PM Wong: Singapore’s FY2024 budget surplus hits S$6.4B as corporate tax revenue surges

SINGAPORE: Delivering the Budget 2025 speech in Parliament on 18 February, Prime Minister and Finance Minister Lawrence Wong announced that Singapore’s national coffers have been boosted by stronger-than-expected revenue in the fiscal year (FY) 2024.

The surge in corporate income tax collections played a crucial role, helping to turn a deficit of S$2.6 billion in FY2023 into a surplus of S$6.4 billion, or 0.9 per cent of gross domestic product (GDP).

Corporate Tax Becomes Largest Revenue Contributor

According to the Ministry of Finance (MOF), corporate income tax collections rose by 6.5 per cent year on year, reaching S$30.9 billion—higher than the initial estimate of S$28 billion.

This brought corporate tax revenue to 4.1 per cent of GDP in FY2024, surpassing the historical average of 3.2 per cent.

PM Wong described this as an unexpected shift, highlighting that corporate income tax has now overtaken the Net Investment Returns Contribution (NIRC) as the single largest source of government revenue.

The NIRC, which allows the Government to spend up to 50 per cent of long-term investment returns from past reserves, totalled S$24 billion in FY2024, up from S$23 billion in FY2023.

The increase in corporate tax revenue was attributed to industry-specific cyclical factors, particularly in finance and wholesale trade, alongside a possible shift in multinational enterprises’ (MNEs) investment decisions as they seek stable business environments like Singapore for high-value operations.

Wong Rejected Alternative Revenue Sources, Defended GST Hike in 2022 Budget Debate

Beyond corporate tax, goods and services tax (GST) revenue rose sharply by 23.8 per cent year on year, reaching S$20.6 billion in FY2024.

MOF attributed this to stronger-than-expected private consumption growth.

Personal income tax revenue also saw an increase, rising 8.3 per cent to S$19 billion, driven by higher nominal wage growth.

Back in 2022, Wong has rebutted opposition calls to raise public revenues from sources beyond a planned GST increase, as he called on lawmakers to beware proposed alternatives that “are not prudent and will come at the detriment of the next generation”.

The GST rate was raised from 7 per cent to 8 per cent on 1 January 2023, and further increased to 9 per cent on 1 January 2024.

He argued in the Budget round-up speech that higher corporate, wealth, and other taxes could not fully replace the need for a GST increase.

Instead, he emphasised that Singapore requires “a good mix” of income-, asset-, and consumption-based taxes.

In this year’s Budget speech, Wong defended the government’s fiscal approach, stating that while revenue has increased, government spending has also risen.

“For example, we provided S$3 billion in Medisave top-ups in December last year, which will help to cushion the increases in MediShield Life premiums to fund better coverage and higher payouts,” he said.

Additionally, funds have been allocated for strategic projects aimed at boosting Singapore’s economic competitiveness, including the development of Changi Terminal 5 and energy transition initiatives.

Fiscal Outlook for FY2025

For FY2025, PM Wong projected a similar fiscal position, with a budget surplus of S$6.8 billion, or 0.9 per cent of GDP. He noted that additional corporate income tax revenue could be expected from FY2027 onwards following the implementation of the domestic top-up tax, which will raise the effective tax rate for large MNEs to 15 per cent.

However, he cautioned that the actual revenue impact remains uncertain, as it depends on whether MNEs continue to view Singapore as an attractive base for their operations.

PM Wong warned of considerable uncertainty in government revenues in the coming years, particularly due to changes in the global tax environment.

He pointed to recent developments in the United States, where former President Donald Trump, in late January, declared that the global corporate minimum tax deal “has no force or effect” in the US, effectively withdrawing from the agreement.

For FY2025, MOF expects corporate income tax revenue to grow by 5.8 per cent to S$32.7 billion, reflecting strong economic growth in 2024.

Revenue from GST and personal income tax is also expected to rise, alongside projected increases in government expenditure, particularly in healthcare and defence.

The NIRC for FY2025 is estimated at S$27.1 billion, marking a 12.9 per cent increase from FY2024.

PM Wong reaffirmed that MOF’s projection for government spending to rise to around 20 per cent of GDP by 2030 remains unchanged.

Government expenditure has already increased from S$75.3 billion in FY2019 to S$112.9 billion in FY2024, with a projected rise to S$123.8 billion in FY2025.

He assured that the Government will continue to monitor fiscal trends closely, spend responsibly, and ensure that all Singaporeans benefit from the nation’s progress.

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