Singapore Ups Sin Taxes Amid Higher Social Spending
February 27, 2014 Leave a comment
February 22, 2014, 11:43 AM
Singapore Ups Sin Taxes Amid Higher Social Spending
SINGAPORE—Indulging in drinks, smokes or even a wager are about to become pricier in this strait-laced island state.
Singapore increased duties levied on tobacco and liquor products on Friday, and will raise taxes on lottery betting from July, Deputy Prime Minister Tharman Shanmugaratnam told Parliament his annual budget speech.
He said the move was “in line with our social objective of avoiding excessive consumption or indulgence in these areas.”
Analysts, however, say the government might be upping so-called sin taxes in lieu of wealth taxes to help fund greater social spending—such as improved health-care benefits for elderly citizens, which were also announced Friday.
“There has been quite a buzz about taxing the wealthier but no change was proposed in the budget in that respect,” said Wu Soo Mee, a Singapore-based partner at accounting firm Ernst & Young.
Hefty spending plans to support the elderly also mean income tax rebates aren’t likely this year, she said.
As of Friday, duties on cigarettes and manufactured tobacco products are now 10% higher. The increase marks the first change to these duties since 2005 and, according to Mr. Tharman, who is also finance minister, could curb the increase in smoking prevalence among Singaporeans, particularly those aged 18 to 29.
All liquor duties have been raised by 25%—the first effective increase since 2004—so as to keep pace with inflation, Mr. Tharman added.
The revised duties are expected to add 120 million Singapore dollars (US$94.7 million) to government coffers every year.
Starting July 1, duties levied on lottery betting will rise to 30% of gross bets, up from 25% currently. The move affects Singapore Pools, a state-owned company that is the country’s only legal lottery operator, and is expected to increase government revenues to the tune of S$255 million a year.
In his budget speech Friday, Mr. Tharman said Singapore’s spending needs are likely to “grow significantly in the next 10 to 15 years,” driven by expenditures on health care, education and infrastructure.
For the fiscal year starting April 1, the government is planning to run a S$1.16 billion deficit—its first deficit since fiscal year 2009—partly to help fund more than S$9 billion in health care and other benefits to be provided to about 450,000 elderly citizens aged 65 or older.
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