Singapore’s 2022 budget: the main points

Singapore’s 2022 budget walked a fine line between generating revenue and stimulating the post-pandemic economy

Singapore’s 2022 budget was billed as the spark to fire the country’s post-Covid recovery.

The statement aimed to balance economic stimulus and strengthening of the social compact after the worst recession in 2020 since the city state’s independence in 1965.

Despite the pandemic-induced downturn, finance minister Lawrence Wong spoke from a position of some strength. Singapore’s Covid response might have emptied the public coffers of about SGD 100bn, but by most criteria it has proved successful.

At 3.2%, unemployment is already back to near pre-pandemic levels and average incomes have started growing again. Minister Lawrence Wong maintained the prediction that overall economic growth would hit 3-5% in 2022, giving the government room for fiscal manoeuvre.

Singapore’s 2022 budget will only hit high earners

Nevertheless, the budget acknowledged that business support delivered during the pandemic had come at a price.

The recent measures are clearly designed to breathe life back into public finances, without undermining growth or deepening hardship for low-income households. Many tax rises in the budget will hit only higher earners.

For example, top rate income tax will rise from 22% to 23% for chargeable income between SGD 500,000 and SGD 1m. On earnings above that, it will rise to 24%. Most workers in Singapore – resident and non-resident – will see no change to their tax rate.

Other changes to the tax system also attempt to address social inequalities by increasing the burden only on those who can most afford it.

A significant increase in progressive tax rates on the value of owner-occupied residential properties pushes the top rate to 23% (from 16%) in 2023 and to 32% in 2024.

Tax on non-owner occupied residential properties will also increase, with a 36% top rate pencilled in for 2024.

Singapore’s 2022 budget hikes goods and services tax

None of this was unexpected. The government had signalled that tax rises were likely after the most severe phase of the pandemic to help pay for economic recovery and the rising costs of health and social care that are inevitable in an ageing population.

The rise in Goods and Services Tax (GST – a form of Value Added Tax on the costs of goods and services) was also widely expected. In fact, it was first mentioned in the 2018 budget, before Covid intervened.

The increases are staggered and relatively modest, with GST rising from 7% to 8% in 2023 and 9% in 2024.

Raising GST affects all walks of society, but the government also announced that it will add SGD 640m to a SGD 6bn Assurance Package aimed at mitigating the impact on low and middle income families.

The wider impact of Singapore’s 2022 budget

In his statement, Mr Wong was keen to emphasise Singapore’s continued importance as a launchpad for international businesses looking to expand in the region.

He mentioned BioNTech, the German biotech company that, together with US drug maker Pfizer, developed one of the most widely used Covid vaccines.

Like many before it, the company is establishing its regional headquarters for South-east Asia in Singapore. It also plans to build a manufacturing facility in the country.

Nothing in Singapore’s 2022 budget is likely to stem long-established inflows of investment and foreign talent. Corporate tax remained at 17%, and the statement included new infrastructure announcements, particularly on digital capabilities.

Singapore continues to appeal to middle and high income earners thanks to the stability of its political system and its advanced connectivity and infrastructure. Only foreign employees with chargeable incomes above SGD 500,000, or who own large properties in the city state, will be hit by changes in this budget.

You can read more about the tax system in Singapore for multinational corporations and their foreign employees here {LINK to Carol Sim’s previous article}.

Mr Wong also mentioned potential headwinds and the volatility of the global economy. For now, Singapore is well placed to weather any coming storms.

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