Drivers of Corporate Income Tax Revenue of $23.1 Billion in Financial Year 2022/2023
Ministry of FinanceSpeakers
Summary
This question concerns the drivers of the $23.1 billion Corporate Income Tax (CIT) revenue in FY2022/2023 and whether its growth justifies deferring the scheduled GST increase. Mr Saktiandi Supaat asked about the factors behind the 26.8% revenue increase and how it compares to historical collections and future fiscal requirements. Deputy Prime Minister Lawrence Wong attributed the higher revenue to strong business profits in sectors such as finance, services, and manufacturing following the 2021 economic recovery. He explained that revenue generally tracks GDP growth and that rising healthcare costs for an ageing population will likely increase government expenditure to over 20% of GDP by 2030. Consequently, he stated that the scheduled GST increases remain necessary to meet medium-term spending needs and ensure fairness for both current and future generations.
Transcript
66 Mr Saktiandi Supaat asked the Deputy Prime Minister and Minister for Finance (a) what are the drivers of our Corporate Income Tax (CIT) revenue of $23.1 billion in the financial year 2022/2023, which is a 26.8% increase from the preceding financial year; (b) how does the $23.1 billion figure compare to the CIT revenue in the past 10 years; and (c) whether the trajectory of the CIT revenue suggests that we can defer or cancel the scheduled increase in GST on 1 January 2024.
Mr Lawrence Wong: The higher corporate income tax collection in FY2022 was due to higher business profits driven by the strong economic recovery in 2021. The increase was mainly from the financial and insurance, services, wholesale and retail, as well as manufacturing sectors. Data on corporate income tax collection in the past years is publicly available on the data.gov.sg website. Generally, growth in our corporate income tax revenue has been broadly in line with gross domestic product (GDP) growth.
We adopt a responsible approach to managing our fiscal resources. We consider not just the year-to-year changes but, more importantly, the medium-term trend in our expenditures and revenues. With an ageing population and rising healthcare costs, Government expenditure is expected to increase from the current 18% of GDP to potentially over 20% of GDP by FY2030. This has yet to account for additional spending that may arise from new policy initiatives, including the need to invest further in resilience and to strengthen our social compact and economic competitiveness.
On the revenue side, while we may get some upsides from time to time, our revenue generally does not grow faster than GDP in the medium term without tax rate changes. This is why the revenue measures announced at the recent Budgets, including the GST increase this year and next year, remain necessary to meet our medium-term spending needs.
Deferring the Goods and Services Tax (GST) increase will only store up more problems for the future, leaving us with less resources to take care of our growing fiscal needs. We will continue to monitor our revenue and expenditure trends closely and adjust our fiscal strategies to meet our collective aspirations in a way that is fair to both current and future generations of Singaporeans.