure," Wong added.
Regarding the residential property tax, Wong explained, his party will increase the property tax rate or residential property that is not occupied by the owner, which is an investment property. For such properties, Singapore will increase the property tax rate from the previous 10% to 20% to 12% to 36%.
Furthermore, Singapore will hoist the top marginal personal income tax or PIT rate, which will take effect from the 2020 assessment year.
In detail, income more than US$ 500,000 to US$ 1 million will be taxed at 23%, while those over US$ 1 million will be taxed at 24%. The two tax rates are higher than the current rate of 22%.
“This increase is expected to affect 1.2% of the top personal income taxpayers and will increase $170 million in additional tax revenue per year,” explained Wong.
The tax increase is Singapore's effort to increase revenue to fund future spending that is expected to reach more than 20% of its gross domestic product (GDP) by 2030. Mainly due to increasing spending on health care in one of the fastest-aging countries.
Over the past two years, the government has also committed nearly S$100 billion to protect its communities, businesses and economies from the effects of the Covid-19 pandemic.
The Singapore government estimates the budget deficit will reach S$ 5 billion for 2021 and Wong unexpectedly forecasts a deficit of S$ 3 billion for 2022. Total expenditure for 2022 is estimated at S$ 102.4 billion compared to S$ 98.4 billion in the previous year.
Wong added that the government would spend a total of about S$9 billion (US$6.70 billion) over the next five years on measures to help low-wage workers. It will also be spent on schemes to build digital capabilities for businesses and workers.
