Every year around the first quarter of the year, Singapore tunes in to our Finance Minister’s Budget Speech, which sets the direction that the government is moving towards in the new fiscal year. While we often focus on the strategic direction of the Budget Speech, the Singapore Budget also encompasses the country’s Revenue and Expenditure which contains the fiscal details of running the country.
This year, we take a deep scrutiny of Budget 2022’s Revenue And Expenditure and uncover the nitty gritty details behind the Singapore Budget.
Read Also: [Liveblog] Singapore Budget 2022: Live Coverage And Real-Time Commentary
#1 Revenue From Goods And Services Tax (GST) Is Projected To Increase 6.6%, Higher Than Corporate Income Tax And Personal Income Tax In FY2022
The top 3 operating revenue sources for Singapore are: Corporate Income Tax, Personal Income Tax and Goods And Services Tax (GST). These revenue sources resulted in $17.51 billion, $13.83 billion and $12.01 billion respectively in FY2021.
What is interesting to note is that GST is projected to increase by 6.6% to $12.80 billion in FY2022. This is much higher than both Corporate Income Tax and Personal Income Tax which are projected to increase by 3.9% and 1.1%.
This GST revenue increase is estimated for FY2022 which is before the planned GST increment to a rate of 8% in FY2023 and 9% in FY2024. This planned GST rate increment to 9% is 29% increase from the current GST rate of 7%. Given that GST is already the third highest source of operating revenue in FY2021, it is likely that GST would overtake Corporate Income Tax or Personal Income Tax to be one of the top two sources of government revenue in the coming years.
Read Also: 6 Things From Singapore Budget 2022 That Will Affect You Financially
#2 Revenue From Stamp Duty And Vehicle Quota Premiums Increased The Most (By 51.8% and 41.4% Respectively) Compared To Their Estimates In FY2021
Another point that stood out from the operating revenue in FY2021 was the large gap between the estimated revenue and actual revenue from Stamp Duty and Vehicle Quota Premiums.
Revenue from Stamp Duty was estimated to be $4.25 billion but the final revised revenue was $6.45 billion in FY2021, a jump of 51.8%. While a small portion can be attributed to the December 2021 property cooling measures which increased Additional Buyer’s Stamp Duty, this is likely to be largely driven by the surging property market in 2021.
Likewise, cars and COE prices increased steeply in 2021 which corresponded with the increase in revenue from Vehicle Quota Premiums. The original estimated revenue from Vehicle Quota Premiums was $2.28 billion while the final revised revenue was $3.22 billion, an increase of 41.4%.
The steep differences show how volatile the housing and vehicle markets were in 2021. While housing demand was anticipated, even the government did not predict how sharply this demand (and corresponding revenue) would have increased in 2021.
Read Also: Singapore Budget 2022: 5 Ways Taxes In Singapore Are Increasing
#3 Net Investment Returns Contribution Increased To $20.33 Billion In FY2021, More Than Estimated
Net Investment Returns Contribution (NIRC) is the greatest contributor of government revenue, higher than any individual tax revenue. Instead of being a source of operating revenue, it is revenue derived from investment of our national reserves.
NIRC comprises up to 50% of the Net Investment Returns (NIR) on the net assets invested by GIC, MAS and Temasek; and up to 50% of the Net Investment Income (NII) derived from past reserves from the remaining assets.
In FY2021, NIRC actually increased to $20.33 billion, higher than the $19.56 billion estimated.
Read Also: Singapore’s National Reserves: What Is It And What Can They Be Used For?
#4 Social Development, Especially Health, Has The Highest Expenditure Allocation In FY2022
Defence has traditionally been the sector that incurs the highest government expenditure and this has been true as recently as FY2019.
However, in FY2020, this changed to Health being the sector that the government spends the most on. This change is likely spurred by the pandemic which required high expenditure into our health sector to cope with the waves of pandemic outbreaks. However, as highlighted in this year’s Budget Speech, Health has also become an area of strategic concern as our population ages
For FY2022, $19.29 billion is budgeted for Health expenditure. The next two sectors with the highest expenditure allocation are Defence at $16.36 billion and Education at $13.6 billion. This makes Social Development, which includes Health and Education, take up the lion’s share (almost 50%) of the government’s expenditure allocation.
#5 Expenditure On Manpower Accounts For 18% Of The Government’s Running Costs
It is widely acknowledged that the government is Singapore’s largest employer. About 18% of the government’s running cost is due to manpower.
Expenditure on manpower for FY2022 is estimated to be $10.6 billion for 144,813 establishment positions. This expenditure on manpower has slowly increased from $8.36 billion in FY2016 to $9.89 billion in FY2021.
According to this year’s Budget Speech, the government will be applying a further 1% cut (on top of the existing 2% cut) to the budgets of Ministries and Organs of State from FY2023. This suggests that there may be a future freeze on government running costs despite the increase in manpower expenditure in FY2022.
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