SINGAPORE - Several announcements related to Singapore's tax system were unveiled during Finance Minister Lawrence Wong's Budget speech on Friday (Feb 18), including the timing of the goods and services tax (GST) hike, higher marginal personal income tax rates and increased residential property tax rates.
These tax adjustments are to raise additional revenue and to contribute to a fairer revenue structure in Singapore, he said.
Here are six highlights:
1. Two-step GST hike to take place in 2023 and 2024
The planned increase in the goods and services tax (GST) from 7 per cent to 9 per cent will be done in two stages - by 1 percentage point each time on Jan 1, 2023 and Jan 1, 2024.
The impact of the hike, which was first announced in 2018, will be cushioned by an enhanced $6.6 billion Assurance Package.
The package, which provides payouts to Singaporeans over the next five years, was announced in previous Budgets to buffer the GST increase for households by up to 10 years, and enhanced with a $640 million top-up in this year's Budget.
On top of the transitional support through the Assurance Package, the GST Voucher scheme will also be enhanced to provide continuing offsets for the GST expenses of lower- to middle-income households.
Both support schemes will be implemented together before the GST increase takes place, so that Singaporeans can benefit from both schemes at the same time, said Mr Wong.
READ MORE: Singapore to raise GST from 7% to 9% in two stages in 2023 and 2024
2. Higher personal income taxes for top earners
Singapore's personal income tax regime will be enhanced to be more progressive, with the top marginal personal income tax rate to be increased with effect from the year of assessment 2024.
Resident taxpayers' chargeable income in excess of $500,000 up to $1 million will be taxed at 23 per cent, while chargeable 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 chargeable income in excess of $320,000.
The increase 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.
READ MORE: Higher personal income taxes for top 1.2% of taxpayers in Singapore
3. Increased tax rates for residential properties
Property tax, which is currently Singapore's principal means of taxing wealth, will be adjusted from 2023.
The marginal property tax rates will be revised in two steps for residential properties.
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, with the increase more significant for properties at the high end.
For owner-occupied homes, the property tax rates for the portion of annual value in excess of $30,000 will also be increased to 6 per cent to 32 per cent, from 4 per cent to 16 per cent currently.
When fully implemented, the higher tax rates are expected to raise Singapore's property tax revenue by about $380 million per year.
READ MORE: Tax rates for residential properties to be raised, as Singapore adjusts wealth taxes
4. Luxury cars to be taxed at higher rate
In another means to tax wealth, luxury cars will be taxed at a higher rate to make Singapore's vehicle tax system more progressive.
A further ARF (Additional Registration Fee) tier will be introduced 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 vehicles such as the Porsche Cayenne and Mercedes-Benz S-class sedan.
The new rate will apply to all cars registered with certificates of entitlement (COEs) obtained from the second COE bidding round in February.
This change is expected to generate an additional $50 million in revenue per year.
READ MORE: Buyers of luxury cars to pay even higher taxes
5. Carbon tax rate raised to $50 to $80 per tonne by 2030
Singapore's carbon tax will be raised to $50 to $80 per tonne of emissions by 2030, as part of a move to help the country achieve more ambitious climate goals.
Singapore's current carbon price of $5 per tonne will be in place until 2023.
The carbon tax will be raised in stages: first to $25 in 2024 and 2025, and $45 in 2026 and 2027, before reaching $50 to $80 per tonne by 2030.
This higher carbon tax is so that businesses and individuals will be able to internalise the costs of carbon and take actions to moderate their emissions, in line with Singapore's efforts to achieve net-zero emissions.
READ MORE: Singapore' carbon tax could increase to $80 per tonne of emissions by 2030
6. Exploring a 'top-up tax' for MNCs
Singapore's corporate system will need to be updated due to global tax developments relating to the Base Erosion and Profit Shifting initiative (BEPS 2.0).
Singapore will adjust its tax system in response to the rules under the second pillar in BEPS 2.0, Mr Wong said.
To this end, it is exploring a top-up tax, called the Minimum Effective Tax Rate, which will top up the multi-national enterprise (MNE) group's effective tax rate to 15 per cent.
This will be studied further by the Inland Revenue Authority of Singapore, which will consult the industry on the design of this top-up tax.
There are two pillars in BEPS 2.0. The first reallocates profit of the largest and most profitable MNEs from where activities are conducted to where consumers are located.
The second pillar introduces rules that include a global minimum effective tax rate of 15 per cent for MNE groups with annual global revenues of €750 million (S$1.15 billion) or more.
READ MORE: S'pore's tax revenue will be hit by international rule changes; Republic exploring top-up tax for MNCs