Singapore Finance Minister Heng Swee Keat delivered the budget statement on Monday, saying the government’s planning, spending and taxation needed to be “prudent and progressive.”
Many of the initiatives in the speech appeared to extend previous efforts to boost productivity and innovation in the corporate sector.
The much-anticipated hike in the goods and services tax (GST) was included, with plans to raise the levy by two percentage points to 9 percent sometime in the 2021 to 2025 period. Heng said the timing would depend on the state of the economy, but he added it would likely be earlier than later.
Selena Ling, head of treasury research and strategy at OCBC, told Channel News Asia on Monday, that while the GST hike was later than she expected, the government was likely planning to delay the increase until after the next election.
She also noted that the government’s budget surplus was much larger than expected and that may have made a GST hike earlier difficult.
Sectors likely impacted by the budget
For property, the budget included a plan to raise the residential property buyers stamp duty, with the top rate of 4 percent for the part of the price that is above S$1 million. Heng pointed to the need to enhance the progressivity of tax rates.
But that could dent some property demand.
Retailers might ring up some short-term gains after the budget included plans for a one-off hung bao of S$100-S$300 for Singaporeans, depending on income. The government plans to use S$700 million of the budget surplus to pay for this item.
Green companies may see some boost as the country introduces a carbon tax from 2020 on 2019 emissions. Heng said he expected the tax would raise around S$1 billion in revenue over the first five years, and that he was willing spend far more than this to support projects that reduce emissions.
The starting rate is S$5 per ton for the amount over 25,000 tons of greenhouse gas emissions in a year, with the plan to raise it to S$10-S$15 by 2030; it will apply to all sectors without exception.
The introduction of an ecommerce tax, which had been closely watched, was delayed while the government continues to consult on how to implement it. But the budget did call for adding a tax on imported services from 2020, which would include introducing the GST on downloads of apps and music from overseas.
The government also plans to increase investments in healthcare and infrastructure, both of which will likely boost construction and healthcare players.