Ahead of Budget Day on Friday (18 February), Insight speaks to observers on what to expect, from tax changes to enhanced support measures for families and firms.
While the Budgets of the last two years focused on getting individuals and businesses through Covid-19, this year’s looks to be different in setting its sights on longer-term goals, said experts.
With a high vaccination rate among the population and less willingness to sacrifice more economic gains for the sake of public health, the Government, like many others around the world, will continue to roll back pandemic support measures, they said.
Said economist Walter Theseira from the Singapore University of Social Sciences: “Assuming that the economy continues to register good growth, it’s also the case that the process of transition by businesses and workers should continue as that is more helpful to the economy than to support firms that have not been able to adapt.
Firms in Singapore are still facing a labour crunch as a result of restrictions on foreign hires and the difficulty of finding manpower with the skills they need.
While some relief may soon be on the way as Covid-19 border restrictions ease, employers are also hoping for policy changes at Budget 2022 that will support their operations and ambitions for growth.
At an Institute of Singapore Chartered Accountants’ pre-Budget roundtable last month, panellists cited rising labour costs and the difficulty attracting the right talent as their major business challenges that were exacerbated by a tighter foreign worker policy and Covid-19 border restrictions.
On the cards for the upcoming Budget is more help for firms in redesigning jobs to be more attractive as well as incentives to hire mid-career job seekers with the right skills, said MPs and economists.
At the same time, there are likely to be inducements for workers to keep upgrading their skills.
Mr Liang Eng Hwa, the MP for Bukit Panjang, said the Government should help firms to redesign jobs so that these are more attractive to local job seekers. This could also help widen the pool of potential hires at the same time, he said.
Budget 2022 will reveal the timeline for the planned goods and services tax (GST) hike, though experts disagreed on when it will take place and whether the increase from 7 per cent to 9 per cent will be done in one go or in two stages.
Some experts said it could come as early as July while others suggested it would come in mid-2023.
But any further delay is not likely, though there have been concerns from harder-hit sectors and groups after Prime Minister Lee Hsien Loong’s New Year message, in which he said the tax increase would be tackled in Budget 2022.
Additional means to tax wealth could be introduced at Budget 2022, which would help to boost Government coffers and reduce wealth inequalities.
A property-related tax would be easiest to implement and enforce, experts said, noting that any form of wealth tax, if implemented, should not result in excessive compliance costs for taxpayers.
Second Minister for Finance Indranee Rajah told Parliament last November that the question is not whether Singapore wants to tax wealth, but how it can be done effectively so that such taxes cannot be easily avoided.
Singapore’s revised carbon tax rate for 2024 will be announced at Budget 2022, which will also indicate what to expect of carbon pricing up to 2030.
Experts are also looking out for measures to support the country’s green transition, such as incentives for firms which adopt more energy efficient processes and machinery.
The Republic’s current rate of $5 per tonne on firms that emit at least 25,000 tonnes of carbon dioxide-equivalent greenhouse gases is on the low end of the spectrum in comparison to what other countries are charging.
Policy measures to drive further digital transformation and to help companies adapt to the changing business landscape are likely to be announced during Budget 2022.
Finance Minister Lawrence Wong has indicated that besides providing support for sectors still facing difficulties from the pandemic and helping Singaporeans manage cost concerns, the Budget will also have measures to put Singapore in a stronger position post-pandemic. This includes building new capabilities for the future.
UOB economist Barnabas Gan, in a note last month, said that monies could be dedicated to efforts to build Singapore’s presence as a global node of technology, innovation and enterprise, especially as this goal took a step back in 2021 because of the need to devote resources to combat Covid-19.
Households will have to grapple with the looming goods and services tax (GST) hike, as well as the uncertainty of what the post-pandemic era holds for them, and this year’s Budget will continue to provide the needed support.
The rising cost of living is a perennial issue, said Marine Parade GRC MP Seah Kian Peng, who is also chief executive officer of NTUC FairPrice.
“I would be surprised if the Government does not unveil measures to help all mitigate the rising cost of living,” he said.
Text: Goh Yan Han and Choo Yun Ting/Straits Times