Singapore’s budget was presented by the country’s finance minister on Feb 19. The highlights were the plans of increasing GST and a one-time bonus “hongbao” for Singaporeans aged 21 and above.

Into the Headlines

Heng Swee Keat announced that GST will be increased 2% and will up to 9% sometime in the period 2021-2025 in order to increase government revenues. Heng expects to bring in this hike in the earlier phase of the period, as an early announcement will help people prepared better in order to handle the tax hike blow (read: ETFs in Focus as Singapore GDP Exceeds Expectations).

Per a Channel News Asia article, Heng said, “This GST increase is necessary because even after exploring various options to manage our future expenditures through prudent spending, saving and borrowing for infrastructure, there is still a gap, “adding “Increasing GST by two percentage points will provide us with revenue of almost 0.7 per cent of GDP per year. This boost will be vital in closing this gap.”

Singapore’s GDP grew 3.6% in 2017 compared with 2.4% in the prior year. This helped Singapore register a budget surplus of S$9.6 billion ($7.3 billion) in 2017, driving Singapore government’s decision to announce a one-off Singaporean bonus. Prime Minister Lee said in a Facebook post, “Last year, we had a better-than-expected surplus,” adding “Each Singaporean aged 21 and above [will] receive an SG Bonus of S$100 to S$300 depending on income, as we share the fruits of Singapore’s prosperity.”

Moving on to the government’s aim of becoming cleaner and greener, a carbon tax of S$5 per ton of greenhouse gas emissions for companies producing 25,000 tons or more of greenhouse gases a year was announced in the budget, in order to encourage industries to reduce emissions. This rate is expected to be reviewed in 2023 and introduces an added expenditure for Singapore’s industries, while Heng expects to generate around S$1 billion ($760 million) in carbon tax in the first five years.