Singapore today announced tough budget cuts and budget cuts to help families manage rising living costs while filling coffers damaged by the pandemic.
The fiscal position “is appropriate for the expected economic conditions this year,” Finance Minister Lawrence Wong told Parliament as he briefed the 2023 budget. Wong, who is also the deputy prime minister, said and the government has received more money than expected last year. resulting in a lower deficit of 2 billion Singapore dollars (US $ 1.51 billion) for the financial year 2022 instead of the first estimated deficit of 3 billion Singapore dollars, or 0, 5% of GDP. For 2023, the expected shortfall will be S$0.4 billion, or 0.1% of GDP.
Wong announced tax reforms that would affect Singaporeans with high incomes and large businesses, but added support for low-income families, funding for health subsidies and a support package to remove sales tax. “With a tighter fiscal environment than last year, Deputy Prime Minister Lawrence Wong’s Valentine’s Day 2023 Budget rightfully provided many good things for low-income earners, working mothers and retirees age. through various promotions,” Ajay Kumar Sanganeria, partner at KPMG Singapore. said.
Singapore’s trade-based economy is facing a headwind this year from slowing global growth, inflation and interest rate hikes. Meanwhile, its expenses are rising due to rising health care costs, driven by an aging population.
From Wednesday, those buying properties between S$1.5m and S$3m will be taxed at 5%, while those buying more than S$3m will be taxed at 6%. Buyer’s stamp duty is currently 4%.
Wong unveiled a “progressive” car tax affecting three categories of car buyers, which will generate S$200 million in additional revenue every year. “Our system is based on collective action,” he said.
“Everyone contributes, but the better ones contribute more.”
This comes on top of last year’s fiscal policy changes which have already raised taxes on the wealthiest Singaporeans on their income from buying luxury goods and cars. The city-state plans to introduce a national top tax to increase taxes on large companies to 15% by 2025. This is to address the 2 pillars of the base erosion and profit shifting (BEPS) from the Organization for Economic Co-operation and Development. Wealth. Development. Framework 2.0. Wong said that the global development in BEPS 2.0 is water and Singapore will monitor them. “If there is another delay, we will adjust our implementation process,” Wong said. support package
Wong said Singapore should prepare for higher prices, but added that the government will help citizens and businesses deal with price pressures.
The government will boost a support package to help Singaporeans offset their recent sales tax bill from S$6.6 billion ($4.97) to S$9.6 billion. The second phase of the sales tax is planned to go ahead as planned in 2024. The sales tax will rise to 9% next January, after rising from the current 7% to 8% on January 1 of this year. Wong said it would eliminate any increased spending that low-income families face as a result of the increase in sales tax, while “fully covering” the increase in spending for high-income families.
The FY2023 budget is planned with a balanced budget, said Maybank analyst Chua Hak Bin. “There is more fiscal space in the FY2023 budget to allow for investment and investment in trust for medium-term goals compared to last year’s budget, which was not restricted due to the Covid relief measures. ”
Singapore’s core inflation forecast in 2023 is forecast between 3.5% and 4.5% and headline inflation between 5.5% and 6.5%.
For 2022 as a whole, core inflation rose to 4.1%, higher than the 0.9% recorded in 2021. Meanwhile, headline inflation stood at 6.1% last year, down to 2.3% in 2021.