Finance Minister, Mr. Lawrence Wong, delivered his maiden Budget speech – Charting Our New Way Forward Together on 18 February 2022.
Singapore Budget 2022 focuses on investments for the future which revolve around the following key items:
- Invest in new capabilities
- Invest in our people
- Renew and strengthen our social compact
- Advance our green transition
- Build a fairer and more resilient tax system
This article will provide you with a key summary of the Singapore Budget 2022.
Invest in New Capabilities
1. Support for businesses
Singapore’s Minister for Finance, Lawrence Wong stated that the Government is well aware of the challenges posed by rising inflation and the cost of living.
As such, the Government will provide support to businesses via Jobs and Business Support Package and extension of the Temporary Bridging Loan (TBL) programmed to 30 September 2022. The Job Growth Incentive will also be extended to September 2022 to encourage the hiring of workers.
2. Strengthen Local Enterprises
To strengthen the local enterprise ecosystem, the Government will set aside another $600 million to enhance the Production Solution Grant and push for greater innovation and adoption of productivity solutions by Small and Medium Enterprises (SMEs) in the next 4 years.
3. Digitalisation and Innovation
One of the priorities is to improve businesses digital capabilities by investing in infrastructure upgrade and future technologies.
As such, the Government is putting in an additional $200 million in the next few years to enhance schemes that build digital capabilities and to increase capacity of centres that engage in technology, innovation and enterprise activities.
4. Invest in our People
There is a strong focus on fostering a culture of lifelong learning at the workplace, upskilling and
reskilling of our workforce, and adjusting our foreign worker policy framework to improve the
local-foreign complementarity.
5. Renew and Strengthen Our Social Compact
This part of the plan is multifaceted. It extends the progressive wage model to our lower-wage workers in more sectors. It also requires companies employing foreign workers to pay all their local employees at least the Local Qualifying Salary.
To manage the expected cost increases, the Government will co-fund the cost of the wage increases during the transitional period. There is also a significant enhancement of the Workfare Income Supplement scheme, increases in CPF contribution rates for older workers aged 55 to 70, and raises the basic retirement sum for those turning 55 in 2023 to 2027.
To help family with bills, daily essentials and their children’s education expenses, the Government will roll out a S$560m Household Support Package. In addition, there will also be a $6.6 billion Enhanced Assurance Package support for Singaporeans affected by the impending GST hike.
6. Advance Our Green Transition
Singapore aims to achieve net zero emissions by mid-century. To accomplish this, the carbon tax will be raised progressively to $50-$80 by 2023.
As part of its green plan, it will accelerate the adoption of Electric Vehicles by having more charging points near homes and also increase public sector green bonds issuance to $25 billion by 2030.
6. Build a Fairer and More Resilient Tax System
Budget 2022 encompasses five major changes to our tax system.
The first is a response to BEPS 2.0 Pillar 2. The Government is exploring a top-up tax called the Minimum Effective Tax Rate (METR) regime in response to the global minimum tax proposal. The METR will top up a multinational enterprise (MNE) groups’ effective tax rate in Singapore to 15%. The METR will apply to MNE groups operating in Singapore that have annual revenues of at least €750 million, as reflected in the consolidated financial statements of the ultimate parent entity. IRAS will study the METR further and consult industry stakeholders on the design of the METR.
The next three tax changes take the form of an increase in the top marginal personal income tax rates, a higher tax on luxury cars, and a higher property tax for owner and non-owner occupied high-end residential properties.
The last is the GST rate hike from 7% to 9%, taking effect in two stages from 1 January 2023 and 1 January 2024.
Charting Our New Way Forward Together
All in all, the budget position remains expansionary and the government is expecting an overall deficit of S$3b, which is 0.5 percent of GDP for FY2022.
As the name of Budget 2022 would have it, the support measures announced by the government today serve to help prepare Singapore for future challenges and opportunities while helping Singaporeans tackle more immediate concerns such as higher cost of living, challenges those businesses and workers face and more.
