Indirect Levies Will Account For Half Singapore's Tax Revenue By 2004

by Mary Swire, Tax-News.com, Hong Kong

10 May 2002

According to recent reports, the tax reforms announced in Singaporean Finance Minister, Lee Hsien Loong's first budget last week will mean that indirect taxes will account for over half of revenue collected by 2004.

In order to increase the country's competitiveness against regional rivals such as Hong Kong and mainland China, Mr Lee on Friday reduced personal income tax from 26% to 22%, and corporate income tax from 24.5% to 22%. He increased the goods and services tax (GST) from 3% to 5%, but in order to cushion Singapore's lower income households, offset this increase with a five-year package of assistance measures valued at $1.23 billion.

A Finance Ministry official told the South China Morning Post on Thursday that around 59.8% of this year's S$22.9 billion in tax revenue would be coming from direct taxes. However, by 2004, direct and indirect taxes are likely to represent equal proportions of total revenue collection.

Singapore's Finance Ministry, which the SCMP suggests has enjoyed a 'mixed' reputation for macro-economic forecasting in the past, has said that it is impossible to predict the impact of the forthcoming tax reforms, as it is 'not known how our population would react' to the tax changes.

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