SINGAPORE: Singapore’s Finance Minister Lawrence Wong on Friday announced increased government spending to help households fight inflationary pressures in the city-state, but promised a balanced budget in the coming years.
The prime minister-in-waiting also told parliament he would introduce a 15% global minimum corporate tax rate, led by the Organization for Economic Co-operation and Development (OECD), to bring in additional revenue for the Asian financial hub.
Although the government’s medium-term fiscal situation is difficult, Wong said its overall stance is “appropriate as it provides targeted support”.
He said Singapore expected a modest surplus of S$800 million, or 0.1% of gross domestic product (GDP), in the 2024 financial year, and was in an “essentially balanced fiscal position”.
An additional S$1.9 billion ($1.41 billion) will be added to support households in one of the world’s most expensive countries, while an additional S$1.3 billion ($1.41 billion) will be added to support households in one of the world’s most expensive countries. Support measures for businesses will also be introduced. .
The country’s population of 5.9 million people is also facing a consumption tax hike that began last year and a planned water rate hike. Mr Wong said a total of S$6 billion worth of vouchers would be distributed to support the sales tax hike.
The government will also spend an additional S$300 million a year on medical support for the aging population.
“The best way to deal with inflation is to make businesses and workers more productive and increase real incomes,” he said.
Singapore’s inflation rate has fallen from a peak of 5.5% early last year, but remains above pre-pandemic levels at 3.3% in December.
Mr Wong also announced a new energy transition fund, with an initial injection of S$5 billion.
New tax credits will be created to support high-value economic activities, manufacturing, research and development and the green transition, with an additional S$3 billion to the Research and Development Fund and S$1 billion over five years for talent development. Dollars are added. Industry and artificial intelligence.
tax challenge
Mr Wong said he would push ahead with the implementation of Pillar 2 of BEPS 2.0, an OECD project in which more than 140 countries agreed to raise the minimum effective tax rate to 15% for large companies.
But it was unclear how much additional income would be generated and for how long it would last in a country whose low tax rates have long made it attractive to investors.
“If multinational companies (multinationals) move some of their activities to other jurisdictions, their tax base may even be reduced,” he said.
In Singapore, the current maximum interest rate is 17%, but some investors are paying effective interest rates as low as 4%. Mr Wong said last year that BEPS 2.0 would reduce Singapore’s ability to use tax incentives to attract new investment.
Singapore expects GDP growth to pick up further this year, from 1% to 3% this year, after plummeting from 3.8% in 2022 to 1.1% in 2023.
However, he said the government is not willing to push for economic expansion at all costs, as growth is not everything, and fiscal constraints and issues surrounding labor and land limit the speed at which the country can grow. said.
He said Singapore would become an “economy that benefits the many, not the few”. – Reuters