What You Need to Know About Singapore Budget 2022

Singapore has announced a number of measures to support employers and workers as part of the country’s 2022 budget.

Mayumi Soh of Pinsent Masons MPillay, the Singapore joint law venture between MPillay and Pinsent Masons said: “It is important that employers review the new measures to better understand how they will be impacted and take any necessary action.\"

Singapore Minister of Finance, Lawrence Wong has focused the 2022 budget on three initiatives:

• Investing in new capabilities
• Strengthening social impact
• Advancing green initiatives

The hope is that these three sectors will use the lessons of the last three years to help create smooth sailing ahead for all of Singapore. What does that look like for businesses specifically? While the future conditions can’t be predicted, there are a few markers in the planned course ahead that businesses should be aware of to make the most of the opportunities available. Here are my top four takeaways for businesses looking to plot ahead based on the government’s thinking.

GST Hike Delayed, but Should Not Be Ignored

While the tack towards a GST hike has been swirling for quite some time, Minister Wong understands that such a hike needs to be gradual and measured so as not to create an unnecessary burden for businesses and citizens alike. While this delay offers a short reprieve, it would be unwise to think that this is a sign that GST won’t be scrutinized greatly by the government over the coming years. The GST’s eventual hike to 9% in 2024 would likely make it the second-largest source of tax revenue for the government behind only Corporate Taxes, justifying such scrutiny.

This delay is a good-faith buffer to help the economy regain a stable keel after the pandemic. As the eventual hike from 7% to 8% on 1 January 2023 is now very much confirmed, businesses should factor this into their long-term plans.

Given the 10-month lead-in for businesses, there is still time to adjust to the increase. There will also be a SGD million pool for businesses to acquire new accounting resources and point of sale adjustments to help them manage this increase. This gives companies more time and resources to review their processes and tax structures to minimize the impact on their profits. You should absolutely use this time wisely and commit resources to ensure you don’t get caught in any GST-related rough weather.

Carbon Tax to Increase to SGD per Tonne by 2030

“To move decisively to achieve our new net-zero ambition”, according to Minister Wong, the carbon tax will increase to SGD per tonne in 2024, all the way up to SGD per tonne in 2030. While the current tax of SGD per tonne will remain until 2023, this should be a wake-up call for all industries reliant on fossil fuels.

Combined with Russia’s current weaponization of fossil fuel economics, this is a clear marker for a shift towards greener, more efficient options for most sectors. The commercial heavy-duty transport industry should accelerate plans towards electrification, or even hydrogen.

Industries in petroleum and chemicals, iron and steel, cement, and other major greenhouse gas (GHS) emitters will see more value in adopting renewable energy,  electrifying their processes, and/or introducing new-energy alternatives in their operations.

The carbon taxes shouldn’t just be set aside for any old rainy day — the future of climate change is the be-all and end-all of rainy days, and they should be used exactly for that purpose. The taxes should for the most part be channeled into research and development on decarbonization and new energies to reduce greenhouse gas emissions. This is an opportunity for Singapore to be a world leader in charting the way ahead for what will undoubtedly be the race towards the next major leap forward in global energy.