Taxpayers, both corporate and individual, contributed more to the Government’s coffers in the past financial year, but analysts caution that the pace could slow down on the back of the Covid-19 pandemic.
The Inland Revenue Authority of Singapore (Iras) collected $53.5 billion in taxes in the fiscal year 2019/20, which is 2.1 per cent more than a year earlier, according to its annual report released yesterday.
The collection accounted for 72 per cent of government operating revenue, and 10.5 per cent of Singapore’s gross domestic product (GDP), or economic output.
But going forward, Maybank Kim Eng senior economist Chua Hak Bin expects total tax collection to fall by around 10 per cent this financial year, with corporate income tax and goods and services tax (GST) taking the biggest hit from the economic downturn. “Stamp duties may not fall as much because property transactions have been more resilient,” he said.
KPMG tax director See Wei Hwa said that while the medical and biopharmaceutical sectors have done well, many companies in other sectors have been adversely affected.
“We would expect income tax collection to fall significantly in tandem with the overall decline in the Singapore GDP,” he said.
Singapore has slashed its full-year growth forecast to between minus 5 per cent and minus 7 per cent, its worst-ever contraction and first full-year recession in almost two decades. The Government has committed around $100 billion in Covid-19 support this year, and is expected to draw up to $52 billion from past reserves.
In Parliament on Thursday, Deputy Prime Minister Heng Swee Keat said that GST collections this year are projected to be down by 14 per cent from initial estimates before the start of the year, mainly due to travel disruptions and the impact of the circuit breaker period.
Today, the bulk of Singapore’s tax revenue comes from income tax, comprising corporate income tax, individual income tax and withholding tax. It amounted to $30.8 billion, or 57 per cent of Iras’ collection for the 12 months ended March 31.
Corporate tax revenue grew 4.3 per cent year on year to $16.7 billion, while personal income tax collection went up by 5.7 per cent to $12.4 billion. These two areas account for over half of total tax collections.
The next biggest category of tax revenue was the GST, making up 21 per cent of total collection. It inched up by 0.2 per cent to $11.2 billion.
KPMG head of indirect tax Lam Kok Shang said that GST collection could plunge next year due to the collapse in tourist numbers, retrenched foreign staff going back to their home countries and Singaporeans tightening their spending.
“We expect that once the economy recovers, the GST rate increase will happen sooner in the timeframe of 2022 to 2023, rather than later,” he said, referring to the GST increase to 9 per cent which will take place by 2025.
Mr Richard Mackender, the indirect tax leader for Deloitte Singapore and South-east Asia, said a full recovery in GST collection is unlikely until the travel and tourism sectors are back to normal, “which could be a long while yet”.
“The Government still needs revenue from taxation, so we should expect to see more attention paid to taxpayer compliance as the economy recovers,” he said.