SINGAPORE, Feb. 18 (Xinhua) -- Singapore's Finance Minister Lawrence Wong announced on Friday while delivering the Budget Statement 2022 that Singapore will make major enhancements to strengthen its tax structure, and build a fairer and more resilient tax system.
He said that Singapore's corporate tax system will need to be updated due to global tax developments relating to the Base Erosion and Profit Shifting initiative, or BEPS 2.0, which has two pillars.
The Pillar 2 introduces, amongst others, a global minimum effective tax rate of 15 percent for Multi-National Enterprise (MNE) groups with annual global revenues of 750 million euros (about 852.3 million U.S. dollars) or more, under its Global Anti-Base Erosion (GloBE) Model Rules. This means that if such an MNE were to have an effective tax rate of less than 15 percent in Singapore at the group level, other jurisdictions such as its home jurisdiction can collect the difference up to 15 percent.
Wong said that Singapore will adjust its tax system in response to Pillar 2 GloBE rules by exploring a top-up tax called the Minimum Effective Tax Rate (METR). The METR will top up the MNE group's effective tax rate in Singapore to 15 percent.
"IRAS will study this further and consult the industry on the design of METR," he added. "We will also continue to closely monitor international developments before making any decisions on the METR."
The finance minister also announced that Singapore will increase the top marginal personal income tax with effect from the Year of Assessment 2024. This increase is expected to affect the top 1.2 percent of personal income taxpayers in the city-state and will raise 170 million Singapore dollars (about 126.57 million U.S. dollars) of additional tax revenue per year.
Wong announced some adjustments to the wealth taxes as well, saying that wealth taxes are needed to build a fairer society where everyone can aspire to succeed regardless of their backgrounds. He said that Singapore will make several adjustments to property tax, which is currently Singapore's principal means of taxing wealth, and will tax luxury cars at a higher rate to make Singapore's vehicle tax system more progressive.
Meanwhile, the minister said that Singapore will delay its plan to increase Goods and Services Tax (GST), considering the concerns that Singaporeans have about the GST increase taking place at the same time as rising prices. He said that the first increase will take place on Jan. 1, 2023, from 7 percent to 8 percent, and the second increase on Jan. 1, 2024, from 8 percent to 9 percent.
Besides, Wong announced that Singapore will raise its carbon tax to 25 Singapore dollars per tonne of emissions in 2024 and 2025, and 45 Singapore dollars per tonne in 2026 and 2027, with a view to reaching 50 to 80 Singapore dollars per tonne by 2030. Singapore introduced the carbon tax in 2019 and kept the initial tax as low as five Singapore dollars per tonne to give its businesses time to adjust, he added. (1 U.S. dollar equals 1.34 Singapore dollars) ■
