Extra corporate tax collections do not replace stable, reliable revenue base from GST, says PM Wong

SINGAPORE – While the Republic expects to collect a “significant” increase in corporate taxes in the coming years, this does not mean that the goods and services tax hike will be rolled back.

The additional corporate tax revenue will strengthen Singapore’s fiscal position and support its growing needs, but does not replace the structural role of the GST, which is a “stable and reliable revenue base”, said Prime Minister Lawrence Wong on Feb 26.

The increase in GST – from 7 per cent to 9 per cent over two stages in 2023 and 2024 – was done to fund permanent and growing healthcare spending needs of an ageing population, added PM Wong, addressing concerns raised by MPs over three days of debate on the Budget 2026 statement that he had delivered on Feb 12.

He was responding to a call by Workers’ Party MP Gerald Giam (Aljunied GRC) to re-evaluate the GST hike, given a larger-than-expected $15.1 billion Budget surplus for the 2025 financial year that was in part due to stronger corporate tax collections.

When the decision was made in 2022 on when to increase the GST rate, there was no sign that corporate income tax collections would rise significantly, and discussions on global tax reform were still evolving, said PM Wong.

The eventual outcomes and their revenue implications were far from certain, he said. “It would not have been responsible to fund permanent healthcare commitments using revenue sources that were uncertain and could yet dry up.”

GST was the only broad-based and sustainable option, and the Government also made sure to mitigate its impact on Singaporeans, said PM Wong, adding that the majority of collections are from higher-income households, tourists and foreigners.

He laid out the medium-term outlook for revenue and expenditure as he tackled criticism from opposition MPs on his Government’s fiscal marksmanship. During the debate, several WP MPs had questioned whether the Government was overly conservative in its fiscal projections and wound up running a surplus that was too large.

On revenue, PM Wong said the authorities expect a structural increase to kick in from the 2027 financial year, when the first tranche of additional collections rolls in from the domestic top-up tax that Singapore is implementing under the Base Erosion and Profit Shifting (BEPS) 2.0 global tax reform framework.

It will raise the effective tax rate for large multinational enterprises to 15 per cent and could lead to a “significant” increase in revenue.

The recent rise in corporate tax collections – which are dependent on how the economy performs – in the last two years was not an outcome that was anticipated, said PM Wong. He added that the Government would continue to firm up its estimates for the collections in the coming months with updated data on how firms are performing and adjusting their plans.

On expenditure, the Government has been spending more in many other areas beyond healthcare, such as social needs, economic competitiveness and Singapore’s energy transition, as well as security and infrastructure.

Expenditure pressures are already evident, said PM Wong, citing defence spending as an example.

He had said during his Budget statement that the Defence Ministry’s budget would remain at about 3 per cent of GDP – the largest of the ministries – which would include expenditure on cybersecurity by the ministry and the Singapore Armed Forces.

But the Government will also have to invest more in cybersecurity in other agencies, which contributes to more security spending in the coming years, he said in his wrap-up speech.

With this outlook in mind, the Ministry of Finance will be publishing by 2027 the updated medium-term projected figures for revenue and expenditure up to 2035, said PM Wong.

The last time it published such projections was in 2023, when it said in an occasional paper that state expenditure would increase from about 18 per cent of GDP then to 20 per cent by 2030.

He cautioned that assumptions can quickly become outdated, so the forward projections serve as a guide and will have to be continually updated. “Ultimately, what matters most is maintaining fiscal discipline, together with the agility and nimbleness to respond swiftly as circumstances change.”

Overall, the Government aims to have a balanced Budget over its term and does not aim to run high surpluses over the next few years, said PM Wong. A balanced Budget means a fiscal surplus within the range of 0.5 per cent of GDP. The 2025 financial year surplus was 1.9 per cent of GDP.

The larger-than-expected surplus of $15.1 billion drew the most scrutiny over the three days of the Budget debate, with MPs on both sides of the aisle suggesting that these funds be channelled towards Singaporeans.

"When there are revenue upsides, we will deploy these to meet our growing needs,” said PM Wong.

Some have already been shared with Singaporeans, noted PM Wong, referencing a proposal from Mr Shawn Loh (Jalan Besar GRC) on the first day of the debate for any fiscal surpluses above 2 per cent of GDP to be given back to Singaporeans through measures like extra CDC vouchers and universal CPF top-ups.

“In practice, we actually do not wait to cross a mechanical threshold like that,” he said, citing the SG60 package in 2025, and the CPF top-ups and the Cost-of-Living Special Payment in Budget 2026.

In the light of the fiscal position, Mr Loh had also suggested during the debate that the Government commit to no further major revenue-raising moves till 2035, beyond its promise not to raise the GST until 2030.

PM Wong said that if circumstances remain broadly stable and without any further major revenue moves, Singapore’s fiscal position during this term of government is expected to remain healthy.

The Government will continue to review its tax system and make revenue adjustments only when necessary – to fund structural spending needs or achieve clear policy objectives, such as strengthening progressivity or addressing externalities, said PM Wong.

“Any tax increase is a difficult decision. We take them only after careful study and full consideration of the impact on households and businesses.”

PM Wong also pledged to provide more information to ensure fiscal accountability and value for money in government spending, following calls for such accountability by WP chief Pritam Singh (Aljunied GRC), Mr Yip Hon Weng (Yio Chu Kang), and Nominated MP Haresh Singaraju over the course of the Budget debate. He said he would ask all ministries to provide clearer and more accessible information on major initiatives so that Singaporeans can better understand how public resources are used and what results they achieve.

In a follow-up question after his speech, WP chairperson Sylvia Lim said PM Wong had been more cautious about the upsides from the potential first BEPS top-up tax collections in previous debates, and had said he would consider the incentives that would have to be given out. She asked if his view had changed.

“Governments everywhere want to attract these strategic investments to their own countries, and they are continuing, notwithstanding a minimum corporate tax of 15 per cent, to offer other generous incentives, which are considered BEPS-compliant,” he said.

Amid a competitive global landscape, where other governments are spending more and offering different incentives, he noted: “The revenue upside is more assured in terms of the domestic top-up tax, but at the same time, we are very likely to also have to spend more on the economic front to stay competitive.”