Higher collections from property tax, corporate income tax a boost to Government's revenues
SINGAPORE: A “healthy” contribution from corporate income tax and property-related taxes this year has shored up the Government’s coffers, enabling recent COVID-19 support measures to be rolled out without tapping on past reserves, economists said.
These higher tax collections come on the back of a buoyant property market, the continued expansion of some industries such as manufacturing, and a rebound in Singapore’s gross domestic product growth this year, they added.
Singapore is in the midst of a “stabilisation phase”, with stricter COVID-19 rules in place such as a two-person limit for social gatherings and dining out.
First imposed on Sep 27, the initial plan was for these tighter protocols to be in place for a month to quell the surge in local COVID-19 infections. But with the country’s healthcare system remaining under pressure as daily new cases remained in the four digits, the rules have since been extended to Nov 21.
To help affected businesses and workers, a S$650 million package containing wage subsidies, rental waivers and other forms of support was rolled out in late September. When the tighter curbs were extended last month, the Government announced a second round of aid worth S$640 million.
These latest support measures, totalling up to nearly S$1.3 billion, will be funded by higher-than-expected revenues collected to date, with no further draw on past reserves, authorities have said.
Economists told CNA that the Government’s revenues likely got a boost from higher tax collections across several areas in financial year 2021.
“It is true that budget revenue collections are currently running higher than expected … thanks to healthy corporate and personal income taxes, property tax, stamp duty, and customs and excise duties,” said OCBC’s head of treasury research and strategy Selena Ling.
“In fact, the year-to-date 2021 collection numbers (for these taxes) have exceeded the same period in pre-COVID 2019,” she added.
Since the financial year began in April, corporate income tax collection up until September has come up to about S$12.8 billion, according to latest data from the Accountant-General’s Department made available on the website of the Singapore Department of Statistics.
This more than doubled the S$5.7 billion collected over the same period in the last financial year.
Personal income tax collection thus far totalled S$8 billion, slightly above the S$6.9 billion collected over the same six-month period in the preceding year.
Property tax collection quadrupled to nearly S$2 billion, the latest official figures showed, compared with the S$508 million collected previously.
Stamp duty collection from April to September was S$3.2 billion, also way higher than the S$1.2 billion collected in the previous financial year.
WHAT’S BEHIND THE BOOST IN TAX REVENUE
Asked why corporate income tax receipts have surged despite the COVID-19 pandemic, Ms Ling said some industries such as manufacturing have performed better than expected so far. This may have helped to offset the downturn in other industries.
DBS senior economist Irvin Seah agreed, adding that it has been “a very uneven recovery” due to some sectors getting a lift from improving external demand and accelerated trends like digitalisation. Others such as travel and tourism, remain hampered by the pandemic’s uncertainties.
“So basically, the value-add from sectors doing better has helped to offset the downside from sectors that continue to struggle,” he said.
“Those sectors that have done well will bring in fairly strong revenue collection, and they form quite a big part of the economy. This explains why the overall GDP this year is a positive number, and a strong one at between 6 to 7 per cent,” Mr Seah added.
The same reasoning is behind the resilience in personal income tax collections, the two economists said.
But Ms Ling noted that the rise is “a bit surprising” and pointed to the Jobs Support Scheme and other government measures that may have provided a buffer for the labour market.
A buoyant property market fuelled by rising prices and increased transactions have bolstered the property tax and stamp duty collections.
Singapore’s private home prices rose at a faster rate of 1.1 per cent in the third quarter, partly bolstered by landed property sales and prices, official data showed.
While monthly sales of new private homes fell for the second straight month in September, the total number of new units sold for the first three quarters of this year have already surpassed the whole of 2020, property analysts have said.
Mr Seah said property demand has held up due to two reasons.
First, the pandemic-induced economic impact has been “highly regressive”, with low-income earners bearing the brunt.
“The mid to high-income are mostly in industries and sectors that are less affected by the pandemic. Many of their jobs can also be performed remotely,” he said. “Given that they are not that badly impacted, they may continue to invest and one way is buying properties.”
The work-from-home arrangement may also be spurring some to consider bigger homes, Mr Seah said.
BETTER TAX REVENUE TO CONTINUE
Higher tax collections in these same categories are likely to continue, thanks to a recovery in the Singapore economy.
CIMB Private Banking economist Song Seng Wun said: “It’s all about the economy. If restrictions are eased, more in-person activities and more hiring can take place, it should add to the overall sentiment.
“So the trend of improving tax collections should broaden out beyond the sectors and industries that have held up so far.”
Earlier this year, the Government also doled out support packages worth more than S$2 billion for those affected by the two “heightened alert” periods from May to July. These were funded via budget reallocations from areas that have been under-utilised due to the pandemic.
With the latest use of higher-than-expected revenues to fund COVID-19 relief measures, there may be “less likelihood of an upside surprise” in the country’s overall fiscal position, said Mr Seah.
He noted that the Government tends to be conservative with its estimates and previous budget deficits have turned out smaller than projected.
“I’m not discounting the possibility of an upside surprise ... but this time round, I think that will be moderated because of the series of ad-hoc spending on the support measures," the DBS economist added.
The Government has said it expects a budget deficit of S$11 billion, or 2.2 per cent of GDP, for Singapore’s overall fiscal position in FY2021.
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