Singaporeans aged 21 and above will get a one-off bonus of S$100 to S$300 (US$73.8-221.4) this year.
But together with the cash handout, the Singapore government has decided to increase the goods and services tax (GST) as well as introduce a carbon tax and e-tax.
All these tax initiatives are expected to generate over S$10 billion in fiscal revenue for the city, far exceeding the S$700 million cost of the one-time bonus.
Similar to Hong Kong, Singapore has benefited from a robust financial industry, buoyant global trade and improving consumption.
The city expects an overall budget surplus of S$9.6 billion for the 2017 financial year, much higher than the initial forecast of S$1.9 billion.
Singapore also boasts a total fiscal reserve of S$997.4 billion if cash, state-owned equity, listed stocks and development funds are included.
With such a deep pocket, the handout is not surprising at all.
Singaporeans with assessable income of S$28,000 and below will receive S$300 as one-time bonus. Those that earn S$28,001 to S$100,000 will get S$200 and those with income above S$100,000 or own more than one property will get S$100.
At the same time, the city intends to overhaul its tax regime to ensure stable revenue flow.
All facilities producing 25,000 tons or more of greenhouse gas emissions in a year will have to pay a carbon tax of S$5 per ton from 2019. Also, consumers and businesses who buy services from overseas suppliers (e.g., music streaming and online games) will start paying goods and services tax from 2020. Besides, GST will go up to 9 percent from 7 percent starting from 2021.
These new tax initiatives, apart from the carbon tax, are targeting local residents rather than corporates or foreign investors.
Currently, Singapore maintains a corporate tax rate of 17 percent, close to 16.5 percent in Hong Kong. That makes taxes from both cities among the lowest in the world.
Some economists believe that the Singapore government is trying to expand its tax base and pave the way for the city to further cut corporate tax and make it more competitive.
This article appeared in the Hong Kong Economic Journal on Feb 21
Translation by Julie Zhu
[Chinese version 中文版]
– Contact us at [email protected]