Despite the bite of inflation, Singapore’s government will continue spending to ease the pain, with higher taxes coming to offset the cost.
This year’s two-hour-long budget speech given by Finance Minister Lawrence Wong today in Parliament addressed plans to delay a hike to the GST and packages supporting businesses, households and the push for net-zero emissions.
“I have carefully considered the overall situation, the ongoing pandemic, the state of our economy and the outlook for inflation. Our revenue needs are pressing but I also understand the concerns that Singaporeans have about the GST increase taking place at the same time as rising prices,” he said.
As in most of the developed world, inflation in Singapore has been surging, driving up consumer costs.
This year, S$6 billion (US$4.4 billion) will be drawn from past reserves to fund public health needs. This brings the total amount drawn on past reserves to S$42.9 billion from 2020, which is less than the S$52 billion originally planned. Last year, only S$5 billion was spent instead of the S$11 billion predicted.
Close to $100 billion was issued in the past two years to aid Singaporeans and businesses through the pandemic. Wong noted that certain segments of the nation’s economy are “still struggling,” and have set aside monetary packages to alleviate costs.
Taxes delayed
The GST rise will be staggered over the next few years, increasing from 7% to 8% in 2023 and to 9% in 2024. As a result, a S$6.6 billion stimulus package will go directly into pockets. This includes payouts ranking from S$700 to S$1,600 for all adult Singaporeans over the next five years, S$600 to S$900 for eligible seniors over the next three years and S$400 worth of vouchers for households over the next two years.
The personal income tax rate for high-earners will be raised from 2024, as well as property tax that will increase over the next two years. Those thriving with luxury cars will also have to start paying higher taxes.
A S$500 million package will be spent supporting jobs and businesses, particularly for smaller businesses in the F&B, retail, tourism, and hospitality sectors. Payouts of S$1,000 will be given to each Singaporean worker with up to S$10,000 per firm.
Another S$560 million will be given this year to households to alleviate utility bills, pay off groceries, and increase education funds. Eligible households will receive rebates up to S$285 for April to December and S$100 worth of Community Development Council, or CDC, vouchers this year.
Each Singaporean child 20 and below will also get a top-up of S$200 to their education accounts.
There will be a 1.5% to 2% increase in the contribution rates for workers 55 to 70 of the Central Provident Fund, a compulsory savings and pension plan. The retirement sum will be raised by 3.5% per year for workers turning 55 in 2023 to 2027.
Green horizon
Wong also touched on Singapore’s green plan to achieve net-zero emissions by 2050 and phasing out internal combustion engine vehicles by 2040. Up to $35 billion in green bonds will be issued by 2030 to fund public sector green infrastructure projects and incentives will be given for those who use electric vehicles. More charging points will also be added.
Wong said Singapore will invest in digital capabilities such as scaling-up company training committees in NTUC and investing in education with SkillsFuture.
The minimum qualifying salary for both S Pass and Employment Pass applicants will be raised this September. For S Pass applicants, salary limits will be raised from S$2,500 to S$3,000 and to S$3,500 for those in financial services. For Employment Pass applicants, salaries will be raised from S$4,500 to S$5,000 and S$5,000 for those in finance.
Wong ended his speech in the most patriotic way – taking words from the nation’s pledge.
“Looking back at what we have been through during these COVID-19 years, we have nothing to fear, we will always overcome. We will always prevail, so long as we continue to stand side by side in solidarity with one another regardless of race, language or religion,” he said.
“We will chart a new way forward together. We will see through the pandemic today and build a better Singapore tomorrow.”
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