Budget 2022: Quick Takes on corporate and personal income taxes

SINGAPORE will strengthen its current system of taxes even as it continues to study the experiences of other countries and explores options to tax wealth effectively, as announced in Budget 2022 on Friday (Feb 18).

Top earners will see an increase in their personal income taxes with effect from the 2024 year of assessment, with the portion of chargeable income in excess of S$500,000 up to S$1 million taxed at 23 per cent, while that in excess of S$1 million will be taxed at 24 per cent.

Amid global tax developments, Singapore is also exploring a Minimum Effective Tax Rate (METR) to top-up the effective tax rate of multinational enterprise (MNE) groups in Singapore to 15 per cent. This is in response to pillar 2 of the Base Erosion and Profit Shifting initiative (BEPS 2.0), which, amongst others, aims to introduce a global minimum effective tax rate of 15 per cent for some MNE groups.

Here are some quick takes from analysts and tax professionals on the latest announcements:

PwC Singapore partner, tax, Lennon Lee:

• "Existing qualifying MNEs enjoying tax incentives in Singapore with preferential tax rates should be indifferent to whether the top up tax is paid in Singapore or back in their home country. However, with the introduction of METR, Singapore could potentially lose an important fiscal tool of using tax incentives to attract foreign investments."

EIU country analyst, Asia, Yu Liuqing:

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• "The recalibration of corporate income tax in line with the global tax treaty is likely to preserve much of Singapore's appeal to large MNCs. Singapore's stellar business environment will remain attractive."

Deloitte Singapore:

• CEO Cheung Pui Yuen: "The Finance Minister trod a fine line, balancing providing support to the livelihood of all Singaporeans with targeted taxation actions to fulfil the need to 'manage the uncertainties' and 'think about tomorrow'."

• Tax and legal leader Low Hwee Chua: "Singapore is right to consider introducing the METR. Looking into the future, gone are the days where Singapore can use our low tax rate or tax incentives as a competitive edge. We would need to work harder on our other non-tax strengths - stable political environment, strong rule of law, world class infrastructure, hard-working and skilled labour force, business friendly environment, etcetera. Key is also to look at arresting rising costs of business and labour and talent shortage."

• International tax leader Liew Li Mei: "It would be helpful if the government could provide further details on (the METR) earlier rather than later to help businesses determine the potential financial impact and allow them to plan for it. Aside from the possible introduction of the minimum effective tax rate, potential areas of guidance for businesses -including expected changes to the tax regime for tax and non-tax incentives to encourage investments, as well as a roadmap for the transition period for Singapore businesses- would be welcomed."

KPMG in Singapore, partner, head of tax, Ajay Kumar Sanganeria:

• "Extensive support has been laid out in Budget 2022 for businesses and workers but there is no free lunch particularly in the context of the fiscal deficits accrued over the last two years and the expected increase in healthcare and social spending in the future. As such, it's not surprising that Budget 2022 is increasing property tax, GST and personal tax in a progressive manner. The question now is whether these increases will provide sufficient finances to cover the needs of the future or will they represent a new trend for future budgets?"

Global Counsel practice lead for Asia, Andrew Yeo:

• "Globally, policymakers will have an eye on a looming global minimum tax rate which will begin to take shape across the next year. This means the need for the country to competitively position itself in non-tax incentive terms, and feeds into the national priority of evolving into the premier hub of global connectivity for talent, travel and capital."

Get the latest updates on Budget 2022 here: bt.sg/budget22

READ MORE:

• Budget 2022: Singapore to explore Minimum Effective Tax Rate amid global tax developments

• Budget 2022: Higher taxes for top earners with chargeable income above S$500,000

• Budget 2022: Singapore to strengthen current system of taxes