As anticipated, the centrepiece of the Singapore Budget 2022 outlined by Minister of Finance Lawrence Wong on 18 February 2022 was the increase in taxes. There were hints of this in Prime Minister Lee Hsien Loong’s New Year address on New Year’s Eve, during which he remarked that Budget 2022 will lay the basis for sound and sustainable finances for the next stage of Singapore’s development, now that economy is emerging from Covid-19.

Singapore’s economy had rebounded strongly in 2021, the resident unemployment rate has come down to 3.2%, close to pre-COVID levels, while the median income of full-time employed residents grew by around 1% in real terms last year, after a decline of 0.4% in 2020.  For the year ahead, barring risks from geopolitics, the scaling back of pandemic support in major economies and the tightening of accommodative monetary policies, businesses in Singapore could see steady recovery in the economy driven by a pick-up in the global economy and the recovery of key trading partners in the region.

Enhancements to Singapore’s tax system

Singapore’s primary Budget has relied on returns from past reserves to turn in an overall surplus. Minister of Finance pointed out that the stream of income from these returns should keep pace with economic growth over time, despite a more challenging global investment environment. But Singapore’s sharply slowing labour force growth and hence slower GDP growth compared to the last decade, will constrain tax revenues.

Hence, enhancements to Singapore’s tax system were proposed in Singapore Budget 2022 to raise additional revenue and contribute to a fairer revenue structure. Significantly, GST will be raised by 1 percentage point yearly in 2023 and 2024.  Carbon tax on emissions will also spike from $5 per tonne currently to a hefty $80 per tonne by 2030.  The qualifying salaries for foreign employees and foreign talent will increase by S$500. All these point to rising cost pressures for businesses across industries.

In addition, the real estate market will be impacted by higher property tax rates from 2023 for owner-occupied properties go up for the portion of Annual Value in excess of S$30,000, from 4-16 per cent today to 5-23 per cent from 2023 and 6-32 per cent from 2024. Property tax for non-owner occupied properties will be hiked across the board from 10-20 per cent currently to 11-27 per cent from 2023 and 12-36 per cent from 2024, with high-end properties seeing a steeper increase. Luxury car market will be impacted by higher taxes of 220 per cent on cars with open market value in excess of S$80,000.

For certain multinational corporations, the government is also exploring implementing a minimum effective tax rate of 15 per cent to keep up with the global Base Erosion and Profit Shifting initiative.

Recharged for a new post-pandemic era

That said, the Singapore Budget 2022 will also extend to corporates a slew of incentives and offerings to recharge companies for a new post-pandemic era. These include providing support for businesses that struggled during the pandemic, and to help build digital capabilities, scale up the productivity ladder, expand overseas, and to build up management capabilities. Companies with cashflow needs will also be able to tap on a six-month extension of the Temporary Bridging Loan Programme and an enhanced Trade Loan Scheme.

The domestic construction sector will also receive a one-year extension to Project Loans, on top of Foreign Worker Levy rebates that they are currently receiving. The aviation sector would receive further targeted support to preserve and enhance Singapore’s status as an international hub. This includes measures to ensure public health and safety at the airport, as well as to preserve core capabilities.

The healthcare sector, a critical priority for Singapore’s future, could also see restructuring over the longer term to centre the healthcare system around the patient, through a “Healthier SG” strategy; the strategy entails a review of our resourcing approach and healthcare financing schemes, as well as the need for more upstream investments in preventive healthcare.

SMEs in industries such as F&B, Retail and Hospitality will be supported by a S$500 million Jobs and Business Support Package as well as an extension of the Jobs Growth Incentive that co-funds local hires. Larger local enterprises will be provided bespoke assistance tailored to the needs of promising local enterprises, in areas like innovation, internationalisation and the fostering of partnerships with other firms as well as support in talent development.

More details of the plans outlined in the Singapore Budget 2022 will be shared at an upcoming Committee of Supply debate.

A fairer, more sustainable, and more inclusive society

Singapore Budget 2022 could be just the first step on the journey towards a new tax system, with other taxes including digital taxes, capital gains and inheritance taxes potentially remaining in the Finance Minister’s tool bag.

Underlying this journey is Singapore’s vision of becoming a fairer, more sustainable, and more inclusive society, as well as the need to have robust policy responses to reinforce Singapore’s resilience and retool capabilities for the future. By investing in workers, advancing their well-being, and improving the quality of jobs, corporates too can play an important role in charting Singapore’s new way forward together.

On this front, the Government will support employers to foster a culture of lifelong learning through the SkillsFuture Enterprise Credit. The Government will also set aside about $100 million to support NTUC in its efforts to scale up Company Training Committees, which bring together unions and employers to develop concrete firm-level transformation plans.

How will your company be impacted by higher taxes or be supported by government incentives? How is your company strengthening Singapore’s social compact? To speak to one of our team about how Klareco can help your business take on new communications challenges in 2022, please contact us at enquiries@klarecocomms.com.

About Klareco Communications

Klareco Communications is an award-winning strategic communications consultancy in Asia. Headquartered in Singapore, its operations span the region with teams on the ground in countries including Indonesia and Malaysia. Klareco’s reach extends globally, across the Americas, Europe and the Middle East. Klareco is a trusted advisor to many leading companies in Asia, as well as multinationals.

Its best-in-class public relations services offer expert counsel to institutions and individuals. The consultancy thrives on bringing clarity to complex situations and creating the most insightful communications solutions for its clients.

Klareco believes that the most impactful communications solutions reach a wide stakeholder base across government and NGOs, business, the media and public. Its integrated communications approach brings together its specialism in corporate and financial communications, as well as public affairs, crisis and digital communications.