GST hike, increase in utilities bills, cash payouts over 5 years: Key takeaways from Budget 2022
Titled Charting Our New Way Forward Together, this year’s Budget focuses on strengthening Singapore’s social compact as we progress into the post-pandemic world.
More support will be given to tide Singaporeans through rising costs of living and the impending GST hike, Finance Minister Lawrence Wong announced in Parliament at the Budget 2022 statement on Friday (Feb 18).
Titled Charting Our New Way Forward Together, the focus of this year’s Budget is about strengthening Singapore’s social compact for a post-pandemic world, said Mr Wong.
This means that all Singaporeans should be aware of their stake in society and know that their contributions matter.
“It is about giving Singaporeans the confidence to embrace the change that lies before us so that we can grow into an ever stronger economy and nation and an ever more secure society and home,” he added.
Mr Wong said that the Government’s measures to support Singaporeans and businesses through the COVID-19 pandemic over the last two years have been effective. Resident unemployment rate have gone down to 3.2 per cent, close to pre-COVID-19 levels.
He added that Singapore’s economy is expected to see a “steady recovery” and grow by 3 to 5 per cent this year.
Key changes made in Budget 2022 will allow Singapore to invest in new capabilities, advance the Singapore Green Plan, as well as develop a fairer and stronger revenue structure.
1. GST hike to occur in two stages
The first will take effect on Jan 1, 2023, increasing GST from 7 per cent to 8 per cent. Subsequently, GST will be increased to 9 per cent on Jan 1, 2024.
All adult Singaporeans will receive up to $1,600 worth of cash payouts over the next five years, with lower income elderlies eligible for additional payments of up to $900.These payouts are part of a $6.6 billion Assurance Package designed to cushion the impact of the GST hike.
The Government will also improve the GST Voucher (GSTV) scheme, which aims to further support lower-income Singaporeans.
Aside from having increased income thresholds such that more Singaporeans are eligible for the GST vouchers, the improved GSTV scheme will fully offset GST for retirees living in one- to four-room HDB flats, said Mr Wong.
The combination of the Assurance Package and enhanced GSTV scheme will cover at least five years of additional GST expenses for most Singaporean households.
All adult Singaporeans will receive cash payouts of between $700 to $1,600 over five years from 2022 to 2026.
Singaporeans who own zero or one property with an annual income of less than $34,000 will receive $1,600 over the next five years. Those with annual income of between $34,000 and $100,000 will receive $1,050. Those with annual income of above $100,000, along with those who own more than one property regardless of income, will receive $700.
Eligible HDB households will receive additional GST Voucher – U-Save Rebates of between S$330 to S$570 depending on their flat types from 2023 to 2026. This will be credited in January of each qualifying year.
The Government will continue to absorb GST on publicly subsidised healthcare and education.
2. Household Support Package
A $560 million package that will help Singaporeans with utility bills, children’s education and daily essentials will be unveiled through rebates and payouts across different eligible household and age groups.
As part of this package, another set of $100 CDC vouchers will be distributed to all Singaporean households later this year. The vouchers can be used at participating heartland merchants and hawkers.
In addition, GST Voucher – U-Save rebates will be doubled for all eligible HDB households for the rest of this year. Eligible HDB households will receive additional rebates of up to $285.
To offset the cost of education, children below 21 years old will get $200 top-ups to their Child Development Account, Edusave Account or Post-secondary Education Account. This is in addition to the existing annual Edusave top-ups by the Government.
3. Utility bills to increase as sustainability efforts ramped up
An average four-room HDB household can expect an increase of about $4 per month in its utility bill in 2024 as the carbon tax will be raised, said Mr Wong.
The carbon tax is expected to increase by five times to $25 per tonne in 2024 and 2025. It will then further increase to $45 per tonne in 2026 and 2027. The goal is to reach $50 to $80 per tonne by 2030.
This is because of Singapore’s new commitment to achieving net-zero emissions around 2050.
In order to achieve this, government revenue from the increased carbon tax will be channeled towards investments into low carbon and energy efficient solutions.
Additional support for Singaporeans, such as more U-Save rebates, will be used to cushion the impact of the increase during the transition period. More details will be announced next year.
The Government will also further encourage the use of electric vehicles by building more charging points closer to people’s homes.
This is because Singapore plans to eliminate petrol and diesel vehicles by 2040 as part of the Singapore Green Plan.
Infrastructure upgrades for the charging points will be financed by green bonds, which the Government plans to issue $35 billion of by 2030, said Mr Wong.
4. Taxes to increase for top earners from 2024
With effect from the Year of Assessment 2024, resident taxpayers earning between $500,000 and $1 million will be taxed at 23 per cent, while income more than $1 million will be taxed at 24 per cent.
This is up from the current 22 per cent taxed on income greater than $320,000. The increase is expected to affect the top 1.2 per cent of personal income taxpayers and raise $170 million of additional tax revenue per year.
“Where personal income tax is concerned, there is room for greater progressivity, so that those who earn more, contribute more,” said Mr Wong.
There will also be higher taxes on luxury cars. An additional tier of registration fees for cars will be introduced, at a rate of 220 per cent for the portion of open market value that exceeds $80,000. This will generate an estimated additional $50 million in revenue per year.
There will also be two changes to the property tax, with steeper increases applied to higher-end properties.
First, the tax rates for non-owner occupied residential properties will be raised from 10 to 20 per cent to 12 to 36 per cent by 2024.
Second, tax rates for owner-occupied residential properties with annual values of more than $30,000 will increase to 6 to 32 per cent by 2024. The increase will impact the top seven per cent of such properties such as large landed properties.
The changes are expected to raise Singapore’s property tax revenue by about $380 million a year.
5. Healthcare system to be reviewed
Healthcare expenditure will form the bulk of government spending by 2030 as Singapore’s population ages.
Hence, the healthcare system needs to be restructured to make healthcare more accessible to the community, said Mr Wong.
“The Government can and must spend more on healthcare for Singaporeans. But the current trajectory of increase is not sustainable.”
As such, the Government will review Singapore’s healthcare resourcing approaches and financing schemes.
Singaporeans can expect changes in the way healthcare is delivered over the longer term as the goal is to centre healthcare around the patient, Mr Wong added.