© . FILE PHOTO: View of Singapore’s central business district skyline March 26, 2021. REUTERS/Edgar Su By Aradhana Aravindan and Chen Lin SINGAPORE () -Singapore will begin implementing a long-flagged goods and services tax hike next year , the finance minister said in his budget speech on Friday, while also announcing a slew of tax increases targeting higher income groups. The steps come as Singapore emerges from a pandemic-induced economic slump, but is holding a tightrope to maintain its attractiveness as a global financial center, while guarding against local concerns about rising wealth inequality and rising costs of living. livelihood. The GST will rise to 8% from January next year and to 9% by 2024, Lawrence Wong said, from 7% now. The government also plans to raise income taxes for high-income earners, raise taxes on housing and impose higher taxes on luxury cars. “These tax adjustments will help generate additional revenue and also contribute to a fairer revenue structure,” Wong said. Singapore has sought to generate revenues to fund future expenditures estimated to exceed 20% of gross domestic product (GDP) by 2030, especially as health spending ramps up in one of the fastest aging countries. Over the past two years, the government has pledged nearly S$100 billion to protect its people, businesses and the economy from the effects of the COVID-19 pandemic. As part of his budget proposals, Wong announced another $500 million ($372 million) package to support jobs and businesses, and proposed setting aside $560 million to help Singaporeans deal with the rising cost of living. The government expects an overall deficit of S$5 billion for 2021 and Wong unexpectedly forecast a deficit of S$3 billion for 2022. Total spending for 2022 was projected to be S$102.4 billion, compared to S$98.4 billion the year before. previous year. Analysts had expected a return to surplus. The budget was more generous than expected, MUFG analyst Jeff Ng said, adding that the government was tackling the still uneven recovery of the economy. Singapore’s economy, which is heavily dependent on global trade, is expected to grow by 3-5% this year as it continues to reopen its borders and ease COVID-19 restrictions. The economy grew 7.6% in 2021, after a record contraction in 2020. Still, the recovery in some sectors, such as aviation and tourism, is expected to take longer as concerns about the virus persist. Wong said the government will spend a total of about S$9 billion ($6.70 billion) over the next five years on measures to help its low-paid workers. It will also spend money on schemes to build digital capabilities for businesses and employees. The government will further tighten its foreign worker policy and raise salary thresholds for issuing work visas. As part of its ambition to achieve net zero emissions, the government will also increase carbon taxes from 2024. Wong said the corporate tax system should be updated, following a global agreement on a minimum corporate tax rate, and is considering a move that would raise the effective tax rate of multinational companies to 15%. Singapore, a low-tax jurisdiction where several multinational corporations, including Google, Microsoft (NASDAQ:) and Alphabet’s (NASDAQ:)’s Facebook (NASDAQ:) have regional headquarters, has a 17% rate, but offers incentives and schemes that reduce the effective rate. . Wong said the government is closely monitoring the risk of rising inflation caused by a recovery in global demand, ongoing supply chain disruptions and, most notably, rising energy prices. The government has set aside a S$6.6 billion package to help cushion the impact of the GST hike. The Monetary Authority of Singapore tightened its policy settings in January in its first out-of-cycle move in seven years, as the economic recovery gained momentum and prices rose. It is widely expected to tighten up again at the planned policy meeting in April. The city-state’s core inflation rate for 2022 is projected to be 2-3% and headline inflation at 2.5-3.5%. ($1 = 1.3431 Singapore Dollar)
