BUDGET 2022
'We will always have each other's back'
Finance Minister Lawrence Wong announced major tax changes and targeted help for workers, households and businesses in his Budget speech yesterday. The tax increases will generate revenues to fund major programmes needed over the next few years, and also improve the lives of Singaporeans, especially those in the lower-income groups, he said. Assistant News Editor Hariz Baharudin and Business Correspondent Choo Yun Ting unpack the highlights from his speech.
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Raising taxes...
Two-step GST hike
• The goods and services tax (GST) will increase from 7 per cent to 9 per cent in two stages. On Jan 1 next year, it will go from 7 per cent to 8 per cent. On Jan 1, 2024, it will increase to 9 per cent.
• The increase in GST is expected to raise about $3.5 billion in revenue annually, or about 0.7 per cent of Singapore's gross domestic product.
Higher personal income taxes for top earners
• The top marginal personal income tax rate will be raised with effect from the year of assessment 2024, which is for income earned in 2023.
• The portion of chargeable income in excess of $500,000 up to $1 million will be taxed at 23 per cent, while that in excess of $1 million will be taxed at 24 per cent. This is both up from the prevailing 22 per cent tax levied on chargeable income in excess of $320,000.
• This is expected to affect the top 1.2 per cent of personal income taxpayers and will raise $170 million of additional tax revenue per year.
Higher residential property tax
• There will be a two-step adjustment to property tax on residential properties from next year, with the increase more significant for properties at the high end.
• 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.
• For owner-occupied homes, the property tax rates for the portion of annual value in excess of $30,000 will be increased to 6 per cent to 32 per cent, up from the current 4 per cent to 16 per cent.
• When fully implemented, the changes will raise Singapore's property tax revenue by about $380 million per year.
Higher tax for luxury cars
• A new additional registration fee (ARF) tier for cars will be introduced affecting buyers of cars such as the Porsche Cayenne and Bentley Continental GT.
• Buyers of cars with an open market value (OMV) exceeding $80,000 will now be taxed at 220 per cent for the portion above $80,000.
• This new tier is on top of the current highest ARF tier which levies a tax of 180 per cent on the portion of OMV above $50,000.
• ARF is the main tax for vehicles and OMV is the approximate cost of a vehicle before taxes.
• This move is expected to generate a further $50 million in revenue per year.
Progressive rise in carbon tax
• Singapore's carbon tax will be raised to $50 to $80 per tonne of emissions by 2030. The current carbon price of $5 per tonne will be in place until 2023.
• The increase will be in stages: to $25 in 2024 and 2025, and to $45 in 2026 and 2027, before reaching $50 to $80 per tonne by 2030.
• The Government does not expect to get additional revenue from the carbon tax increase in this decade.
to help provide for...
Help for GST hike
• The GST increase will be cushioned by an Assurance Package that was originally $6 billion but has been topped up by another $640 million. •
• This $6.6 billion enhanced Assurance Package will provide the following:
- Every Singaporean aged 21 and above will get cash payouts of $700 to $1,600.
- Eligible seniors will get a special bonus totalling $600 to $900.
- Eligible Housing Board households will get additional U-Save rebates totalling $330 to $570.
- All Singaporean children and seniors will get MediSave top-ups totalling $450.
- All Singaporean households will get two tranches of CDC vouchers worth $200 each in 2023 and 2024. These can be used in major supermarkets.
• In addition to the above, the current GST Voucher (GSTV) scheme will be enhanced.
- The service and conservancy charges rebate will be made a permanent component. The assessable income threshold for GSTV-Cash, the cash component of the voucher, will rise from $28,000 to $34,000. GSTV-Cash payouts will also go up to $500 for eligible Singaporeans.
• Mr Wong added that the GST will continue to be absorbed on publicly subsidised healthcare and education. Government fees and charges will not be raised for one year from Jan 1, 2023.
Households
• A $560 million Household Support Package will be launched.
• Eligible HDB households will get additional U-Save rebates totalling $330 to $570.
• All households will get $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.
Environment
• The higher carbon tax collected will be used to support decarbonisation efforts and the transition to a green economy, and cushion the impact of the higher carbon tax on businesses and households.
• Singapore aims to be a car-lite city, supported by a comprehensive public transport network. It intends to phase out internal combustion engine vehicles by 2040. The most promising clean energy option for passenger vehicles is electric vehicles (EVs), with incentives given for people to make the switch. More charging points will be built to hasten the adoption of EVs.
Businesses
• $500 million will be set aside for a Jobs and Business Support Package.
• Another $200 million will be earmarked to enhance schemes that help train and improve the digital skills of workers and businesses.
• $600 million will be designated to scale up the adoption of the Productivity Solutions Grant - which helps small and medium-sized enterprises (SMEs) digitalise and automate their business processes.
• Under a new Small Business Recovery Grant, SMEs badly hit by Covid-19 will get $1,000 per local employee, up to $10,000 per company. Groups which do not hire local employees such as Singapore Food Agency-licensed hawkers, market and coffee shop stallholders will get $1,000.
• The Jobs Growth Incentive will be extended to September, with stepped-down support rates.
• Targeted aid will be given to the aviation sector.
Workers
• A new Progressive Wage Credit Scheme will be launched where companies will get help to fund the wage increases of lower-wage workers.
• Under this scheme, the Government will co-fund 50 per cent of pay increases made this year and next year, 30 per cent of pay increases in 2024 and 2025, and finally, 15 per cent of pay increases in 2026.
• The 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 new Progressive Wage Credit Scheme and enhanced Workfare are expected to cost the Government around $9 billion over the next five years.
• $100 million will be set aside to support the National Trades Union Congress to scale up training for workers.
Longer-term needs
• If current healthcare spending, excluding Covid-19-related expenditure, continues to increase at a similar rate over the coming decade, Singapore will need to spend $27 billion, or around 3.5 per cent of gross domestic product, by 2030.
• On education, more will be spent on the transformation of institutes of higher learning, and enhancing continuing education and training programmes.
• The KidStart programme, where parents from low-income families are guided to support their child's development from birth, is on track to support 5,000 children by next year.
• Measures to support people with disabilities, including an Enabling Masterplan 2030, will be launched later this year.
• To help charities, $100 million will be set aside to extend the Tote Board's Enhanced Fund-Raising Programme for another three years. - More funding will be set aside for charities, as well as the arts and sports sectors.
