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No wealth taxes yet; govt looking at new or higher taxes
THERE were no wealth taxes announced in Monday's Budget, but observers say it's likely to come, just a matter of when, as Singapore spends more on healthcare and infrastructure.
Indeed Finance Minister Heng Swee Keat said his ministry is studying new taxes or raising tax rates.
"Domestically, we will also face rising expenditures over the longer term as we invest more in healthcare and infrastructure," he said.
"We will have to raise revenues through new taxes or raise new rates. We are studying the options carefully," he said.
Observers say higher tax rates on personal income tax, property tax and the goods and services tax (GST) are the most likely sources of additional revenues.
Suan Teck Kin, United Overseas Bank senior economist, said Singapore's labour force growth is set to slow, in part due to the ageing population, and this could moderate the potential growth rate of Singapore companies downwards.
"Given the changing demographic and economic profiles, the fiscal revenue (tax) and expenditure structure would be substantially different five years from now than 10 to 15 years ago," he said.
"To compensate the likely drop in direct tax revenue (both corporate and personal) against a backdrop of rising expenditure such as health care and security, indirect taxes such as GST may be one avenue to raise revenue," he said.
Chung-Sim Siew Moon, head of tax, Ernst & Young Solutions, said it is unlikely that Singapore corporate tax rate will be tweaked upwards as the current corporate tax rate of 17 per cent remains competitive.
It is very likely that the current GST rate of 7 per cent will be increased, most likely progressively (eg, one per cent over a few years) to reach possibly 10 per cent, she said.
"When the GST rate would start increasing would likely be after 2020," said Mrs Chung-Sim.
"In line with a progressive tax system, there is a high probability that new income band (or bands) of above S$320,000 may be introduced with a new personal tax top rate of above 22 per cent in the coming future," she added.
The personal tax top rate of 22 per cent effective this year was raised from 20 per cent two years ago.
"There was no word on wealth tax, but it is the easiest way," said CIMB economist Song Seng Wun who expects higher property tax.
To levy higher property tax is also straightforward and transparent, he said.
Property taxes were raised in 2015 to as high as 16 per cent for owner occupation and 20 per cent for rental property.
"You live in HDB, you get more help. You live in a swanky property or own several swanky properties, you contribute more," said Mr Song.
But the government needs to get the timing right on when to hike taxes because then "politically it'll be less of a headache", he said.
BJ Ooi, KPMG head of global mobility services, said he was worried that personal income taxes would be raised further. Still, he hopes the government would look beyond traditional sources of tax revenue.
"The future however is not that clear but I know that the government would be wise and innovative enough to start looking beyond the traditional revenue base of corporate, personal, GST, vehicle quota premiums and other taxes (which include property taxes)."
- For more Budget 2017 stories visit bt.sg/budget17