Spending may hit 20% of GDP by FY2030: Ministry

GST hike, tax moves required to fund needs like healthcare costs

- Goh Yan Han

Rising healthcare costs are expected to drive up government spending in the years ahead.

It is expected to increase from about 18 per cent of gross domestic product GDP) now to 19 per cent to 20 per cent in the financial years FY) 2026 to 2030, and possibly exceed that by FY2030, a Ministry of Finance MOF) paper said.

The current total revenue, which comprises operating revenue and Net Investment Returns Contribution, is lower, at about 18.5 per cent of GDP. This is not enough to cover the projected increase in government spending.

To help close this gap, tax changes announced in Budget 2022 will contribute about 0.7 per cent of revenue.

The new projections up to FY2030 were part of an occasional paper looking at the fiscal implications of the medium-term challenges facing Singapore that was released on Wednesday.

While the authorities said previously that the Budget 2022 tax changes were meant to cover the increase in healthcare and social spending costs, this is the first time detailed numbers have been pulled together to show how these moves are likely to ensure a more balanced budget.

The measures announced in 2022 include confirming the timeline of the goods and services tax GST) hike from 7 per cent to 9 per cent, increases to the top marginal personal income tax rate, as well as changes to property tax and fees for those purchasing luxury cars.