In light of Singapore's economy rebounding from the reverberations from the COVID-19 pandemic, Budget 2022 was unveiled by Singapore's Minister for Finance Mr Lawrence Wong on 18 February 2022. With the theme "Charting Our New Way Forward Together", Mr Wong laid out a wide range of measures to tackle Singapore's immediate challenges, including:
- S$500 million Jobs and Business Support Package to provide targeted help for workers and businesses in segments of the economy that are facing slower recovery;
- S$560 million Household Support Package that helps Singaporean families to manage cost of living pressures by providing support for daily essentials;
- S$600 million set aside to strengthen local enterprises under the Productivity Solutions Grant; and
- S$200 million to improve digital capabilities in businesses and workforces, such as investing in future technologies like 6G.
There were also tax measures and changes announced which were categorised as follows:
- Maintaining the competitiveness and resilience of the tax system;
- Building a fairer and more resilient tax system;
- Enhancing service delivery; and
- Increasing the carbon tax.
With regard to the carbon tax increase, Singapore has set the goal of achieving net zero carbon emissions by or around 2050. Accordingly, the carbon tax that was introduced in 2019 will be increased from S$5 per tonne of emissions to:
- S$25 per tonne in 2024 and 2025;
- S$45 per tonne in 2026 and 2027; with a view to reaching
- S$50 to S$80 per tonne by 2030.
Any subsequent increases will be announced ahead of time to provide certainty for businesses.
To support businesses as they adjust to carbon tax increases and to manage the near-term impact on their competitiveness, the Singapore Government will put in place a transition framework in 2024. Under this framework, firms will be provided with allowances for a share of their emissions. The allowances will be determined based on efficiency standards and decarbonisation targets. This will help to mitigate the impact on business costs while still encouraging decarbonisation.
From 2024, businesses will be allowed to use high-quality, international carbon credits to offset up to 5% of their taxable emissions in lieu of paying carbon tax.
For more information on the carbon tax increase and other tax measures, changes, enhancements, extensions, and refinements announced in Budget 2022, click here to read our Legal Update.
