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SINGAPORE – Taxpayers, both corporate and individual, contributed more to government coffers in the last financial year, but analysts warn that the pace could slow as a result of the Covid-19 pandemic.
The Singapore Internal Revenue Authority (Iras) collected $ 53.5 billion in taxes in fiscal 2019/20, up 2.1% from a year earlier, according to its annual report released on Friday (October 16).
The Iras collection represented 72 percent of the government’s operating income. This amount represented 10.5 per cent of Singapore’s gross domestic product or economic output.
Going forward, Maybank Kim Eng Senior Economist Chua Hak Bin expects total tax collections to fall by around 10 percent this financial year, and that corporate income tax and goods and services tax ( GST) are the most affected due to the economic recession.
“Stamp duty may not decrease as much because property transactions have been more resilient,” he said.
Singapore has cut its full-year growth forecast to between -5% and -7%, its worst contraction and the first full-year recession in nearly two decades.
On Thursday, in Parliament, Deputy Prime Minister Heng Swee Keat said that this year’s GST collections are projected to decline by 14 percent from initial estimates before the start of the year, mainly due to disruptions in trips and the impact of the breaker period.
GST collection is also expected to remain lower than usual for a few more years until international travel fully recovers, he added.
Most of Singapore’s tax revenue comes from income tax, which includes corporate income tax, personal income tax and withholding tax. It amounted to $ 30.8 billion, or 57 percent of Iras’ revenue for the 12 months ended March 31.
Corporate tax revenue grew 4.3 percent year-on-year to $ 16.7 billion, while personal income tax collection increased 5.7 percent to $ 12.4 billion. These two areas represent more than half of total tax collection.
The next most important category of tax revenue was GST, which accounted for 21 percent of total revenue. It increased by a slight 0.2 percent to $ 11.2 billion.
CIMB private banking economist Song Seng Wun said a “sharp drop” in tax collection will only be seen next year, when the full impact of the job and wage cuts due to the pandemic takes place.
“There have been large amounts of transfers to (support) businesses and workers, and government revenues will continue to lag behind spending,” he said.
The government has committed about $ 100 billion in support of Covid-19 under four budgets this year, and is expected to pull up to $ 52 billion from past reserves.
In a press release on Friday, Iras said it continues to support the government in administering assistance plans such as the Employment Support Plan and the Job Growth Incentive. So far this year, more than $ 18 billion in donations have been disbursed.
It has implemented digital initiatives, such as an interactive chatbot, to make tax filing more seamless, and will move most notices and paper letters online starting in May 2021.
Iras Commissioner and CEO Ng Wai Choong said: “We will continue to collaborate with various stakeholders to innovate and implement new digital solutions, so that paying taxes is even more convenient.”
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