Despite these efforts, the economic pie is unlikely to grow as rapidly as in previous decades. Now that Singapore is a high-income economy closer to the technology and productivity frontier, the opportunities for catch-up growth are lower.
When Singapore was a young nation, a rising tide lifted all boats. Today, as a maturing society with wealth and socio-economic advantages accumulated over generations, fiscal redistribution will play a greater role in mitigating inequality and maintaining social mobility through education and other social investments.
HOW THE TAX SYSTEM IS CHANGING TO SUPPORT REDISTRIBUTION
Some ask if our tax system can be overhauled to give more to those who need it. Indeed, Singapore’s tax system has evolved over the years to promote redistribution while keeping the overall tax burden low. Everyone contributes something in taxes, with the better off contributing more.
The latest tax changes are part of this development. Although the 2022 budget stands out as the one that made an additional and significant shift towards greater progressivity in income and asset taxes, previous budgets – particularly those of 2010, 2013 and 2015 – have seen measures aimed at improving the progressivity of income and asset taxes and taxes. landforms.
With the rise in the GST, there was a lot of pre-budget speculation about what new forms of wealth tax might be considered and about the return of inheritance tax, abolished in 2008.
The government has instead chosen to work within the existing framework of taxes on residential property and luxury cars, given the practical difficulty of fairly assessing a person’s net worth, as well as the mobility of other forms of wealth. across borders.
It also raised the top marginal personal income tax rate for those earning more than S$500,000. This increase in personal income tax for the top 1.2 per cent of earners is expected to bring in around S$170 million in additional revenue each year. This builds on the personal income tax hike announced in the 2015 budget, which hit the top 5% of earners with a projected gain of S$400 million.