Trends for Singapore's Tax Sources and Strategies to Ensure Long-term Tax Revenue Sustainability
Ministry of FinanceSpeakers
Summary
This question concerns the trends of Singapore’s major tax sources and the strategies adopted to ensure long-term revenue sustainability amidst economic volatility and evolving global tax regimes. Mr Saktiandi Supaat inquired if the reliance on corporate income tax and goods and services tax (GST) would persist despite potential economic slowdowns and international tax changes. Minister of State Jeffrey Siow responded that corporate tax revenue faces risks from developments like Base Erosion and Profit Shifting (BEPS) Pillar Two and a competitive investment landscape. He highlighted that GST increases address rising healthcare costs for an ageing population, while the Net Investment Returns Contribution now funds approximately one-fifth of the annual budget. The government intends to maintain fiscal resilience through prudent expenditure management, a diversified tax base, and policy adjustments that adapt to changing economic and social circumstances.
Transcript
107 Mr Saktiandi Supaat asked the Prime Minister and Minister for Finance in light of the IRAS' latest annual report showing that corporate income tax and GST are the two largest revenue sources (a) whether such trends are expected to persist; and (b) what strategies are being adopted to ensure long-term tax revenue sustainability given the volatility of corporate tax collections, potential of economic slowdowns and evolving global tax regimes.
Mr Jeffrey Siow: Corporate income taxes and goods and services taxes are regularly the highest contributors to tax revenue. While corporate income tax collections have increased in recent years, this cannot be taken for granted, given the increasingly competitive investment landscape, economic volatility and new developments on international tax regimes like the Base Erosion and Profit Shifting (BEPS) Pillar Two. The increase in Goods and Services Tax (GST) revenue due to the GST rate increase in the last term of Government supports medium-term priorities, such as rising healthcare costs of an ageing population.
Revenue sustainability is an integral part of Singapore's fiscal strategy. This is why we made several revenue moves in the last term of Government to make our tax base more resilient and diversified. The Net Investment Returns Contribution (NIRC) from our Reserves now provides about a fifth of our annual budget. We will continue to manage our expenditure prudently, while adjusting our tax policies where necessary to adapt to changing circumstances.