SINGAPORE’S tax revenue for financial year 2023 rose 13.1 per cent to S$68.6 billion compared to the year before. This reflects the economic recovery following the end of the Covid-19 pandemic, the Inland Revenue Authority of Singapore (Iras) said on Wednesday (Sep 6).

Tax revenue collection rose across most tax types, the authority added.

At S$23.1 billion, corporate income tax (CIT) continued to make up the largest share – 33.7 per cent – of Iras’ revenue collection. It also accounted for 62 per cent, or S$4.9 billion, of the S$7.9 billion increase in tax collection. This came on the back of buoyant corporate earnings. (* see amendment note below)  

Goods and services tax (GST) collection rose S$1.5 billion due to higher consumption and a rebound in international arrivals, Iras said. Overall, GST made up 20.5 per cent, or S$14.1 billion, of tax revenue.

Individual income tax revenue increased by S$1.3 billion from higher personal incomes. It was Iras’ second-largest source of tax revenue at 22.6 per cent, or S$15.5 billion; 83 per cent of that came from taxpayers whose annual incomes exceed S$150,000.

However, stamp duty collection fell 12 per cent, or S$0.8 billion, as a result of lower volume of transactions than in the year before. It accounted for 8.7 per cent of tax revenue at S$6 billion.

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Analysts pointed out that corporate income tax collection registered the highest year-on-year increase across all other categories, at 26.8 per cent. In comparison, personal income tax collection rose 9.1 per cent in the same period.

“The increase in corporate income tax collection appears in line with the significant year-on-year increase of over 75 per cent in FDI (foreign direct investment) that Singapore attracted during 2021,” said Soh Pui Ming, head of tax at EY.

The total revenue collection represents 75.4 per cent of the government’s operating revenue and 10.7 per cent of Singapore’s gross domestic product.

“Taxes collected are used to support Singapore’s economic and social programmes to achieve quality growth and an inclusive society,” said Iras.

The authority disbursed S$4.6 billion in grants to more than 120,000 enterprises to support local hiring and wage growth for Singaporeans, it said. These come under schemes such as the Jobs Growth Incentive, Progressive Wage Credit Scheme, Senior Employment Credit and Small Business Recovery Grant.

Iras also noted that it rolled out several initiatives in the past year to make tax filing more seamless for both businesses and individuals.

These include the launch of a chatbot that provides “instant answers” to taxpayers who need to check on their outstanding tax, payment status and filing status of Form IR21 for tax clearance, among other queries. Iras noted that 70 per cent of taxpayers who used the bot rated it positively.

These initiatives led to a 12 per cent increase in the use of Iras’ self-help digital services, which totalled 43 million transactions in FY2023.

For the current financial year, analysts believe tax collection may continue to improve. Harvey Koenig, partner for telecommunications, media and technology as well as tax at KPMG in Singapore, said it is expected that Singapore will maintain a “competitive corporate tax structure to continue to attract multinationals and a good inflow of foreign investment”.

Maybank economists Chua Hak Bin and Brian Lee noted that government operating revenue for the first four months of FY2024 – from April to July – rose 17.2 per cent from the year before, exceeding the 11.5 per cent growth for the same period last year.

“We think operating revenue is on track to exceed MOF’s projections in FY2024, given that total collections over April to July, at S$36.6 billion, already amounted to 38 per cent of the budgeted revenue of S$96.7 billion,” said the Maybank team, referring to the Ministry of Finance’s (MOF) estimates.  (* see amendment note below)  

“There is ample fiscal space to allow for more generous top-ups and transfers, and yet still adhere to the balanced-budget rule over the term of government,” they added.

ANZ head of research Khoon Goh said while tax revenue collection is off to a strong start, the economic slowdown would moderate the growth of tax revenue – even if the 1 percentage point hike in the GST in 2024 provides another boost to GST revenue.

“Overall, a return to single-digit tax-revenue growth is to be expected for FY2024,” he said.

However, Loh Eng Kiat, tax partner at Deloitte Singapore, pointed out that Singapore may gain a new source of tax revenue from Jan 1, 2024.

He noted that MOF had in June announced it may impose a tax on gains from the sale of foreign assets in certain situations, to align its tax treatment in this regard with that of the European Union. The ministry had released the draft Income Tax (Amendment) Bill 2023 for public consultation that took until end-June.

“This marks a significant change in our regime, which otherwise did not tax capital gains,” he said. “A change like this is largely driven by an increasingly multilateral tax policymaking environment, which otherwise may lead to Singapore being greylisted by the EU, which has broader reputational repercussions.”

* Amendment note: In an earlier version of this story, the Maybank team said government operating revenue from April to July is S$38.6 billion. They have clarified that it should be S$36.6 billion.