Impact of Singapore Budget 2022 on the Finance Industry

Budget 2022 is an opportunity to take Singapore in bold directions by achieving sustainability goals and evolving global tax rules. Singapore’s Finance Minister, Lawrence Wong, unveiled a budget on Friday, 18 February 2022, that aims to rebuild finances and revive the post-pandemic finance industry by raising taxes on the wealthy. 

Despite the Covid-19 pandemic, geopolitical tensions, inflationary pressures, and global supply chain crisis impacting economies worldwide, Singapore made a stronger-than-expected recovery in 2021. Singapore has successfully maintained its growth forecast of 3% to 5% in the first quarter of 2022. This year’s Singapore budget focuses on laying the groundwork to better position the country for future challenges and opportunities. Moreover, it aims at strengthening its competitiveness as a financial and business hub. 

Budget 2022 for Singapore includes the much-anticipated tax proposals, including the carbon tax, wealth tax, and GST (goods and services tax).

Let’s understand how Singapore’s budget for 2022 has impacted the finance industry. 

The Effects of The Budget 2022 on the Finance Industry in Singapore:

1. Carbon Tax

Being one of the world’s most pressing issues, climate change remains a top priority for Singapore. For this year’s budget, the Finance Minister announced an increase in carbon tax from $5 per tonne of emissions to $50-$80 per tonne of emissions by 2030. He also stated that increasing the carbon tax is not revenue-generating for the government. Instead, the revenue generated by the carbon tax will be used to fund incentives and help companies make the green transition and grab opportunities in the green economy. 

Companies that have reduced their carbon emissions will benefit from the tax increase. However, emissions-heavy companies will be affected negatively. The government has taken this step to signal the seriousness of meeting the climate goals. 


2. Goods and Services Tax (GST)

The Finance Minister announced the augmentation of wealth collection, including luxury vehicle and property tax, increased personal income tax rates for higher-income earners, and an anticipated increase in the GST. This significant increase in the current tax rates and the addition of new taxes are announced to meet the increasing long-term government expenditures, especially in the healthcare sector. 

However, to soften the overwhelming increase in taxes, the government has decided to postpone the increase in GST until 2023. It will implement the GST increase in two steps to mitigate the impact on the consumers. 


3. Long-Term Structural Concerns

The government also announced its plans to address the long-term structural concerns by supporting small and medium-sized enterprises (SMEs) to undertake R&D activities and increase investments in digital opportunities. It will also launch a new initiative, “Singapore Global Enterprise”, to help the local firms of Singapore go global. The government has taken these measures to signal that Singapore will successfully deal with the evolving changes bought by Covid-19. And not just that, but it will also pave the path for a post-pandemic future with its multifaceted measures. 


The Road Ahead

The 2022 budget offers clear measures to strengthen Singapore’s competitive advantage, attractiveness for inbound investments, and social impact. These directives aim to prepare the country for a greener future that is fast-paced and full of opportunities. 

To learn more about the finance industry in Singapore, you can visit the DataTracks blog.

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