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Income tax, GST take taxman's haul to new peak of S$47b
DESPITE a subdued economy, the Inland Revenue Authority of Singapore (IRAS) collected S$47 billion in tax revenue for its financial year ended March 31, 2017, up 5 per cent from S$44.8 billion a year ago.
Economists told The Business Times that tax collection, at yet another record high, was likely to have received a boost from the global and domestic economic recovery beginning from the later months of 2016.
They added that collection might rise again in the coming year given recovering economic growth in Singapore and a more progressive personal income tax structure.
For the latest financial year, individual income tax collected rose to S$10.5 billion from S$9.2 billion a year ago. This was due to higher individual earnings and the cessation of one-off personal income tax rebates given in Year of Assessment 2015.
IRAS also collected more goods and services taxes (GST), suggesting that demand within the economy is still robust. Stamp duties collected rose due to a larger number of property transactions.
Corporate income taxes collected, the largest category of tax collections, slipped slightly to S$13.6 billion from S$13.8 billion a year ago.
"Growth might have moderated but many businesses continue to do reasonably well," said CIMB Private Bank economist Song Seng Wun.
He pointed out that with growth still positive, tax revenue is likely to hold up, even while there is an uneven distribution of beneficiaries.
Maybank Kim Eng economist Chua Hak Bin said that Singapore's budget surplus this year might be better than anticipated. "The government will have more fiscal room to spend and support the economy . . . Further income tax and GST increases may not be necessary at this stage."
Selena Ling, OCBC Bank head of treasury research and strategy, said that individual income tax and GST receipts improved probably because the domestic labour market remained relatively healthy in 2016. Singapore's economy grew at 2 per cent in 2016, and the unemployment rate was 2.1 per cent.
Looking ahead, Ms Ling said that tax revenues could still go up. "Given that 2017 gross domestic product (GDP) growth is expected to accelerate to around 2.5 per cent and the adjustment to a more progressive personal income tax rate structure from Year of Assessment 2017, there may be still potential upside."
A new personal income tax structure is in place this year with more granular divisions for high earners. The top marginal tax bracket rises to 22 per cent from 20 per cent.
CIMB's Mr Song said that betting taxes collected here might increase, given how Macau casinos have also been doing better.
Betting tax collection, which includes casino taxes along with betting and private lottery duties, fell 1.4 per cent to S$2.7 billion for the last financial year.
Meanwhile, IRAS continues to be efficient at collecting taxes. For the latest financial year, the cost for every dollar of tax collected is just 0.84 cent, up slightly from 0.83 cent a year ago.
Tax compliance in Singapore remained high. Tax arrears were kept low, at 0.68 per cent of net tax assessed, due to a focus on maximising voluntary compliance, IRAS said.
Commissioner of Inland Revenue Tan Tee How said that the agency will continue to use analytics, design and digitalisation to improve the experience of taxpayers.
"I am encouraged by the early successes and the projects we have completed," he said.