The fiscal outlook of Singapore has taken a favourable turn, buoyed by stronger-than-anticipated revenue in the financial year 2024.

Prime Minister and Finance Minister Lawrence Wong, in his Budget 2025 speech on 18 February, attributed this uplift largely to a surge in corporate income tax collections.

The nation’s budget for 2025 stands at S$143.1 billion, marking an increase from $134.2 billion in the previous year. The revenue boost is credited to higher tax collections across multiple streams, including corporate and personal income tax, the Goods and Services Tax, as well as customs excise and carbon taxes.

The Ministry of Finance reported that corporate tax revenue saw a notable 6.5% year-on-year rise, reaching $30.9 billion – surpassing the earlier projection of $28 billion.

In the bigger picture, overall revenue for 2025 is expected to reach $122.8 billion, reflecting a 5.3% or $6.2 billion increase over last year’s revised estimates.

From deficit to surplus: A financial turnaround

The higher tax collection has significantly improved Singapore’s fiscal standing, shifting from a budget deficit of $2.6 billion in FY2023 to a surplus of $6.4 billion in FY2024, equivalent to 0.9% of GDP.

Corporate income tax now constitutes 4.1% of GDP, well above the historical average of 3.2%.

Wong noted that this unexpected surge in corporate tax revenue stems from several factors, including cyclical trends in finance and wholesale trade, as well as strategic shifts by multinational enterprises seeking a stable and business-friendly environment for their high-value activities.

“This is an unexpected change,” he remarked. “Corporate income tax is now the single largest contributor to total revenue, larger than even the net investment returns contribution.”

Looking ahead, a similar fiscal position is projected for FY2025, with a surplus of $6.8 billion – again, approximately 0.9% of GDP.

Uncertainty looms over future tax collections

A potential additional revenue stream could emerge from FY2027 onwards with the introduction of a domestic top-up tax.

This measure is designed to ensure that large MNEs are subject to an effective tax rate of at least 15%, aligning with global minimum tax efforts.

However, Wong cautioned that the extent of revenue gains from this policy would depend on whether these enterprises continue to see Singapore as a competitive location for their operations.

There is considerable uncertainty regarding government revenue in the coming years, particularly in light of shifting global tax policies, he warned, pointing to the US’s reversal on earlier tax consensus agreements brokered by the Organisation for Economic Cooperation and Development.

A new fiscal landscape: Windfall or one-off?

While the sharp rise in corporate tax collections has strengthened Singapore’s financial footing, questions remain about whether this trend will persist or prove to be a temporary phenomenon.

The government collected $30.9 billion in corporate income tax in 2024 – a 10.2% jump from initial estimates.

However, given the fluidity of global economic conditions and investment decisions, policymakers remain cautious about counting on sustained growth in tax revenues.

Singapore’s evolving tax landscape proves the complexity of maintaining fiscal sustainability and remaining an attractive hub for global businesses.

Discourse around corporate taxes will continue to take centre stage in the city-state’s revenue structure.

Future budget planning will therefore likely hinge on how effectively Singapore navigates this year’s shifting tides of international taxation and economic cycles.